Frequently Asked Questions: HDHP with HSA 2011 Annual Enrollment. What s New for 2011

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Jared Powell
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Frequently Asked Questions: HDHP with HSA What s New for 2011 1. Will my High Deductible Health Plan with Health Savings Account (HDHP with HSA) vendor be the same in 2011? 2. If my medical plan vendor changes for 2011, will my HSA vendor also change?

1 Frequently Asked Questions: HDHP with HSA What s New for Will my High Deductible Health Plan with Health Savings Account (HDHP with HSA) vendor be the same in 2011? 2. If my medical plan vendor changes for 2011, will my HSA vendor also change? High Deductible Health Plan UTC is making some changes to our medical plan vendors for 2011 to ensure you continue to have the best quality and access to comprehensive networks for your care. In making this transition, we took care to ensure an overlap with current providers by completing a thorough analysis. This means that nearly all of the providers you and your family members use today will continue to be in network. If your medical plan vendor will no longer be available in 2011, you do not need to take any action. You will automatically be transferred to your new vendor, who will be listed on Your Benefits Resources during Annual Enrollment. If you are currently enrolled in the HDHP with HSA, the transition to a new medical plan vendor may affect your HSA bank. If your 2011 medical plan vendor partners with a different bank, you will receive more information after you ve submitted your enrollment elections on Your Benefits Resources. 3. What is the HDHP with HSA? The best way to learn about this plan is to watch the I-Cast or listen to the podcast called Getting to Know: The HDHP with HSA available on Your Benefits Resources. The HDHP with HSA is made up of two components: the HDHP, which provides medical, prescription drug and mental health / substance abuse coverage and the HSA, an interestbearing bank account that allows you to save money for current and future health care expenses. 4. Who administers the HDHP with HSA? How can I contact them? 5. Which in-network preventive services are eligible to be covered at 100%? Health plan vendors vary by your home zip code. For more information about the vendors available to you, refer to your E-Guide which can be found under the Understanding your options enrollment step on Your Benefits Resources. Preventive services for the HDHP with HSA are defined by the IRS. Eligible services include routine adult physicals (and related preventive screenings and tests), well-baby and well-child care (including immunizations up to age 17), and well-woman care. Whether a service is considered preventive also depends on how your health care provider codes the service. If you have questions about whether a service is preventive, please contact your health plan vendor or ask your health care provider how they will code the service.

2 Frequently Asked Questions (HDHP with HSA) 2 6. What is the difference between my paycheck contributions and my deposits? 7. How do the family deductible and the out-of-pocket maximum work for the HDHP with HSA? 8. How do prescription drugs work with the HDHP with HSA? 9. Does the HDHP with HSA have a mail-order prescription drug service? 10. Are there different tiers of prescription drugs under the HDHP with HSA? 11. Can I be enrolled in another medical plan while I m covered under the HDHP with HSA? 12. If I enroll in the HDHP with HSA, can I also enroll in a dental plan? 13. Can I participate in the DCSA while I m enrolled in the HDHP with HSA? 14. Am I locked into the HDHP with HSA for all future years once I join and decide to contribute money to the HSA? In our benefits communications, 2011 UTC uses Annual the term Enrollment paycheck contributions to refer to the amount you pay out of your paycheck for coverage under UTC s various benefits plans. The term deposits refers to the money that you put into your Health Savings Account (HSA), Health Care Spending Account (HCSA) or Dependent Care Spending Account (DCSA). For family coverage, there are no individual limits for the deductible or out-of-pocket maximum. This means that you must meet the family deductible before the plan starts paying anything towards your medical expenses, and you will continue to pay coinsurance until you meet the family out-of-pocket maximum. Prescription drug coverage for the HDHP with HSA is administered by the same health plan vendor that administers the medical coverage. Under the HDHP with HSA, prescription drug expenses count towards your annual deductible and out-of-pocket maximum. This means that you will pay the full cost of your prescriptions until you meet your plan s annual deductible. After you meet your deductible, you will pay coinsurance for your prescription drugs, until your out-ofpocket maximum is reached. Then the plan will pay 100% of the cost. You will not receive a separate prescription drug identification (ID) card. Instead, you should use your medical ID card for the HDHP with HSA when you purchase prescription drugs. Prescription drugs are available through retail pharmacies or through mail-order. Yes. The HDHP with HSA has a mail-order prescription drug service. You are encouraged to use mail-order services for maintenance medications. For more information, please visit the health plan s website. Yes. There are different tiers of prescription drugs under the HDHP with HSA. The tiers are generic, preferred brand-name and non-preferred brand-name. To learn more, look up the formularies on the health plan vendors' websites. No. You cannot be covered under any other plan, such as your spouse s plan or Medicare. Yes. You can be enrolled in the HDHP with HSA and a dental plan at the same time. You can use your HSA to pay for eligible dental expenses that your dental plan doesn t cover (e.g., orthodontia). Yes. You may participate in the DCSA regardless of your medical coverage. No. If you elect the HDHP with HSA, it will be your coverage for 2011, but you are not obligated to choose it in 2012 or beyond. You will not be locked into continuing your medical coverage under the HDHP with HSA after 2011 but, remember, you must actively change your coverage. Otherwise, you will default into your current coverage, unless it is no longer available. Please note that you must be enrolled in the HDHP with HSA to make contributions to an HSA. However, you may continue to use the money in your HSA to help pay for eligible health care expenses even if you are no longer enrolled in the HDHP with HSA.

3 Frequently Asked Questions (HDHP with HSA) If I enroll in the HDHP with HSA and elect not to contribute to an HSA, would the only deductions from my paycheck related to this plan be the contributions for participating in the plan? 16. If I am participating in a BYO Plan this year and switch to the HDHP with HSA next year (or vice-versa) will my lifetime maximum start over? 17. Suppose I am enrolled in the HDHP with HSA for 2010, and carry over money from my HSA into 2011, but I don t participate in the HDHP with HSA in Can I participate in the HCSA in 2011? 18. If I go on COBRA, can I stop participating in the HDHP with HSA? Yes. If you do not elect to contribute to your HSA, then the only amount deducted from your paycheck would be the contributions, if any, required for coverage under the HDHP with HSA. Lifetime maximums will continue to apply through the remainder of the plan year (through December 31, 2010). However, as part of Health Care Reform, all lifetime maximums will be eliminated beginning January 1, This means that you will not need to worry about lifetime maximums if you are participating in the BYO Plan and switch to the HDHP with HSA for Additionally, beginning January 1, 2011, if you or a covered dependent have previously met a lifetime maximum under a UTC medical plan, you may begin receiving coverage again. Yes. As long as you are not enrolled in an HDHP and eligible to contribute to an HSA, you can participate in the HCSA for 2011 while continuing to use money from your HSA for eligible health care expenses. (Remember, the tax-free dollars in an HSA roll over from year to year; unlike other tax-advantaged health care accounts, the HSA has no IRS use it or lose it rule. The dollars are yours until you decide to use them.) No. But you can opt out of the HDHP with HSA at the next Annual Enrollment period and choose another UTC option. Health Savings Account Opening an HSA 19. How do I sign up for an HSA? You may open an HSA with the bank that partners with your HDHP with HSA vendor or with any financial institution that offers an HSA. In order to have money deducted from your paycheck and sent to your HSA, you must open the HSA through the bank that partners with your health plan vendor. You may do so from the Your Benefits Resources website during Annual Enrollment. After you complete your enrollment, you will see a confirmation screen with a link to the bank s website. Use that link to open your HSA. If you do not open the HSA at the time you enroll, you will also receive the link within your confirmation message after you enroll. After you open your HSA, the bank will send you a welcome kit. If you do not enroll online, but are eligible to open an HSA, you will receive an HSA enrollment kit from the bank that partners with your health plan vendor. 20. Do I have to use the bank that partners with my HDHP vendor to open my HSA? No. You may choose any banking institution that provides an HSA. However, UTC payroll will only be able to deduct pre-tax contributions from your paycheck for deposit into your HSA if you use the bank that partners with your HDHP vendor. Additionally, if you use your health plan vendor s partner for your HSA, UTC will pay the basic monthly account administration fee. If you choose a different bank, you may deposit money directly into your HSA. However, those funds will be after-tax money and you will have to claim the deposit on your individual tax return for tax-favored treatment.

4 Frequently Asked Questions (HDHP with HSA) 4 Contributing to an HSA 21. When and how can I elect the amount I want to contribute per pay period to the HSA? 22. What are the minimum and maximum amounts that I can contribute to my HSA? How can I change my elections during the year? 23. What are HSA catch-up contributions? 24. Why am I limited in how much I can deposit to my HSA? 25. Can I deposit money directly into my HSA? 26. How long does it take for my money to show up in my HSA? If you elect the HDHP with HSA when you enroll on the Your Benefits Resources website, you will be prompted to enter the total amount you d like to contribute to your HSA. You will also be contacted by the financial institution working with your health plan vendor. In order to have money deducted from your paycheck and sent to your HSA, you must open the HSA through the bank that partners with your health plan vendor. Any health care claims incurred before you set up your account are not eligible to be reimbursed from your HSA. Therefore, you should be sure to open your HSA as part of your Annual Enrollment process. If, during the year, you need to change the amount you are contributing, you can do so by calling the UTC Benefits Center at from 8:00 a.m. to 6:00 p.m. Eastern Time (ET), Monday through Friday. There is no minimum amount you have to contribute to your HSA. Although UTC encourages you to contribute to an HSA, you are not required to contribute just because you enrolled in the HDHP with HSA. If you elect to cover only yourself under the HDHP with HSA, you can contribute up to $3,050 a year tax-free. If you elect to cover yourself plus at least one other person under the HDHP with HSA, you can contribute up to $6,150 a year tax-free. Once you are age 55, and each year thereafter, you are eligible to make an additional annual tax-free "catch-up" contribution of up to $1,000 to your HSA for that year. If, during the year, you need to change the amount you are contributing, you can do so by calling the UTC Benefits Center at from 8:00 a.m. to 6:00 p.m. Eastern Time (ET), Monday through Friday. Once you are age 55, and each year thereafter, you are eligible to make an additional annual tax-free "catch-up" contribution of up to $1,000 to your HSA for that year. However, these contributions will be after-tax money that you deposit directly into the account. You will have to claim the deposit on your individual tax return to receive the benefits of a pre-tax deposit. The IRS regulates how much money you can deposit into your HSA each year. Yes. You may deposit money directly into your HSA in addition to making deposits through payroll deductions up to the annual IRS contribution limit. However, those funds will be after-tax money and you will have to claim the deposit on your individual tax return to receive the benefits of a pre-tax deposit. Money withheld from your paycheck is wired to your HSA bank and deposited into your HSA within five to seven business days. The current process includes three hand-offs and reconciliation steps before the funding can occur. UTC holds the contributions until the money transfer can occur.

5 Frequently Asked Questions (HDHP with HSA) I would like to enroll in the HDHP with HSA and open an HSA, but am currently participating in the HCSA. Can I elect the HCSA again in 2011 while I am contributing to an HSA? Using an HSA 28. How do I use the HSA to pay for eligible health care expenses? 29. Is a debit card available for the HSA? No. The IRS does not permit you to contribute to both an HSA and an HCSA. However, if you are participating in the HCSA in 2010, you may still enroll in the HDHP with HSA for 2011, as long as you don t enroll in the HCSA for Please note if you currently participate in the HCSA and you have money left in your account on December 31, 2010, you have until March 15, 2011, to use the money on dental and vision expenses only (not medical expenses) even if you have enrolled in the HDHP with HSA for You have until April 15, 2011, to submit all claims for reimbursement from your HCSA. It is important to note that the HSA is a bank account so you can only access HSA funds that are actually in the account. Your HSA allows you to pay at the point of service, upon receipt of a bill, or to reimburse yourself by using a debit card or check. There may be other options available; please check with your financial institution. Yes. Your financial institution will provide one debit card automatically. 30. How do I avoid ATM fees? You can avoid incurring ATM fees by only using your debit card at the point of service or at the issuing financial institutions ATMs. 31. Can I use the HSA to pay for dental and vision expenses? 32. Can I use the HSA to pay for overthe-counter drugs? 33. Can I use my HSA to reimburse expenses up to my total annual deposit? For example, if I ve elected to deposit $600 for the entire year, can I be reimbursed for $600 of expenses before the year is over? 34. Can I pay myself back with money from my HSA for previous medical expenses incurred before the HSA was opened? Yes. Eligible dental and vision expenses can be reimbursed from the HSA. The same types of eligible dental and vision expenses that can be reimbursed from the HCSA are eligible to be paid with your HSA. No. Beginning January 1, 2011, over-the-counter medications are not considered to be an eligible expense for an HSA unless you have a doctor s prescription. No. For the HSA, you may only be reimbursed up to the amount of money you have in the account at the time. This is different from the way the HCSA works. Once a deposit is made to your HSA, you may begin using those funds immediately to pay for eligible health care expenses. No. You can only pay yourself back with money from your HSA for medical expenses you incurred after the HSA was opened.

6 Frequently Asked Questions (HDHP with HSA) I am currently enrolled in a BYO Plan and have an HCSA. If I have money left in my HCSA at the end of the plan year, and I incur a medical expense before March 15 of the following plan year, can I use the leftover money to reimburse the medical expense, rather than apply it to my HSA? 36. Why is the HCSA limited use period in effect for 2011? If you enroll in the HDHP with HSA for 2011, you may use any money remaining in your HCSA at the end of 2010 only for eligible dental and vision expenses that are incurred during the limited use period that runs from January 1 through March 15, The IRS requires that a company must impose this limitation for all participants in a plan that offers a High Deductible Health Plan with a Health Savings Account. 37. Can the HSA be invested? Yes. Once the balance in the HSA reaches the minimum level required by your HSA bank, you can invest your money in one of the investment vehicles your financial institution offers. The investment options and minimum investment amounts differ by financial institution. Please check with your financial institution for more information. 38. What happens to the money in my HSA before I reach the minimum balance needed to invest the funds? 39. Do I have to use the funds in the HSA by a certain time each year (i.e., does use it or lose it apply)? 40. Do I have to use all of my HSA money by a certain age? 41. Who can I use the funds in my HSA for? 42. If I participate in the HDHP with HSA for one year, and then I switch to another plan or leave UTC, what happens to the balance in my HSA? Before you reach the minimum balance for investing, your HSA balance will accumulate interest. No. You do not have to use the funds in the HSA by a certain deadline, as you would for an HCSA. If you don t use your total balance during the year, you can just carry it over to the next year. You can continue to use the money in the HSA for health care expenses in future years, even if you leave UTC. No. There is no age limit related to using the money in your HSA. You can use the funds in your HSA to pay for eligible expenses for yourself and your tax dependents. If your adult child is covered under your HDHP with HSA, but is not your tax dependent, you may not use the money in your HSA to pay for their medical expenses. The HSA is a separate bank account that you set up with a financial institution. If you stop participating in the HDHP with HSA or leave UTC, the account (and any money in it) is still yours. You may need to contact your financial institution to find out the terms of using your HSA going forward.

7 Frequently Asked Questions (HDHP with HSA) If I leave UTC, how do I take the money in my HSA with me? Do I need to maintain a minimum balance to keep my HSA after I leave? 44. If I go on COBRA, can I continue to make deposits to my HSA and use the money in my account to pay for eligible health care expenses? 45. After I retire, can I still use the money in my HSA? If so, can I use it to pay for retiree medical contributions? 46. Do the same audit rules that apply to the HCSA apply to the HSA? 47. What happens to the money in my HSA if I die? Your HSA is portable. This means that if you change health plans, leave UTC or retire from the Company, you take your money with you. If you wish to keep your account open with your current financial institution, you will need to work with the financial institution that administers your HSA to find out the rules (and any applicable fees) that apply for keeping the account open. You can also roll your HSA over to your new employer's HSA or to one you set up independently. Each financial institution has different requirements when it comes to minimum balances. Yes. You can continue making deposits to your HSA on an after-tax basis, and then deduct your deposits when you prepare your tax return. You can also continue to use your HSA to pay for eligible health care expenses. Yes. The HSA is designed to allow you to save for future health care expenses, including in retirement. You have the option of using money in your HSA to pay for eligible services today, or paying for the services out of your pocket and saving the money in your HSA for the future. When you retire, you may use the money in your HSA to offset retiree medical expenses, eligible health care expenses and certain other contributions, including insurance premiums (other than premiums for Medicare supplemental policies, such as Medigap) if you re 65 or older. No. UTC does not audit or substantiate how you use the money in your HSA. The IRS may ask for proof that the money in your HSA was used for eligible medical expenses. Therefore, you should keep records to show that HSA funds were used properly. It is important to note that if you are under age 65 and use your HSA to pay for an ineligible expense, that amount is subject to regular income taxes plus a penalty. Currently, if HSA funds are used for something other than eligible expenses, the amount is subject to regular income taxes plus a 10% tax penalty. Beginning January 1, 2011 the tax penalty will increase to 20%. If you are age 65 or older at the time you withdraw money for an ineligible expense, the tax penalty is waived. You designate a beneficiary when you set up your HSA. If your spouse is your designated beneficiary, the HSA will be treated as your spouse s HSA after your death. If your spouse is not the designated beneficiary, the account stops being an HSA, and the fair market value of the HSA becomes taxable to the beneficiary in the year that you die.

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Frequently Asked Questions: HDHP with HSA 2012 Annual Enrollment Table of Contents Click on a section or question to be taken directly to the answer you re looking for, or read through all the questions