Health Savings Account (HSA)

Transcription

1 IU Human Resources Health Savings Account (HSA) INDIANA UNIVERSITY

2 Reality Check A healthy couple retiring at age 65 can expect to pay: $404,253 in premiums, dental, vision, hearing and all other out of pocket health- related expenses during retirement* *Source: HealthView Services 2017 Retirement Health Care Costs Data Report

3 Reality Check Using Social Security benefits to cover healthcare costs: A 66- year- old couple will need 59% of benefits A 55- year- old couple will need 92% of benefits A 45- year- old couple will need 122% of benefits Healthcare costs will be one of the most significant expenses in retirement. *Source: HealthView Services 2017 Retirement Health Care Costs Data Report

4 Health Savings Account Savings Account For Healthcare Expenses Paired with enrollment in an HDHP Offers Triple Tax Savings Help prepare for Retirement

5 Tax Advantage #1 No taxes on contributions No Federal Income Taxes No State Income Taxes No Local Income Taxes No Social Security Taxes (OASDI) No Medicare Taxes (FICA)

6 HSA Contributions University makes a contribution each year Varies by Medical plan enrollment Varies by coverage level You make contributions each year Minimum of $300 per year Annual maximums are set by the IRS Made through payroll deductions Can change election any time

7 Annual HSA Contribution Maximums For 2018 (changes each year) Employee HDHP Coverage: $3,450 Family HDHP Coverage: $6,850 Age 55+ catch-up : $1,000 If Spouse also on an HDHP they can contribute to their own HSA up to another $1,000 Maximum includes contributions from all sources (University contribution and Employee contributions)

8 Tax Advantage #2 No taxes on interest or earnings Cash Account o earns savings interest Open an Investment Account o $1,000 initial account transfer o Set up one time or recurring transfers o Manage investments online (FREE) o Speak with a Nyhart registered investment representative (FREE)

9 Tax Advantage #3 No taxes on funds when used for IRS approved health expenses Medical Prescriptions Dental Vision Hearing Aids Acupuncture COBRA premiums Medicare premiums

10 More Advantages Can be used for the health expenses of any tax dependent (spouse, child(ren), dependent relative, etc.) Flexibility of access o Use debit/visa card at healthcare providers (physician offices, pharmacy, dental, vision providers) o Use Online tools to pay bills directly o Use Online tools to transfer money o Download the mobile app

11 More Advantages Unused funds are always yours to keep o o o o Even when you retire Even when you leave IU employment Even when you are no longer eligible to make contributions Even when you pass away, your funds can pass to your beneficiaries Review & update every year!!! Can use funds to reimburse yourself for expenses incurred all the way back to the date the account was opened

12 IRS Rules

13 HSA Restrictions Must meet eligibility requirements to be eligible to make tax-free contributions Until Age 65, must use ONLY for IRS qualified healthcare expenses, otherwise IRS imposes: o o 20% penalty Income taxes Age 65 or older, can use account for non-healthcare expenses: o o NO penalty Income taxes

14 Eligibility Rules You must have a valid Social Security Number. You cannot be claimed as a dependent on someone else s tax return. You must be covered under an HDHP. You must have NO other medical coverage. o o o Coverage by a federal government program, e.g., Medicare A & B or D, Tricare, or VA medical Coverage by a spouse s medical plan unless it is also an HDHP Coverage by a spouse s: Flexible spending account (FSA) Health Reimbursement Arrangement (HRA) IU s TSB Healthcare Reimbursement Account (TSB)

15 HSA Reporting Requirements What to retain: Copy of Receipt Doctor s Prescription or Note Show expense is primarily for medical care Recommended for treatment of a specific medical condition Receipts do not get sent to the IRS. Keep receipts and records for use if audited by the IRS Tax Reporting: Form 8889 (annually with income taxes) Report contributions to your HSA Report distributions from your HSA Figure any taxes or penalties for ineligible contributions and/or distributions

16 Retirement Considerations

17 Medicare affects your HSA Medicare enrollment (A, B or D) will make you ineligible to contribute tax-free dollars to your HSA. If actively employed and covered by a group health plan at age 65: Can postpone enrollment in Medicare until retirement Not able to postpone if drawing from Social Security income benefits (yours or spouse s)

18 When you enroll in Medicare Enroll during initial eligibility (7 month period around 65 th birthday): o Birthday falls mid-year o HSA Contribution maximum will be prorated based on number of months you were on an HDHP up to your Medicare effective date o Birthday falls after December 1st o Can contribute full annual contribution maximum Enrollment postponed until after retirement: o Medicare backdates the enrollment date in Medicare Part A either 6 months or back to 65th birthday (which ever is closest) o HSA Contribution maximum will be prorated based on number of months you were on an HDHP up to your Medicare effective date

19 Ineligible to make Tax-Free Contributions You can enroll in HDHP plan and waive the HSA No HSA account will be opened;; No IU contribution No taxes or penalties to worry about Can still enroll in the TSB Healthcare Reimbursement Account If you are ineligible and still enroll in the HSA You will be required to contribute the $300 minimum to receive the IU Contribution to your account You are responsible for: Filing an Excess Contribution form with Nyhart Reporting all contributions (University and Employee contributions) as taxable income on your annual tax return Paying any taxes or penalties assessed by the IRS. Recommend consulting a tax advisor

20 Resources

21 Nyhart (iu.nyhart.com) View account activity Expense Tracker function Transfer funds online to/from a personal bank account Pay your healthcare expenses directly from account Find common forms Searchable IRS Qualified Expense List

22 Castlight Health (us.castlighthealth.com) Search for a primary care physician Learn more about prescription drug options Know where you stand in your deductible Look up prior medical claims Estimate personalized costs for medical services Compare in-network doctors, facilities, and medical services Review step-by-step explanations of past medical spending Receive helpful tips

23 IRS website ( Publications 969 Health Savings Accounts and Other Tax- Favored Health Plans 502 Medical and Dental Expenses Tax Forms Form 8889 Instructions for Form 8889

24 Questions

25 IU Human Resources The IU Human Resources Customer Care Team is here to assist you in all matters related to your employment at Indiana University. Starting from when you begin your career, continuing through your service, and providing a seamless transition as you complete your employment journey we are here for you. TEL: FAX: askhr@iu.edu

26 IU Human Resources HSA Questions: HSA web page: IRS web page: