KNOW YOUR BENEFITS Health Savings Account (HSA) Qualified H igh Deductible Health Plan (QHDHP)
KNOW YOUR BENEFITS HSA BASICS 1 2
What is an HSA? • A health savings account (HSA) is an account that you can use to pay health care expenses: KNOW YOUR BENEFITS…. – Must be used in conjunction with a Qualified High Deductible Health Plan (QHDHP). Qualified means an HSA can be offered alongside the underlying medical plan. – You own the account, but both you and your employer can contribute funds. – Tax-advantages: Contribute pretax money, funds accrue tax-free and withdraw funds tax-free (if used for eligible health care expenses – medical, dental and/or vision expenses). 2
Benefits of an HSA • Triple tax advantage means you save money on KNOW YOUR BENEFITS…. your health care expenses. • Funds rollover each year, so you can use your HSA to save tax-free money for retirement. • You own the account, even if you leave the company/ • Lower monthly premiums than a traditional health plan. 3
QHDHPs & HSAs • HSAs can only be offered with a QHDHP. • This is a plan that must provide coverage as KNOW YOUR BENEFITS…. follows: (Limits established by the IRS) – Minimum deductible: • $1,300 single, $2,600 family (for 2017) • $1,350 single, $2,700 family (for 2018) – Maximum annual out-of-pocket: • $6,550 single, $13,100 family (for 2017) • $6,650 single, $13,300 family (for 2018) • Though the deductible is higher for this plan than traditional plans, your monthly premium is lower, and HSA funds can pay for qualified health care expenses. 4
How Does an QHDHP/HSA Work? • You contribute money to the HSA (either a lump sum payment or monthly through payroll KNOW YOUR BENEFITS…. deductions). You can also change your payroll deductions as often as monthly, if need be (so long as done in advance of payroll run and appropriate forms are turned in). • You can use HSA dollars to pay your health insurance deductible, along with other qualified health care expenses such as dental or vision services. • Once you meet your medical deductible and coinsurance limit, your insurance pays additional covered expenses in accordance with your plan (mostly at 100% in network). 5
Who is Eligible For an HSA? • Anyone who is: KNOW YOUR BENEFITS…. – Covered by an QHDHP – Not enrolled in Medicare (Parts A, B, C and/or D) – Not covered under other health insurance (including Medicaid or Tricare)* – Not covered under Healthcare Marketplace – Not eligible or enrolled in another Medical flexible Spending Account (FSA) – Not another person’s tax dependent *Other health insurance does not include: specific disease or illness insurance, accident, disability, dental care, vision care and long-term care insurance 6
KNOW YOUR BENEFITS…. HSA CONTRIBUTIONS 7
HSA Contribution Limits • Each year, the IRS sets contribution limits KNOW YOUR BENEFITS…. – These limits are for the TOTAL funds contributed, including company contributions, your contributions, and any other contributions. It is YOUR responsibility to monitor this and ensure compliance! • 2017 limits: – $3,400 for individual coverage – $6,750 for family coverage • 2018 limits: – $3,450 for individual coverage – $6,900 for family coverage 8
HSA Contributions • You are allowed to contribute the entire year’s limit KNOW YOUR BENEFITS…. when you first become eligible for the HSA, as long as you are still eligible on the first day of the last month of your tax year (Dec. 1 for most taxpayers). • However, if you join mid-year and contribute the maximum amount to your HSA, you must remain eligible for at least 12 months after the last day of the last month of that tax year (Dec. 31 for most taxpayers), or you will be subject to taxes and penalties on the amount you contributed. 9
Catch-up Contributions • For individuals ages 55-plus, the IRS allows KNOW YOUR BENEFITS…. additional “catch - up contributions”. • Eligible individuals may contribute an extra $1,000 for the year. • This rule is meant to help save additional money for retirement 10
KNOW YOUR BENEFITS…. HSA DISTRIBUTION RULES 11
HSA Distribution Rules • Distributions from your HSA are tax-free if they are taken for “qualified health care expenses”. KNOW YOUR BENEFITS…. • You will receive a debit card to easily access your funds, but it’s like your personal checking or savings account – you can only pull out what you have deposited. • Your HSA can only be used for expenses that are incurred on or after the date the HSA was established. • However, HSA funds can be used for expenses from a prior year, as long as the expenses incurred on or after the date the HSA was established. 12
HSA Distribution Rules • HSA distributions can be taken for qualified KNOW YOUR BENEFITS…. health care expenses for the following people: – The account holder (person enrolling in the QHDHP) – Spouse of that individual (even if not covered by the QHDHP) – Dependents of that individual (even if not covered by the QHDHP). Must be Tax Dependents. 13
Distributions — Age 65+ • For individuals age 65 and older, HSA KNOW YOUR BENEFITS…. distributions can be used for nonqualified medical expenses without facing the 20% penalty – However, income taxes will apply for non qualified distributions – This rule is regardless of whether the individual is enrolled in Medicare post age 65 14
KNOW YOUR BENEFITS…. QUALIFIED HEALTH CARE EXPENSES 15
Qualified Health Care Expenses • The IRS defines expenses that are considered “qualified health care expenses” for HSA KNOW YOUR BENEFITS…. distributions. • Expenses must be primarily to treat or prevent a physical or mental defect or illness. • If you use HSA funds for expenses beyond what the IRS defines as qualified, you will be subject to income tax on the distribution and an additional 20% penalty. 16
Qualified Health Care Expenses • Examples of qualified health care expenses include: KNOW YOUR BENEFITS…. – Most medical care that is subject to your deductible (copays, coinsurance, doctor visits, inpatient or outpatient treatment, etc.) – Prescription drugs – Insulin (with or without a prescription) – Dental and vision care – Select insurance premiums • COBRA, qualified long-term care insurance, health insurance premiums paid while receiving unemployment benefits, health insurance after you turn 65 except for a Medicare supplemental policy The Business Office can provide you with a full list of eligible expenses upon request. 17
Ineligible Health Care Expenses • Expenses that are not considered “qualified health care expenses” include: KNOW YOUR BENEFITS…. – Insurance premiums (other than the exceptions listed on the previous slide) – Over-the-counter drugs (unless a prescription is retained from a physician – insulin is an exception) – Surgery purely for cosmetic reasons – Cosmetic Dental and Vision services – Expenses covered by another insurance plan – General health items such as tissues, toiletries and hand sanitizer The Business Office can provide you with a longer list of ineligible expenses upon request. 18
Recordkeeping • Whenever you use HSA funds to pay for a KNOW YOUR BENEFITS…. health care expense, you should keep your receipt (keep for at least 7 years recommended). • You may need to demonstrate to the IRS that HSA distributions were for qualified health care expenses. • If the IRS requests receipts for verification purposes, failure to provide those receipts could result in having to pay a penalty. 19
Thank you! If you have additional questions, please contact the Business Office. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change. . 20
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