Facts about your HSA. Your money works for you. W hat is a Healt h Savings Account (HSA)? W hat is a Qualif ied Hig h Deduct ible Healt h Plan (HDHP)?

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1 Facts about your HSA Your money works for you. W hat is a Healt h Savings Account (HSA)? A Health Savings Account is a special account used w ith a qualif ied Hig h Deductible Health Plan. HSAs offer you a different way to pay for health care. They enable you to pay for current health expenses and save for future qualif ied m edical expenses on a tax-f ree basis. You m ust be covered by a qualif ied Hig h Deductible Health Plan (HDHP) to take advantag e of an HSA. HDHP prem ium s g enerally cost less than traditional health care prem ium s, so the m oney that you save on insurance can be put into your Health Savings Account. You ow n and control the m oney in your HSA. Decisions on how to spend the m oney are m ade by you w ithout relying on a third party or a health insurer, as long as you follow the IRS-established g uidelines. (See IRS Publication 969.) W hat is a Qualif ied Hig h Deduct ible Healt h Plan (HDHP)? You m ust have an HDHP to open an HSA. An HDHP is a health insurance plan that has a hig her annual deductible than a traditional health plan. Your deductible is the am ount you pay for elig ible expenses f rom your ow n m oney before any benef its w ill be paid under the plan. Of course, your HSA is available to help you pay for the expenses your plan does not cover, including the deductible HSA q u alif icat ion s: SELF-ONLY COVERAGE Maxim um annual HSA contribution $3,500 Minim um annual deduct ible for HDHP $1,350 Maxim um annual out-of-pocket expense lim it for HDHP $6,750 *HDHPs can have f irst-dollar coverag e (no deductible) for preventive care and apply hig her out-of-pocket lim its (and copaym ents and coinsurance) for out-of-network services. FAM ILY COVERAGE Maxim um annual HSA contribution $7,000 Minim um annual deduct ible for HDHP $2,700 Maxim um annual out-of-pocket expense lim it for HDHP $13,500 Resource: w w.treasury.g ov/resource-center/faqs/taxes/pag es/health-saving s-accounts.aspx EMI.ENR.HSA-FAQ

2 W ho is elig ible for a Healt h Savings Account? You cannot have an HSA if your spouse's FSA or HRA can pay for any of your m edical expenses before your HDHP deductible is m et. To be elig ible for a Health Savings Account, you m ust be covered by a qualif ied Hig h Deductible Health Plan (HDHP) and m ust not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered "health insurance" (see below ) and w ill not jeopardize your elig ibility for an HSA. You cannot be covered by Medicare or Tricare and m ust not be a dependent on som eone else's tax return. Can I g et an HSA if I have ot her insurance t hat pays m edical bills? You are only allowed to have auto, dental, vision, disability and long-term care insurance at the sam e tim e as a Hig h Deductible Health Plan (HDHP). You m ay also have coverag e for a specif ic disease or illness as long as it pays a specif ic dollar am ount w hen the policy is trig g ered. Wellness prog ram s offered by your em ployer are also perm itted if they do not pay sig nif icant m edical benef its. I'm on Medicare, can I have an HSA? You are not elig ible for an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it and use the accum ulated balance to pay for qualif ied m edical expenses. However, you cannot continue to m ake contributions to an HSA after you enroll in Medicare. My em ployer offers an FSA; can I have bot h and FSA and an HSA? You can have both types of accounts, but only under certain circum stances. Full Flexible Spending Arrangem ents (FSAs) w ill probably m ake you inelig ible for an HSA. If your em ployer offers a "lim ited purpose" (lim ited to dental, vision, or preventive care expenses) or "post-deductible" (pay for m edical expenses after the plan deductible is m et) FSA, then you can still be elig ible for an HSA. My em ployer offers an HRA; can I have bot h an HRA and and HSA? You can have both types of accounts, but only under certain circum stances. General Health Reim bursem ent Arrangem ents (HRAs) w ill probably m ake you inelig ible for an HSA. If your em ployer offers a "lim ited purpose" (lim ited to dental, vision or preventive care) or "post-deductible" (pay for m edical expenses after the plan deductible is m et) HRA, then you can still be elig ible for an HSA. If your em ployer contributes to an HRA that can only be used w hen you retire, you can still be elig ible for an HSA. My spouse has an FSA or HRA t hroug h his/her em ployer; can I have an HSA? You cannot have an HSA if your spouse's FSA or HRA can pay for any of your m edical expenses before your Hig h Deductible Health Plan deductible is m et. Can I st art an HSA for m y child? No, you cannot establish separate accounts for your dependent children, including children w ho can leg ally be claim ed as dependents on your tax return. Pag e 2

3 I'm a single parent w it h an HDHP but have a child/relat ive t hat can be claim ed as a dependent for t ax purposes, and t his dependent also has non-hdhp coverag e. Am I st ill elig ible for an HSA? Yes, you are still elig ible for an HSA. Your dependents' non-hdhp coverag e does not affect your elig ibility, even if they are covered by your HDHP. Do unused funds in an HSA roll over year after year? Yes, the unused balance in a Health Savings Account autom atically rolls over year after year. You won't lose your m oney if you don't spend it w ithin the year. How m uch can I contribute to m y HSA each year? Reg ardless of w hat point in the year your Hig h Deductible Health Plan was opened, you and your em ployer are elig ible to m ake contributions up to, but not exceeding, the m axim um of $3,500 for individual coverag e, or $7,000 for fam ily coverag e. These num bers are valid for If you are ag e 55 or older, you can also m ake additional "catch-up" contributions (see below ). I have a very hig h deduct ible; is t here a lim it on how m uch I can contribute? The m ost you (or anyone else on your behalf, including your em ployer) can contribute to your account for 2019 is $3,500 if you have single coverag e and $7,000 for a fam ily. These am ounts typically increase each calendar year. Do m y HSA contributions have to be m ade in equal am ounts each m onth? No, you can contribute in a lum p sum or in any am ounts or f requency you w ish. However, your account trustee /custodian (bank, credit union, insurer, em ployer, etc.) can im pose m inim um deposit and balance requirem ents. Can m y em ployer contribute to m y HSA? Contributions to HSAs can be m ade by you, your em ployer, or both. All contributions are ag g reg ated to determ ine w hether you have contributed the m axim um allowed. If your em ployer contributes som e of the m oney, you can m ake up the difference. Do m y contributions provide any t ax benef it? Your personal contributions offer you an "above-the-line" deduction. An "above-the-line" deduction allow s you to reduce your taxable incom e by the am ount you contribute to your HSA. You do not have to item ize your deductions to benef it. Contributions can also be m ade to your HSA by others (e.g., relatives). However, you receive the benef it of the tax deduction. Can I m ake contributions t hroug h m y em ployer on a pre-t ax basis? If your em ployer offers a "salary reduction" plan (also know n as a "Section 125 plan" or "cafeteria plan"), you (the em ployee) can m ake contributions to your HSA on a pre-tax basis (i.e., before incom e taxes and FICA taxes). If you can do so, you cannot also take the "above-the-line" deduction on your personal incom e taxes. Pag e 3

4 Can I claim bot h t he above-t he-line deduct ion for an HSA and t he item ized deduct ion for m edical expenses? You m ay be able to claim the m edical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution f rom the HSA, including distributions taken for non-m edical expenses, in the calculation for claim ing the item ized deduction for m edical expenses. I'm over 55 and w ould like to m ake catch-up contributions to m y HSA like I've done w it h m y IRA. Is t hat possible? Yes, individuals 55 and older w ho are covered by a Hig h Deductible Health Plan can m ake additional catch-up contributions each year until they enroll in Medicare. The additional HSA "catch-up" contributions allowed are $1,000 annually. I t urned 55 t his year. Can I m ake t he full catch-up contribution? If you had Hig h Deductible Health Plan (HDHP) coverag e for the full year, you can m ake the full catch-up contribution reg ardless of w hen your 55th birthday falls during the year. If you did not have HDHP coverag e for the full year, you m ust pro-rate your "catch-up" contribution for the num ber of full m onths you were "elig ible", i.e., had HDHP coverag e. If bot h spouses are 55 and older, can bot h spouses m ake catch-up contributions? Yes, if both spouses are elig ible individuals and both spouses have established an HSA in their nam e. If only one spouse has an HSA in their nam e, only that spouse can m ake a "catch-up" contribution. Does t ax f iling st at us (joint vs separate) affect m y contribution? Tax f iling status does not affect your contribution. May a self-em ployed person contribute to an HSA on a pre-t ax basis? No. Self-em ployed persons m ay not contribute to an HSA on a pre-tax basis and m ay not take the am ount of their HSA contribution as a deduction for SECA purposes. However, they m ay contribute to an HSA w ith after-tax dollars and take the above-the-line deduction. How do I know w hat is included as "qualif ied m edical expense?" Unfortunately, we cannot provide a def initive list of "qualif ied m edical expenses." A partial list is provided in IRS Pub 502 (available at w w w.irs.g ov/pub/irs-pdf/p502.pdf). A determ ination of w hether an expense is for "m edical care" is based on all the relevant facts and circum stances. To be an expense for m edical care, the expense has to be prim arily for the prevention or alleviation of a physical or m ental defect or illness. W hat happens if I don't us t he m oney in t he HSA for m edical expenses? If the m oney is used for other than qualif ied m edical expenses, the expenditure w ill be considered incom e and be taxed and, for individuals w ho are not disabled or over ag e 65, subject to a 20 percent tax penalty. Pag e 4

5 Can I use t he m oney in m y HSA to pay for m edical care for a fam ily m em ber? Yes, you m ay w ithdraw funds to pay for the qualif ied m edical expenses of yourself, your spouse or a dependent w ithout tax penalty. This is one of the g reat advantag es of HSAs. Can I pay m y healt h insurance prem ium s w it h an HSA? Typically you cannot use your HSA to pay health insurance prem ium s unless you are collecting Federal or State unem ploym ent benef its, or you have COBRA continuation coverag e throug h a form er em ployer. (See IRS Publication 969.) Can I purchase long-term care insurance w it h m oney f rom m y HSA? Yes, if you have tax-qualif ied long-term care insurance. However, the am ount considered a qualif ied m edical expense depends on your ag e. (See IRS Publication 502 for the am ounts deductible by ag e.) I already have an HSA but no longer have a HDHP. Can I st ill use t he m oney t hat is already in t he HSA for m edical expenses t ax-f ree? Once funds are deposited into the HSA, the account can be used to pay for qualif ied m edical expenses tax-f ree, even if you no longer have HDHP coverag e. The funds in your account roll over autom atically each year and rem ain indef initely until used. There is no tim e lim it on using the funds. There m ay be an adm inistrative cost to m aintain the HSA. (Please refer to the HSA adm inistrator.) W hat happens to t he m oney in m y HSA if I lose m y HDHP coverag e? You can continue to use your account tax-f ree for out-of-pocket health expenses. W hen you enroll in Medicare, you can use your account to pay Medicare prem ium s, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benef its throug h your form er em ployer, you can also use your account to pay for your share of retiree m edical insurance prem ium s. The one expense you cannot use your account for is to purchase a Medicare supplem ental insurance or "Medig ap" policy. Once you turn ag e 65, you can also use your account to pay for things other than m edical expenses. If used for other expenses, the am ount w ithdraw n w ill be taxable as incom e but w ill not be subject to any other penalties. Individuals under ag e 65 w ho use their accounts for non-m edical expenses m ust pay incom e tax and a 20 percent penalty on the am ount w ithdraw n. W ho w ill be t he bookkeeper for m y HSA? It is your responsibility to keep track of your deposits and expenditures and keep all of your receipts. Pag e 5

6 How do I use m y HSA to pay m y physician w hen I'm at t he physician's off ice? If you are still covered by your Hig h Deductible Health Plan (HDHP) and have not m et your policy deductible, you w ill be responsible for 100 percent of the am ount ag reed to be paid by your insurance policy to the physician. Your physician m ay ask you to pay for the services provided before you leave the off ice. If your HSA adm inistrator has provided you w ith a checkbook or debit card, you can pay your physician directly f rom the account. If the adm inistrator does not offer these features, you can pay the physician w ith your ow n m oney and reim burse yourself for the expense f rom the account after your visit. If m y spouse enrolled in Medicare, can I st ill contribute to an HSA? Beg inning w ith the f irst m onth you or your spouse are enrolled in Medicare, the contribution lim it becom es zero for w hoever is enrolled in Medicare. If your spouse is enrolled in Medicare, then you can still contribute on behalf of yourself but not your spouse. Resou rces: IRS Publication w w.irs.g ov/publications/p502/ IRS Publication w w.irs.g ov/publications/p969/ar02.htm l w w.treasury.g ov/resource-center/faqs/taxes/pag es/health-savings-accounts.aspx Leg al Disclaim er: The inform ation contained on this docum ent does not constitute leg al advice or tax advice. Its authors m ake no claim s about its accuracy, com pleteness, or up -to-date character. Leg al rules and tax rules change f requently; therefore, we cannot g uarantee that any inform ation on this docum ent is accurate or up to date. Nothing in this docum ent should be viewed as tax advice nor is any inform ation in this docum ent intended to be used for the purpose of state or federal tax penalty protection. Leg al advice, including tax advice, m ust always be tailored to your circum stances, and nothing in this docum ent should be viewed as a substitute for the advice of a com petent attorney. Pag e 6