Santa Paula Unified School District (SPUSD) Health Savings Account (HSA) FAQs

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1 Santa Paula Unified School District (SPUSD) Health Savings Account (HSA) FAQs Does SPUSD offer a Health Savings Account (HSA) option for medical benefits? Starting with the Benefit Plan Year, Santa Paula Unified School District will offer two (2) different HSA plans through Coastal Schools Employee Benefits Organization (CSEBO). One is through Anthem Blue Cross- Lumenos HSA 709 and the other is through Kaiser - DHMO HSA #7590. What is a Health Savings Account (HSA)? An HSA is a tax exempt financial bank account you put money in to pay for health care services that are defined by the IRS as qualified medical expenses, which include dental and vision expenses. You will not pay federal taxes on the money contributed or withdrawn if used for qualified medical expenses. You can use the funds available in your account any time to pay for qualified medical expenses. Your account will earn interest, and you can take your account with you if you change jobs or retire. See question below on what defines Qualified Medical Expenses. You must be an eligible individual to qualify for an HSA. What are the benefits of an HSA? You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on your tax form You put money in your HSA with pre-tax contributions from your paycheck contributions are eligible for state taxes in California or post-tax contributions on your own. The contributions remain in your account until you use them. Any unused funds roll over each year to help pay for future health expenses there is no use it or lose it. Preventive care is covered at 100% in-network. You can use your HSA for you and your spouse and all dependents you claim on your tax return. The interest or other earnings on the assets in the account is tax free. Distributions may be tax free if you pay qualified medical expenses. An HSA is portable, it stays with you if you change plans or leave SPUSD, Anthem or Kaiser. After you accumulate a minimum amount ($1,000 Anthem and $2,000 Kaiser), you can invest money and earnings will be tax free. Who is eligible to set up an HSA? To be an eligible individual and qualify for an HSA, you must meet the following requirements: You must be covered under a high deductible health plan (HDHP). You have no other coverage except what is permitted. See question below on what defines Other Coverage. Some exceptions include specific injury insurance or coverage for accidents, disability, dental, vision or long-term care. You are not enrolled in Medicare or Medicaid. You cannot be claimed as a dependent on someone else s tax return. You must not be on active military status. 1

2 If you are a Veteran, you may not have received Veteran s benefits within the last three months. You cannot be enrolled in a full purpose Flexible Savings Account (FSA) including through a spouse exception is for dental and vision insurance known as limited-purpose. You may want to consult with a financial adviser for more information about HSA eligibility. See IRS Publication 969 on specific rules available at irs.gov/publications What are qualified medical expenses? Qualified medical expenses are defined by the IRS for tax purposes, and include many health care services and related costs, such as: Primary and specialty care visits Non-cosmetic dental care X-rays and lab tests Eyeglasses and LASIK vision correction Hospital visits Prescription drugs Dental and Vision expenses For a more detailed list, see IRS Publication 502, Medical and Dental Expenses, available at irs.gov/publications What is defined as Other Coverage? You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. However, you can still be an eligible individual even if your spouse has non-hdhp coverage provided you are not covered by that plan. You can have additional insurance that provides benefits only for the following items: Accidents. Disability. Dental, Vision or Long-term care. A specific disease or illness. Hospital indemnity if it pays a fixed cost per day, per admission or other period. Wellness programs offered by an employer, if they do not pay for significant medical benefits. Worksite employee assistance programs, if they do not pay for significant medical benefits. What is a High Deductible Health Plan (HDHP)? An HDHP has: A higher annual deductible than typical health plans. A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums. An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. 2

3 What is included in Preventive Care? Preventive care includes, but is not limited to, the following: Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Routine prenatal and well-child care. Child and Adult immunizations. Tobacco cessation programs. Screening services. This includes screening services for the following: Cancer. Heart and vascular diseases. Infectious diseases. Mental health conditions. Substance abuse. Metabolic, nutritional, and endocrine conditions. Musculoskeletal disorders. Obstetric and gynecological conditions. Pediatric conditions. Vision and hearing disorders. What is the difference between an HSA and a healthcare Flexible Spending Account (FSA)? Both HSAs and FSAs can be funded with pre-tax dollars and be used to pay for medical expenses. However, HSA balances can roll over from year to year, while a FSA money is forfeited if it is not spent during a 12- month period. If you leave your employer, your HSA dollars are yours to keep, FSA dollars are forfeited. Can I have an HSA and an FSA? Yes, you are eligible to have both an HSA and an FSA only if the FSA has been defined as either a: Limited/Special Purpose FSA, which may be limited to dental or vision services Limited Purpose High-Deductible FSA, which also allows for dental or vision services, as well as paying for coinsurance under the traditional health component of the plan, after meeting the deductible. Does SPUSD contribute a dollar amount toward an employee s HSA? Not at this time. How is my HSA funded? Your HSA is funded by your own pre-tax contributions, up to a certain annual limit contributions are eligible for state taxes in California. You may also contribute money to your HSA after taxes are taken out. Who can contribute to my HSA? You, your family members, your employer, and anyone else can contribute to your HSA. However, the combined total cannot exceed the calendar year maximum contributions determined by the IRS. Any amount in excess of the maximum yearly contribution will have to be withdrawn, and is subject to income tax and a 3

4 20% penalty. This is solely the responsibility of you, the employee. The employer has no way of tracking your contributions. See allowable contributions below: Single-Coverage $3,350 $3,400 Family-Coverage $6,750 $6,750 Age 55+ Catch-up Contribution $1,000 $1,000 These contribution amounts may be changed by the IRS for inflation each year. What is the deadline for enrolling in an HSA and making contributions? The deadline for setting up an HSA is the open enrollment deadline as set by the district each year. Contributions will be taken out on the regular payroll cycle and deposited on payday. Any additional amounts can be deposited with the respective vendor on your own. Once I am enrolled in an HSA qualified plan, how do I set up my account? Vendors will automatically start the account process once eligibility is received. Employee has to agree to terms and conditions prior to using the account. Your benefits administrator will help with the set-up of your account and will work with you on how much you plan to contribute to your HSA for the year, so she can manage your payroll contributions. When can I start accessing my HSA? You can use your HSA once you've opened the account and money has been deposited in the account. You cannot spend more from the account than has been deposited. How do I access the money in my HSA? The Anthem Blue Cross- Lumenos HSA 709 health plan comes with an HSA Visa Debit Card from HealthEquity and the Kaiser - DHMO HSA #7590 health plan comes with an HSA Visit Debit Card from healthpayment. Once you receive your debit card, it will have to be activated. You will then be able to access your account by logging into their website to track your account balance, add money to your HSA, check claims and pay your bills. How do my deductible and out-of-pocket maximum work? The main difference is how you pay for care. You will need to pay the full charges for covered services until you reach a set amount known as your deductible. For example, a $1,500 deductible means you will pay the full charges up to $1,500. After you reach your deductible, you will start paying less just a copay or a percentage of the charges (a coinsurance) for the rest of the year. Most preventive care services are covered at little or no cost even before you reach your deductible. Your plan also has an out-of-pocket maximum that helps limit how much you will pay for care. If you reach it, you will not have to pay for covered services for the rest of the year. This can help protect you financially if you ever have a serious illness or injury. 4

5 Payments for all covered services count toward your out-of-pocket maximum. After you reach your out-of-pocket maximum, the plan will pay for all covered services for the rest of the year. See your Evidence of Coverage for the plan details, plans run calendar year (January 1 December 31). Do copays, coinsurance, and deductible payments count toward my out-of-pocket maximum? Yes. Payments for all covered services count toward your out-of-pocket maximum. For example, let s say you had a deductible of $1,500 and an out-of-pocket maximum of $3,000. After reaching your $1,500 deductible, all of your copays and coinsurance would count toward your out-of-pocket maximum. Check your plans deductible. Will the dollars count toward my deductible? Will the dollars count toward my out-of-pocket maximum? Most preventive services YES YES All other covered services YES YES Prescription drugs YES YES With HSA qualified plans, medical and pharmacy services have one combined deductible. If my coverage starts in the middle of the year, how much can I contribute to my HSA? If you start your health plan in the middle of the year, you may still contribute up to the maximum dollar amount set by the federal government for that year. Here are important timeframes for you to keep in mind when contributing to your HSA: You must be enrolled in an HSA qualified deductible plan at least for the full month of December in the year for which you wish to contribute to your HSA. You must also remain enrolled for the full year following your midyear enrollment. If you do not remain enrolled for the full period, a portion of the maximum contribution you made for the year will be included in your taxable income for the year, which means you could pay taxes or penalties on it. What if I leave employment during the year and do not enroll in another HSA-compatible plan? If you leave employment, the annual contribution maximum is prorated. This is based on the number of months that you were enrolled in an HSA-compatible plan. If you fund your account for the entire year, then leave the plan and do not join HSA-compatible health plan, you will need to withdraw the excess funds before the end of the tax year. You ll have to treat these funds as taxable income if you have over-funded the account. If you do not, you may have to pay tax penalties. What if I use all the money in my HSA before the end of the year? If you use all of the money in your HSA and have already contributed the maximum amount permitted for the year or you reach your out-of-pocket maximum, you will have to pay (post-tax) with your own money for any other health care expenses until the end of the year. 5

6 What if I contribute too much to my account during a year and go over the annual maximum allowed? If you contribute too much to your account, IRS rules require that you pay regular income tax, plus a tax penalty on the amount you went over. Will my HSA earn interest? Yes. The HSA is an interest-bearing account. Can I invest my HSA? Yes. For the Anthem Blue Cross- Lumenos HSA 709 you will need to have at least $1,000 and for the Kaiser - DHMO HSA #7590 you will need to have $2,000. Each plan has a selection of investment funds to choose from. Are the interest and investment earnings in my HSA tax-free? Yes, when the funds are distributed and used for qualified health care costs. Interest and investment earnings grow tax-deferred in the account. That means you will only be taxed if funds are withdrawn for non-health care costs. What should I do with the receipts for services I had? You should keep them. Since you own the HSA, you are responsible for giving documentation to the IRS. If you ever need to, for the expenses charged to your HSA. Are there any special instructions for filing my taxes? Yes. You will have to complete a Form 8889 to report your HSA contributions and distributions when you file your taxes. Information from Form 1099-SA mailed to you by the financial institution shows annual distributions. You can find Form 8889 and instructions at irs.gov. You will receive Form 5498-SA from the HSA bank each May. It is for your information only. You do not need to file it with your tax return. You will need to keep track of your receipts for anything you pay for from your account in case you need to give documentation to the IRS to show you used any HSA funds on qualified health care cost. Please talk with a tax adviser to make sure you file your taxes correctly. If I leave the medical plan, what happens to my HSA? You own the HSA; the money is yours to keep. You may choose to keep the funds in your account or roll the funds into a different account. If you leave the funds in your account, you will have to pay monthly administration fees to keep it. If you retire and are insured by Medicare, change to a health plan that is not an HSA-compatible plan, you can still use your HSA to pay for out-of-pocket qualified health care costs. But you will not be able to make contributions to your HSA. What happens to my HSA when I turn 65? When you turn 65, you can still use the money in your HSA to pay for care. However, you will not be able to contribute money to your account once you're enrolled in Medicare. At age 65, you can also start using your account to pay for things other than medical expenses; such as Medicare premiums, but not Medicare 6

7 Supplement premiums. Any HSA money used for nonmedical expenses will be taxable as income but won't earn an additional penalty. Those younger than 65 who use their accounts for nonmedical expenses will need to pay income tax plus an additional 20 percent penalty on the amount withdrawn (unless they are disabled). What happens to my HSA if I die? You should choose a beneficiary when you set up your HSA. If your spouse becomes the owner of the account, your spouse can use it as if it were their own HSA. If you are not married, the account will no longer be treated as an HSA upon your death. The account will pass to your beneficiary or become part of your estate (and be subject to any applicable taxes). How can I find out more about HSA regulations? Go to the U.S. Treasury website at treasury.gov and type HSA in the search box. You may also read IRS Publication 969 at irs.gov/publications What is the Vendor contact information? Anthem may be reached at or anthem.com/ca Kaiser may be reached at or kp.org How can I get more information on our HSA plans? Friday, August 26, 2016 from 1:00 pm to 6:00 pm is the District s Annual Health and Benefit Fair. Representatives from Anthem and Kaiser will be on hand to answer questions. Specific questions not answered in this FAQs can be ed directly to Verena Hernandez, Employee Benefits Technician at vhernandez@santapaulaunified.org 7