FAQS FOR HSA. Isn t the Health Savings Account (HSA) basically the same as the Health Reimbursement Account (HRA)?

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1 What is an HSA? The Health Savings Account (HSA) is a personal savings account that you use for health care. You may contribute pre-tax* monies towards this account to pay for out of pocket medical expenses such as the deductible under the Aetna HDHP plan and or coinsurance, dental and/or vision expenses. VMware will also fund monies for you based on coverage levels which can reduce the amount of the deductible under the Aetna HDHP plan. These funds are yours to keep and are portable if you leave VMware. You can decide to use the HSA account to pay for medical, dental or vision care out of pocket expenses such as office visits, lab work, X-rays and prescriptions now or in the future. It s only available if you enroll in the Aetna HDHP medical plan or you may decide to save these monies for future medical expenses in retirement and use post tax monies from your personal account. The choice is yours. *In CA, AL and NJ, the HSA is subject to state tax. Isn t the Health Savings Account (HSA) basically the same as the Health Reimbursement Account (HRA)? No. They work differently. The HSA is an account that you own and control and may contribute to, earns interest and offers certain tax advantages, and provides other advantages that the HRA does not.

2 Who can have an HSA? You can elect an HSA if you: (1) are enrolled in an HDHP, like the Aetna HDHP Plan, (2) are not enrolled in Medicare, (3) are not covered by a low-deductible medical plan, such as though your spouse or domestic partner, and (4) are not able to be claimed as a dependent on someone else s tax return. How do I establish my HSA? If you elect the Aetna HDHP plan for your medical coverage during open or new hire enrollment, your HSA account will be set up as part of your benefit enrollment process. Your account will be held with HealthEquity, VMware s HSA vendor. You will receive a Welcome Kit as soon as you are enrolled with detailed instructions on how to use the plan, review your account online, pay provider bills directly, save receipts online. How much does VMware contribute towards my HSA account? Based on a January 1* enrollment date, VMware will seed your HSA account as soon as the first payroll is run establishing your account through HealthEquity. Employee Only $500 + one time seed of $250 = $750 Employee + Spouse/Domestic Partner $1,000 + one time seed of $500 = $1,500 Employee + Child(ren) $1,000 + one time seed of $500 = $1,500 Employee + Family $1,000 + one time seed of $500 = $1,500 *Mid year hires/enrollment from July 1 December 31 will receive 50% of the above amount

3 What expenses can I pay with HSA dollars? You can pay for medical, dental and vision expenses, plus some expenses that insurance doesn't cover, such as in-home nursing services, smoking cessation programs and medications and LASIK eye surgery. There are restrictions. For example, you can't pay for cosmetic surgery or medical services you haven't received yet. For a complete list of expenses, visit to download Publication 502. You can also look for IRS Publication 969 for more information on HSAs. Or call the IRS at for a copy of either of these publications. Does the HSA pay for expenses automatically, like the HRA? No. You own your account, so you decide how and when to use your account for qualified expenses. You can decide to pay your provider using your debit card or save up your HSA dollars for future medical expenses during retirement. As long as it is used for qualified medical expenses all contributions including earnings on this account is tax free. You may elect to pay yourself for any unreimbursed medical expenses during any calendar year from the first day you established your HSA going forward. It is important to keep receipts of your expenses in case of an IRS audit. There is no substantiation required like a Health FSA. HealthEquity provides an online receipt drawer feature for you to save all your receipts which can help avoid being subject to a taxable distribution, if audited. How do I pay expenses with my account? You can use a number of different payment methods. They include a Health Equity debit card, online withdrawals, bank account links and direct deposit. You can even arrange to have payments made directly to a provider or to you as reimbursement for out-of-pocket expenses.

4 How do I access account information? The HSA administrator, HealthEquity provides you with a secure website where you can view balances, check on payments, review year-to-date contributions and much more. Single Sign on through the VMware benefits site Where are my HSA dollars kept? Your HSA contributions and the contribution that VMware makes are deposited in an HSA bank account that is administered by HealthEquity. How do I contribute to the HSA? You may elect to make pre-tax contributions on the ADP Benefits enrollment website. You can start, stop or change your contribution at any time by contacting HR Source at VMWARE8 and select option "US Benefits". You can also make an after tax contribution after the calendar year and prior to April 15 of the following tax year deadline. This allows you to contribute up to the maximum IRS limit for the previous calendar year (optional). You choose, which may be tax-deductible to you, but remember you cannot exceed the maximum contribution limit set forth by the IRS. The maximum limit is calculated using both, VMware s seed contribution and your contribution during the calendar year.

5 Are there limits to how much I can contribute to my HSA? Yes. The IRS determines the maximum amount that can be contributed to an HSA for a calendar year. The 2016 limits for all contributions (employee and employer combined) are $3,350 for an individual plan and $6,750 for a family plan. In addition, account holders who will be age 55 or older by December 31 of the calendar year are allowed to make an annual Catch-Up Contribution of up to $1,000 above IRS limits. Those who enroll in Medicare mid-year should pro-rate contributions. What happens if I don t contribute to my account? VMware will still make a contribution to your account if you are an active HSA eligible employee, and funds will roll over year to year and earn interest. However, if you don't contribute, your account won't grow as fast and you will have less money available to help pay your eligible medical expenses. What is the deadline for making contributions for a particular tax year? As indicated by the IRS, contributions may be applied toward a tax year until the tax filing deadline (typically April 15 of the following year). What happens to my HSA if I leave VMware? The HSA is portable you own your account and keep the full account balance if you leave VMware.

6 I use a post office box as my primary address, will that be a problem? As part of the Patriot Act, banks and other financial institutions are required to verify the identities of customers wishing to open accounts by using their street addresses. You cannot establish your HSA without providing a street address. When you establish your HSA, you will need to provide a physical mailing address (street address) that is not your PO Box. Can I have HSA mail sent to my PO Box? When you establish your HSA you will need to provide a physical mailing address (street address) as well as your PO Box. Once you ve established your account, you may receive HSArelated mail at your PO Box. Is there a minimum balance to earn interest? There is no minimum balance required to earn interest. The funds in your account will earn interest as long as there is a balance. Are there any fees for maintaining an HSA? No. As an active employee, there are no administrative fees for maintaining the HSA. However, you may incur fees under certain situations.

7 Is there a minimum balance I need to have in my HSA before I can begin using the investment options? Yes. You're required to maintain a minimum balance of $1,000 in order to invest. If you maintain this minimum balance, you may choose from several mutual fund investment options. Keep in mind that the money available to invest is the amount over the minimum required balance. Any HSA funds you choose to invest are in an investment account that is not FDIC insured. Is there a fee for using the investing options? HealthEquity does not charge fees to buy or sell mutual funds known as trading charges. Also, there are no fund minimums. HealthEquity does charge an investment platform admin fee of 0.40% annually. The mutual funds charge their own fund expense fee. To calculate the total expense to invest, add the fund expense fee and the HealthEquity investment administration fee to determine the total expense to invest. For example: The Vanguard Growth Index I (VIGIX) has a refund operating expense ratio of 0.08% annual, combined with the HealthEquity, Inc. Investment Administration Fee of 0.40% annual, represents a total expense to the investor of 0.48% annual to invest in this fund. This equates to $4.80 per year per $1,000 dollars invested in this example. Can I use my account to pay non-medical expenses? The HSA is designed to help pay qualified medical expenses. You own your account and may, in fact, use it as you choose. However, any withdrawals or payments from your account for nonmedical expenses will be included in your gross income and taxed. In addition, if you are under age 65 at the time of the withdrawal or payment, you will be subject to an additional 20% tax penalty that is imposed by the IRS.

8 Do I have to meet the annual deductible before using the HSA? No. In fact, any HSA funds that are used to pay for qualified expenses count toward your deductible and out-of-pocket maximum. I tried to purchase over-the-counter medication at a convenience store. Why was my card declined? Purchases on your HSA card are limited to a list of merchants that typically provide medical products and services. If you are at a convenience store, restaurant or other non-medicalrelated merchant, your debit card will not work. In the event that you pay for an eligible medical expense with non-hsa funds, there are several options for reimbursing yourself. Are there limits on how much I can spend on my debit card? Yes. There is a daily limit of $2,500 for point-of-sale purchases. How can I pay for medical expenses without being charged a transaction fee? Ask the merchant or provider to run your card as they would run a credit card. As long as you do not enter your PIN, you will not be charged a transaction fee. Can I use my HSA when I retire? Yes. The HSA is yours to keep and use, including the money contributed by VMware. You may continue to use it in retirement to pay qualified medical expenses. Once you are age 65 or older, you may use your HSA to pay for Medicare and other health coverage (other than premiums for a Medicare supplemental policy, such as Medigap), and other non-qualified expenses without penalty you will just pay income tax on those purchases.

9 Can I have an HSA and an IRA? Yes, having an HSA in no way restricts your ability to have an IRA. However, an HSA cannot be rolled over into an IRA. HSAs can only be rolled over to another qualified HSA without incurring tax consequences. How do the HSA and the Limited-Purpose Flexible Spending Account (FSA) work together? Both accounts can be used to reimburse dental and vision expenses. But it's best to use the Limited-Purpose FSA first. The most important reason is the "use it or lose it" provision of the Limited-Purpose FSA. Funds remaining in your account after the grace period must be forfeited, so it's a good idea to use them before the deadline for reimbursement. If you run out of funds in the Limited-Purpose FSA, you can turn to the HSA to pay vision and dental expenses. Another consideration is interest. The HSA earns interest, while the Limited-Purpose FSA does not. When you're able to pay dental and vision expenses with the Limited-Purpose FSA, you'll keep more money in your HSA. More money in your account means more interest earned. What happens to my account if I leave VMware and my HealthEquity account? Since you "own" your HSA, you keep your account and may continue to use the funds in your account to pay for qualified medical expenses. There is no time limit on using the funds. However, you may not actively contribute to your account unless you are enrolled in a highdeductible health plan (HDHP).

10 How can I find out more about the advantages of owing an HSA with an HDHP plan? HealthEquity has lots of online videos, documents webinars. You can also receive information on what tax receipts and reporting you will need to file when filing your income tax in 2017 for 2016 calendar year. Health Equity Where can I access my HSA information online? Contact Information: Online Single Sign on through the VMware benefits site Using our free mobile app By telephone: Hours: Customer service available 24/7