Health Savings Account Guide

Transcription

1 Health Savings Account Guide Health Savings Account Highlights 2 Introduction 2 Eligibility 3 McKesson Health Savings Account 3 Health Savings Account Amounts 3 Eligible Expenses 4 Non-Eligible Expenses 4 Health Savings Account Administrator 4 Manage Your Fidelity Account Online 4 Health Savings Accounts and Flexible Spending Accounts (FSAs) Health Savings Account FAQs 5 General Information 6 Putting Money in Your Account 8 Eligibility 8 Medicare 10 Growing Your Savings 10 Paying Eligible Expenses 12 Managing Your Account

2 Health Savings Account Highlights Introduction Enrolling in the HSA, HSA Plus or Kaiser Plus plan makes you eligible to contribute to a health savings account. Although not part of your medical plan, a health savings account provides a number of tax advantages that can help you save money for current and future eligible healthcare expenses. Refer to p. 5 to see the answers to common questions about health savings accounts. Because the HSA, HSA Plus and Kaiser Plus plans qualify as high-deductible health plans under federal law, a health savings account is available to eligible plan members. A health savings account allows you to save dollars to pay healthcare expenses on a tax-advantaged basis. But this type of account offers even more here are some of its powerful benefits: Tax-free withdrawals to pay eligible healthcare expenses for yourself and individuals who qualify as your dependents for federal income tax purposes. Dollars you use from your account to pay eligible medical and prescription drug expenses can be applied to your annual deductible. Unused dollars carry over from year to year; there s no use it or lose it requirement. Your health savings account is always 100% vested and portable you keep any balance in your account, even if you switch medical plans, change jobs, stop working or retire. You can withdraw dollars from your account before age 65 for non-healthcare expenses; however, these withdrawals are subject to income tax and a 20% penalty tax. Eligibility You re eligible for a health savings account as long as you: Are covered by a high-deductible health plan (HDHP), such as the HSA, HSA Plus or Kaiser Plus medical plan. Don t have non-hdhp medical coverage, a standard healthcare flexible spending account or a health reimbursement account (for example, under plans available through your spouse s employer). Aren t enrolled in Medicare or Veteran s benefits (Tricare). Aren t eligible to be claimed as a dependent on another person s federal tax return. Health savings accounts are personal accounts and are not a part of the HSA, HSA Plus or Kaiser Plus medical plan or any other Employee Retirement Income Security Act (ERISA) plan established or maintained by McKesson. References to health savings accounts in this guide are provided only to notify plan members that these accounts may be available to them. Health savings account holders have sole responsibility for contributing and using funds in accordance with the requirements of the tax code. For more information on health savings accounts, visit You can also find information (but not tax advice) on the Fidelity website at Dollars can be withdrawn for any purpose after age 65, without paying a 20% penalty tax, although normal income tax still applies. Health savings account contributions reduce your state income taxes (except in Alabama, California and New Jersey) and federal income taxes (in all states). Account balances earn interest and you can choose among investment options. Account earnings accumulate on a tax-free basis. (Earnings may be subject to state taxes if you live in Alabama, California, New Jersey, New Hampshire or Tennessee.) 2

3 McKesson Health Savings Account If you re enrolled in the HSA Plus or the Kaiser Plus plan, McKesson puts money in your health savings account based on who s covered under your medical plan. HSA Plus and Kaiser Plus Plan McKesson Annual Employee Only $750 EE + Spouse/DP or EE + Child(ren)* $1,100 Family $1,500 * EE = Employee; DP = Domestic Partner. Health Savings Account Amounts The IRS limits how much money can be contributed to a health savings account each year. McKesson s contribution to health savings accounts of HSA Plus and Kaiser Plus plan members counts toward the IRS limit (see p. 2) Limits Employee only $3,450 EE + Spouse/DP or EE + Child(ren)* $6,900 Family $6,900 ** EE = Employee; DP = Domestic Partner. Annual limits are established by the IRS and can vary from year to year. Your health savings account contribution limit during a year may be lower than the annual limit for that year. This is because federal law establishes monthly contribution limits (annual contribution amounts shown above divided by 12) and your annual health savings account contribution can t be more than the total of the monthly limits for all months in which you are health savings account-eligible. See example on p. 7. An additional annual catch-up amount of $1,000 (also established on a monthly basis) may be contributed if you are age 55 or over. Please note that special rules apply when determining health savings account contribution limits for married individuals. You can find contribution information in IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans at Because individual limits are complex and subject to change by the IRS, we encourage you to consult a tax advisor about contribution amounts. Eligible Expenses You can use health savings account dollars for eligible healthcare expenses as defined by Section 213(d) of the Internal Revenue Code. These are described in detail in IRS Publication 502, Medical and Dental Expenses. The primary purpose of the expense must be to alleviate or prevent a physical or mental defect or illness. Examples include prescriptions and physicians office visits. Health savings account dollars used for these expenses can be applied to your annual deductible. You can also spend health savings account dollars on vision and dental care, as well as some other healthcare expenses not covered by your medical plan. Examples of expenses that don t qualify include non-prescription medicines (other than insulin), most cosmetic surgery, health club fees, maternity clothing and toiletries. A medicine or drug only counts as an eligible healthcare expense if it: Requires a prescription. Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it. Is insulin. Expenses are eligible only if they re incurred after the health savings account is established (as regulated by state law). The expenses must be for: You. Your spouse (domestic partner expenses generally are not eligible for reimbursement). Anyone you claim as a dependent on your tax return even if that person is not covered under your high-deductible health plan. Anyone you could have claimed as a dependent on your tax return except that (1) the person filed a joint return; (2) the person had gross income of $4,050 or more in 2017; or (3) you, or your spouse if filing jointly, could be claimed as a dependent on someone else s tax return. Note that you normally can t spend health savings account dollars on expenses for adult children between ages 24 and 26. While healthcare reform mandates that children up to age 26 can be covered under your medical plan, they are not considered dependents for health savings account purposes unless you claim them (or could have claimed them except for the factors indicated above) as dependents on your personal income tax. These children may want to review health savings account rules to determine if they are eligible to set up their own health savings accounts through their banks or other health savings account vendors to help pay healthcare expenses. 3

4 Non-Eligible Expenses You may use your health savings account dollars for whatever purpose you wish. But if you use your health savings account dollars for other than eligible healthcare expenses, these withdrawals are subject to the normal income tax and a 20% tax penalty. You must report these withdrawals accordingly on your tax return. The 20% tax penalty does not apply if the withdrawal is made after you reach age 65, become completely and permanently disabled, or die. However, normal income tax continues to apply. Health Savings Account Administrator Fidelity partners with McKesson to provide health savings accounts for eligible employees. The Fidelity health savings account allows you to have before-tax contributions deducted from your paychecks and deposited into your account. (You can choose a health savings account vendor other than Fidelity for example, your bank. Although this will not provide the convenience of before-tax payroll deductions, you receive the tax advantages by taking a tax deduction for your contributions when you file your tax return.) Important! You Need to Activate Your Account After You Enroll When you enroll in the HSA, HSA Plus or Kaiser Plus plan, a Fidelity health savings account is set up for you if you accept the account terms and conditions on UPoint. You need to activate your health savings account with Fidelity at before you can make or receive McKesson contributions to your account. You can start, increase, decrease or stop contributions you make to your Fidelity health savings account on a monthly basis by updating your contribution information on UPoint. If you re not eligible for a health savings account because you don t meet IRS eligibility rules or don t wish to use this account, you must set your contribution amount to $0 on UPoint. How to Activate Your Account Manage Your Fidelity Account Online You can use the HealthExpense tool to manage your expenses, payments and claims. Learn more at > Health Savings Account > Quick Links > HealthExpense Claims and Payments. Fidelity also offers BillPay, a tool that allows you to pay your healthcare bills online directly from your account. Learn more at See p. 12 for more information about managing your health savings account. Health Savings Accounts and Flexible Spending Accounts (FSAs) If you re participating in a standard healthcare FSA like the McKesson healthcare FSA you re not eligible to contribute to a health savings account. This rule also applies if your spouse has a standard healthcare FSA through his/her employer. You can contribute to a health savings account if you meet other eligibility requirements and you or your spouse/domestic partner are participating in an HSA-compatible FSA (sometimes referred to as a limited-purpose FSA). If you have both a health savings account and an HSA-compatible FSA, keep in mind that FSA dollars can be used only for eligible dental and vision expenses, even after you have met your annual deductible. Most participants who have both a health savings account and HSA-compatible FSA choose to use FSA dollars first to avoid forfeiture of those dollars. Dollars you contribute to a McKesson FSA during one year and don t use by December 31 of that same year are forfeited. Health savings account dollars continue to carry over regardless of the balance in your account. Refer to the Flexible Spending Accounts Summary Plan Description available on UPoint for McKesson FSA information. 1. Go to New Users Click Register as a new user to set up your account. Returning Users Log on with your username and password. 2. Click Open in the Health Savings Account box. 3. Review eligibility information, then click Get Started. 4. Enter your personal information, such as your name and address, then click Continue. 5. If your personal information is correct, click Confirm My Information. 6. Review Fidelity s terms & conditions. If you accept the terms & conditions, click Agree & Open Account. TIP If you sign up for a Fidelity health savings account on UPoint, you ll receive a kit from Fidelity with information about your account. You can also find information: In the Health Savings Account FAQs (pp. 5-12). On the Fidelity website at 4

5 Health Savings Account FAQs General Information What s a health A health savings account is a personal account that you use to pay for eligible healthcare expenses. What are the benefits of a health A health savings account has many benefits, including: Before-tax contributions that lower your taxable income.* Tax-free withdrawals to pay for eligible medical, prescription medication, dental and vision expenses now and in the future, even after you retire. Tax-free earnings from interest and investments.* Ownership that lets you keep your health savings account whether you change medical plans, change jobs or retire. You decide whether to spend or save your dollars. * No matter which state you live in, the money you set aside in your health savings account is generally exempt from federal taxes, unless you use it for non-healthcare expenses. Some states tax contributions and interest/earnings. Check with your tax advisor to see how your account is affected or contact Fidelity for assistance. How do health savings accounts and medical plans work together? Your medical plan and health savings account make a great team. You can use your health savings account to pay for eligible healthcare expenses that apply toward your annual deductible, coinsurance, out-of-pocket expenses and expenses not normally covered by your medical plan. For a full list of eligible expenses, go to Total Rewards Library > Health Savings Account > Health Savings Account Qualified Expenses. How do I get a health You need to enroll in a high-deductible medical plan that s compatible with a health savings account, such as the HSA, HSA Plus and Kaiser Plus plans. How do I contribute to my health savings account from my paychecks? When you enroll on UPoint, enter the amount you want to put in your health savings account for The amount you enter is split evenly between your remaining paychecks in 2018 and deducted automatically before taxes. If you don t want to contribute to your health savings account or want to wait until later to contribute, enter $0. You can stop, start or change your contribution amount at any time. Even if you decide not to contribute, you still need to activate your account to get McKesson s contribution for the HSA Plus or Kaiser Plus plan see p. 4. Do I have to make my contributions from my paycheck? No. You can send tax-deductible contributions directly to Fidelity by check. After you open a health savings account with Fidelity for the first time, Fidelity mails you an information packet with details about how to make contributions. If you choose to open a health savings account with a bank or provider other than Fidelity, follow that provider s instructions. How do I start, stop or change my health savings account contribution amount during the year? Click the HSA tile on UPoint or call the HR Support Center at 855.GO.MCKHR ( ) and press 1. Your changes are applied to your remaining pay periods for the year as soon as administratively possible. Does McKesson put any money in my account? If you re enrolled in the HSA Plus or Kaiser Plus plan, McKesson puts money in your health savings account. You need to activate your health savings account within 90 days of your effective date of coverage to get McKesson s contribution. The amount McKesson contributes depends on who s covered by your plan: $750 Employee Only $1,100 Employee + Spouse/Domestic Partner or Employee + Child(ren) $1,500 Employee + Family When does McKesson put money in my health You need to activate your health savings account within 90 days of your effective date of coverage to get McKesson s contribution. After you activate your account, McKesson s contribution is deposited as soon as administratively possible. If you don t activate your account within 90 days of your date of coverage, you lose McKesson s contribution. How long do I have to activate my account? If you enroll in the HSA Plus or Kaiser Plus plan, you need to activate your account within 90 days of the date your coverage begins or you lose McKesson s contribution to your health savings account for I m not a U.S. citizen. Can I still have a health Yes, but you ll need to set up your health savings account directly with Fidelity. When enrolling on UPoint, go to the health savings account contributions page and choose No when asked if you re a U.S. citizen. Read the information at the bottom of that page and click Fidelity HSA Account Opening to enroll in a health savings account. TIP Be sure the amount you put in your account per month and per year doesn t exceed the IRS limits (see p. 3). After completing your enrollment, call Fidelity at to finish setting up and activating your account. I activated my health savings account on the Fidelity website last year. Do I have to activate it again? No. You only need to activate your health savings account once not every year. 5

6 Putting Money in Your Account All-Year Enrollees If you re enrolled in the HSA, HSA Plus or Kaiser Plus plan for all of 2018 and don t have a standard healthcare FSA through your spouse, this section is for you. If you enrolled mid-year or your spouse had a balance in a standard healthcare FSA after December 31, 2017, see p. 7. How much money can be contributed to my health The IRS limits how much money can be put in your health savings account every year, as shown in the chart below. Note that EE = employee, SP = spouse and DP = domestic partner IRS Health Savings Account Limits Coverage McKesson Annual * Your Monthly Limit Your Annual Limit HSA Plan EE Only $0 $ $3,450 EE + SP/DP or EE + Children or EE + Family $0 $575 $6,900 HSA Plus and Kaiser Plus Plans EE Only $750 $225 $2,700 EE + SP/DP or EE + $1,100 $ $5,800 Children EE + Family $1,500 $450 $5,400 If you re age 55 or older, you can make catch-up contributions of $1,000 per year ($83.33 per month). For more information about health savings account limits, read IRS Publication 969 and Form 8889 at You can also contact Fidelity or your tax advisor. Do I have to make all of my yearly 2018 health savings account contributions by December 31, 2018? If you re a calendar-year taxpayer, the last day to make contributions to your health savings account for 2018 is April 15, What happens if I contribute more than the IRS limit? You need to withdraw the amount you re over before filing your income tax return to avoid penalties. See p. 12. What if I don t want to put money in my health Putting money in a health savings account is voluntary. If you enroll in a medical plan that s compatible with a health savings account and don t want to put money in your account, simply enter $0 in the Annual field on UPoint when enrolling. If you change your mind later, you can always click the HSA tile on UPoint and enter a different amount. Can I transfer money from my health reimbursement account to my health No. The IRS doesn t let you transfer money from a health reimbursement account to a health savings account. You give up your health reimbursement account balance when you become an HSA, HSA Plus or Kaiser Plus plan member. * You need to activate your health savings account within the first 90 days of coverage to get McKesson s contribution. 6

7 Mid-Year Enrollees If you re enrolled in the HSA, HSA Plus or Kaiser Plus plan for a part of the year or your spouse had a balance in a standard healthcare FSA after December 31, 2017, this section is for you. How much money can be contributed to my health Unless you satisfy the last month rule, the most you can set aside for the remainder of the year is the number of full months that you re eligible for a health savings account times your monthly contribution limit in the chart below. Note that EE = employee, SP = spouse and DP = domestic partner IRS Health Savings Account Limits Coverage McKesson Annual * Your Monthly Limit Your Annual Limit HSA Plan EE Only $0 $ $3,450 EE + SP/DP or EE + Children or EE + Family $0 $575 $6,900 HSA Plus and Kaiser Plus Plans EE Only $750 $225 $2,700 EE + SP/DP or EE + $1,100 $ $5,800 Children EE + Family $1,500 $450 $5,400 If you re age 55 or older, you can make catch-up contributions of $1,000 per year ($83.33 per month). For more information about health savings account limits, read IRS Publication 969 and Form 8889 at You can also contact Fidelity or your tax advisor. * You need to activate your health savings account within the first 90 days of coverage to get McKesson s contribution. What is the last month rule? You satisfy the last month rule if you enroll in the HSA, HSA Plus or Kaiser Plus plan mid-year, stay enrolled through December 1, 2018, and remain enrolled in the plan for all of If you don t remain enrolled in the plan for all of 2019, you re subject to normal income tax and a tax penalty on any health savings account contributions that exceed the number of months you re eligible for a health savings account times your monthly contribution limit. Do I have to make all of my 2018 health savings account contributions by December 31, 2018? No. If you re a calendar-year taxpayer, the deadline for making contributions to your health savings account for 2018 is April 15, If you want to put money in your health savings account at the beginning of the year, keep in mind that any amount that is applied to months you re ineligible (for example, because you don t qualify for a health savings account) may be subject to an excise tax. To avoid the excise tax, withdraw the money by the time your federal income tax return is due (extensions included). Can I set aside the full IRS annual limit in my health Yes, but only if you if you satisfy the last month rule. Example Karen enrolls in employee-only HSA plan coverage on August 15, The IRS annual limit for employee-only HSA plan coverage is $3,450. As long as Karen stays enrolled in the HSA plan for the rest of the year, she can choose to put in the full $3,450. However, to avoid tax penalties Karen needs to stay enrolled in an HSA plan for all of 2019 as well. What if I enroll in an HSA plan mid-year, but end my coverage before December 1? If you enroll in the HSA, HSA Plus or Kaiser Plus plan mid-year and your coverage ends for any reason before December 1, 2018, the amount you can set aside is equal to the number of full months that you re health savings account eligible times your monthly contribution limit from the table on the left. Example Karen enrolls in employee-only HSA plan coverage on June 1, She gets married and switches to her husband s plan with another company on October 1, Because Karen isn t eligible to put money in a health savings account on December 1, 2018, she can only put aside $1,150 (4 months x $287.50) for She can only contribute the monthly maximum for June, July, August and September. What if my coverage begins on or after December 1? You won t be able to contribute to your health savings account through before-tax payroll deductions. However, you can make tax-deductible contributions directly to Fidelity for the month of December 2018 or, if you satisfy the the last month rule, for all of 2018 up to the IRS annual limit. Do contributions I made to my health savings account at my last job count toward the IRS limit? Yes. All contributions you make to a health savings account in 2018 count toward the IRS limit, whether made while at McKesson, another employer or on your own. Be sure to account for your previous 2018 contributions when setting your monthly contribution amount on UPoint so you don t exceed the IRS annual limit. What happens if I contribute more than the IRS limit? You need to withdraw the amount you re over before filing your income tax return to avoid penalties. See p

8 Eligibility Am I eligible to put money in a health You re eligible to put money in a health savings account for each month that you meet requirements listed on p. 2. Can I have a health savings account if my spouse already has one? Yes, you can each open and contribute to your individual health savings account. If either of you covers your children, your combined annual contributions can t be above the family coverage limit. See your annual contribution limit on p. 6 or 7. Can I contribute to a health savings account if I have an HSA-compatible FSA? Yes. The IRS lets you contribute to both types of accounts at the same time. When you have both accounts, you can pay eligible dental and vision expenses with your HSA-compatible FSA and keep more money in your health savings account to save or invest. Can I put money in a health savings account if I have a standard healthcare FSA? No. Having a standard healthcare FSA disqualifies you from contributing to a health savings account. Can I put money in a health savings account if I have a dependent care FSA? Yes. You can put money in a health savings account and have a dependent care FSA. My spouse has a standard healthcare FSA. Can I put money in a health No. If your spouse has a standard healthcare FSA, you can t put money in a health savings account, even if you re covered by different medical plans. The IRS doesn t let you, or your spouse, put money in a health savings account if you have a standard healthcare FSA. My spouse has an HSA-compatible FSA. Can I put money in a health Yes. If your spouse has an HSA-compatible FSA, you can put money in a health savings account. HSA-compatible FSAs cover only dental and vision expenses and are also known as limited-purpose FSAs. Can I have a health savings account and an IRA? Yes. Medicare Can money be put into my health savings account if I m covered by Medicare? No money can be put into your health savings account for any month you re covered by Medicare Part A, B or D or in any other Medicare benefit. Can money be put into my health savings account if I m eligible for Medicare (for example, I m age 65 or older) but haven t enrolled? Yes. If you re Medicare-eligible but aren t actually covered by Medicare Part A, Part B, Part D or any other Medicare benefit, money can be put into your health savings account until the month you re covered by Medicare. What if I m only covered by Medicare for part of the year? The amount you can contribute for the year is prorated based on the number of months you re covered by Medicare. No money can be put into your health savings account for the months you re covered. How much can I contribute? The maximum contribution amount equals your annual IRS contribution limit multiplied by the number of months you re not covered by Medicare divided by 12. Example Karen enrolls in the HSA Plus plan with employee plus family coverage on January 1, Karen enrolls in Medicare Part A effective July 1, The maximum amount that Karen can contribute (with McKesson s contribution) to her health savings account equals her 2018 IRS contribution limit x 6 months not covered by Medicare 12 months. $6,900 x 6 12 = $3,450 Karen s and McKesson s combined 2018 contributions can t exceed $3,450. What happens if too much is contributed to my health savings account because I m covered by Medicare for all or a portion of the year? To avoid tax penalties, you need to withdraw any excess contributions and related earnings by your tax return filing deadline (April 15, 2019 for most people). Penalty taxes may be cumulative and continue in future years if excess contributions aren t withdrawn. Contact Fidelity to withdraw excess contributions from your health savings account. 8

9 Example Karen enrolls in the HSA Plus plan with employee plus family coverage on January 1, She gets McKesson s contribution of $1,500 for 2018 and contributes $450 a month from her paycheck. How much money can be put into my health savings account if I enroll in Medicare mid-year and my Medicare coverage is retroactive? If you enroll in Medicare Part A mid-year, your Medicare coverage may be retroactive for up to six months before you enrolled. The maximum amount that can be contributed to your health savings account depends on the date your Medicare coverage is effective, even if the effective date of coverage is retroactive. Karen then enrolls in Medicare Part A coverage effective July 1, By this time, Karen s total health savings account contribution for 2018 is $4,200. McKesson s $1,500 (for employee plus family coverage) Karen s $2,700 ($450 x 6 months) Total Amount $4,200 ($1,500 + $2,700) Because Karen is now enrolled in Medicare Part A coverage, the maximum amount she can contribute to her health savings account for 2018 is $3,450: Karen s 2018 IRS contribution limit x 6 months not covered by Medicare 12 months in a year. $6,900 x 6 12 = $3,450 Karen has $750 ($4,200 - $3,450) in excess contributions in her health savings account. Karen needs to withdraw the $750 from her health savings account before April 15, 2019 to avoid paying penalty taxes. She contacts Fidelity, moves the excess contribution to her checking account and plans to report the excess contribution and any earnings as taxable income on her 2018 tax return. Is McKesson responsible for determining whether money can be put into my health savings account because I m covered by Medicare? No. McKesson has no way of knowing if you re covered by Medicare. What happens if McKesson makes a contribution to my health savings account after the date my Medicare coverage is effective? The amount McKesson contributes is an excess contribution. To avoid tax penalties on the excess contribution, you need to notify Fidelity and withdraw the excess contribution and related earnings before your tax return filing deadline (April 15, 2019 for most people). You need to report the excess contribution and earnings as taxable income on your tax return. If you enroll in Medicare July 1, but have retroactive coverage for six months, your actual date of coverage is January 1. That means that the maximum amount that can be contributed to your health savings account is $0, so any contributions you and/or McKesson have made are considered excess contributions. The maximum amount is reduced by 1/12 for each month you re covered by Medicare (including any months of retroactive coverage). Contact Fidelity at if you have questions. Example Karen enrolls in the HSA Plus plan with employee plus family coverage on January 1, She gets McKesson s contribution of $1,500 and contributes $450 a month from her paycheck. In November 2018, Karen enrolls in Medicare Part A with coverage retroactive to May 1, Karen stops making health savings account contributions as of November 1, By this time, Karen s total health savings account contribution for 2018 is $6,000. McKesson s $1,500 (for employee plus family coverage) Karen s $4,500 ($450 x 10 months) Total Amount $6,000 ($1,500 + $4,500) Because Karen s coverage is retroactive, the maximum amount that can be contributed to Karen s health savings account for 2018 is $2,300: Karen s 2018 IRS contribution limit x 4 months not covered by Medicare 12 months in a year. $6,900 x 4 12 = $2,300 Karen has $3,700 ($6,000 - $2,300) in excess contributions in her health savings account. Karen needs to withdraw the $3,700 from her health savings account before April 15, 2019 to avoid paying penalty taxes. She contacts Fidelity, moves the excess contribution to her checking account and plans to report the excess contribution and any earnings as taxable income on her 2018 tax return. 9

10 Can I use money in my health savings account while enrolled in Medicare? Yes. You can keep using your health savings account money tax-free for eligible healthcare expenses, including retiree Medicare premiums, deductibles, copays and coinsurance under any part of Medicare, as well as any other retiree insurance premiums. (Premiums for a Medicare supplemental policy, such as Medigap, aren t an eligible expense.) If you re age 65 or older and spend money on ineligible expenses, you pay normal income tax but not the 20% penalty tax. I m enrolled in an HSA plan and cover my spouse, but he/she is also covered by Medicare. Can I still contribute to my health Yes. As long as you re not covered by any part of Medicare, you can contribute up to the IRS maximum for family coverage. Can I pay for my spouse s eligible healthcare expenses from my health savings account if he/she is on Medicare? Yes. You can pay for his/her expenses, but your spouse can t contribute to the account. TIP Growing Your Savings You can read about how Medicare works at Medicare-and-You.pdf. How does my health savings account grow? Your health savings account grows from: Your before-tax contributions* The money McKesson contributes to your account if you enroll in the HSA Plus or Kaiser Plus plan Tax-free earnings from interest and investments* * No matter which state you live in, the money you set aside in your health savings account is generally exempt from federal taxes, unless you use it for non-healthcare expenses. Some states tax contributions and interest/earnings. Check with your tax advisor to see how your account is affected or contact Fidelity for assistance. Which states tax the money I put in my health As of January 2018, Alabama, California and New Jersey tax the money you and McKesson put in a health savings account. If you live in one of these states, you may need to pay state income tax on the money you and McKesson contribute to your health savings account. This amount is reported as state wages in Box 16 of your W-2 form. Check with your tax advisor to see how your account is affected or contact Fidelity for more guidance. Which states tax interest and earnings? As of January 2018, Alabama, California, New Hampshire, New Jersey and Tennessee tax health savings account interest and earnings. If you live in one of these states, you report and pay state taxes on those amounts when you file your personal tax return. Check with your tax advisor to see how your account is affected or contact Fidelity for more guidance. I currently have a health savings account with my bank. Can I transfer that health savings account balance to Fidelity? Yes. Go to After you log in, choose s from HSA Quick Links. Then, choose Other Ways to Contribute and select Print Transfer Form. Can I invest the money in my health Yes. You control your health savings account and can select and manage your investment funds through Fidelity. Does McKesson select and manage the investment funds for my health No. Health savings accounts are personal savings accounts and aren t part of any ERISA** plan sponsored by McKesson. You re solely responsible for managing your health savings account and selecting the funds into which your health savings account contributions are invested. ** ERISA = Employee Retirement Income Security Act of Paying Eligible Expenses How can I pay for eligible expenses with my health Once you activate your account, Fidelity mails you a health savings account debit card. You can order up to four extra debit cards for your dependents at Can I use the Fidelity debit card at my doctor s office? Yes. Swipe your Fidelity health savings account debit card at your doctor s office, lab or pharmacy. If your medical provider doesn t accept the card or sends you a bill, you can log on to to pay the provider directly from your account. In some cases, you may need to wait to pay for an eligible expense with your health savings account until after your plan discount is calculated and you get a bill. Can I pay vision and dental expenses with my health Yes. Swipe your Fidelity health savings account debit card just like you would for a medical expense (see the previous question). What if I don t have enough money in my health savings account to cover an expense? If you don t have enough money in your account to pay for an eligible expense, you pay for the expense out of pocket. Once you have enough money in your account, you can reimburse yourself on the Fidelity website at or on the Fidelity mobile app. You can download the app at 10

11 How can I use the money in my health You can use the money in your account for any purpose. If you use it to pay for eligible medical, prescription medicine, dental or vision expenses, your withdrawals are tax-free. If you use the account to pay for non-healthcare expenses, the withdrawal is subject to regular income tax and an additional 20% tax. After age 65 or Medicare eligibility, withdrawals for non-healthcare expenses aren t subject to the 20% penalty, although they are subject to income tax. Find a list of eligible expenses at Total Rewards Library > Health Savings Account. Whose healthcare expenses can I pay for with my health You can use your health savings account on a tax-free basis to pay eligible healthcare expenses for: Yourself Your spouse (your domestic partner s expenses generally aren t eligible for reimbursement, unless he or she is also your tax dependent) Anyone you claim as a dependent on your personal income tax even if that person isn t covered by your medical plan You normally can t use your health savings account to pay expenses for adult children between ages Even though your children up to age 26 can be covered by your medical plan, the IRS doesn t consider them dependents for health savings account purposes, unless you claim them as dependents on your federal income tax return. Can I pay my domestic partner s healthcare expenses with money from my health You can t pay your domestic partner s healthcare expenses with money from your health savings account unless he or she is your tax dependent. You can find more information about the IRS rules for domestic partners at Can I use my health savings account to pay expenses for dependents who aren t covered by my health plan? Yes, as long as the expense is eligible and not covered by another health plan. Dependents include anyone you claim as a dependent on your federal income tax return. Can I use my health savings account to pay for nonprescription drugs or medicines? No. You can t use your health savings account to pay for non-prescription drugs or medicines (other than insulin). You can use your health savings account to pay for a medicine or drug only if the medicine or drug: Requires a prescription. Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it. Is insulin. Can I use my health savings account to pay insurance premiums? Generally, you can t use your health savings account to pay insurance premiums. However, the following premiums are eligible expenses: Long-term care coverage Healthcare coverage while you get unemployment benefits Healthcare continuation coverage required under any federal law (e.g., Consolidated Omnibus Budget Reconciliation Act COBRA) Retiree insurance premiums (other than premiums for a Medicare supplemental policy, such as Medigap) if you re age 65 or older Can I spend my health savings account on non-healthcare expenses? Yes, but you ll be taxed the normal tax rate, plus a 20% tax penalty if you spend the money on non-healthcare expenses before you reach age 65. You need to report the money you spend on non-healthcare expenses on your tax return. The 20% tax penalty doesn t apply if you spend the money after you re age 65, become completely and permanently disabled, or die. How can a health savings account work as a retirement account? You can invest your money through Fidelity. In this way, your health savings account is similar to a 401(k) and helps you meet your long-term financial goals. Also, if you choose to pay for your current expenses out-of-pocket, you can keep more money in your health savings account to use for future healthcare expenses. Who makes sure that I use my health savings account for eligible expenses? You need to make sure you use your health savings account dollars for eligible expenses. Keep your receipts, invoices and statements to prove how you spent your account dollars in case you re audited by the IRS. You should keep records demonstrating that: The distributions were exclusively to pay or reimburse medical expenses. The medical expenses weren t previously paid or reimbursed from another source. The medical expenses weren t taken as an itemized deduction in any year. You don t have to send these records with your tax return. Keep them with your tax records. Do I need to give Fidelity receipts for my health savings account claims? No. Fidelity doesn t ask for proof of your health savings account claims. However, keep all your receipts in case you re audited by the IRS. These restrictions don t apply to over-the-counter items other than medicines and drugs such as equipment, supplies, and medical devices, including crutches, bandages, blood-sugar test kits and eyeglasses. 11

12 Managing Your Account How can I track my health savings account balance? To track your balance: 1. Log on to 2. On the dashboard, click the Health Savings Account box to activate your health savings account. 3. Once your account is activated, you can find Quick Links on your homepage in the Health Savings Account box. You can use the Quick Links to check your balance, see your statements, invest your funds and pay your health claims. What happens if I have money left in my health savings account at the end of the year? That money is yours to keep and use for as long as you have the account. What happens to my health savings account if I don t enroll in a high-deductible health plan next year? If you don t enroll in a high-deductible health plan, the account is still yours, and you can use the account balance to pay for eligible healthcare expenses or save it for future eligible expenses. However, you need to be enrolled in a high-deductible health plan to add money to your health savings account. Also, if you rely on the last-month rule (see p. 7) to make a full year s worth of health savings account contributions, you ll need to be enrolled in a high-deductible health plan (such as the HSA, HSA Plus or Kaiser Plus plan) for all of the following year to avoid federal tax penalties. What happens to my health savings account if I leave McKesson? You own your health savings account. You can keep your health savings account with Fidelity or transfer your dollars to another qualifying bank or provider.* If you leave McKesson and keep your health savings account with Fidelity, Fidelity automatically deducts your account administration fees from your available balance. * If you withdraw the money from your current health savings account bank or provider and don t transfer or roll the account over to another qualifying bank or provider within 60 days of the withdrawal, the money is taxable, and you ll likely need to pay tax penalties. Can I transfer the money in my health savings account into an IRA? Yes, but you ll need to pay taxes. How can I transfer my health savings account without paying taxes? You can transfer your account balance into another qualifying health savings account and not pay taxes. What happens to my health savings account if I die? Like your other assets, your health savings account goes to your beneficiaries. You can name your beneficiaries when you open your health savings account. If your beneficiary is your spouse, the health savings account isn t taxable. However, if your beneficiary isn t your spouse, the health savings account is taxable. How do I name beneficiaries for my health savings account online? Use the Fidelity Online Beneficiary Add/Change/Cancel feature by following these steps: 1. Log on to 2. Choose Beneficiaries from the HSA Quick Links. 3. Add or Edit your beneficiary information for your health savings account. Who can close my health Only you can close your account. Do I pay administration fees for my health McKesson pays your administration fees if you re an active employee enrolled in the HSA, HSA Plus or Kaiser Plus plan and have a health savings account with Fidelity. If you leave McKesson, you ll pay any fees charged by Fidelity. If you open your health savings account with another bank or provider, you ll pay any administration fees. What happens if I contribute more than the IRS limit? McKesson doesn t monitor the limit on your health savings account. If you know you re over the limit, you can withdraw the amount you re over before the tax-filing deadline to avoid penalties. Contact Fidelity at or go to to request a Return of Excess (ROE) form. Follow the instructions on the form to complete your withdrawal and keep a copy for your tax records. Fidelity (Health Savings Accounts) :30 a.m. - 7 p.m. Central time, M-F UPoint Review and manage your Total Rewards. Total Rewards Library Find information about health and wellness programs from any device connected to the internet. WageWorks (Flexible Spending Accounts) a.m. - 7 p.m. Central time, M-F HR Support Center 855.GO.MCKHR ( ) Press 1 for Health, Vitality and Pension questions. Benefit experts are available 7 a.m. - 6 p.m. Central time, M-F. Oprime 1 para asistencia en español a través del McKesson Benefits Center. May 2018