Health Savings Plan Overview

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Presentation transcript:

Health Savings Plan Overview August 2016

Health Savings Plans Overview of Account-Based Plans HSAs are funded, individually owned accounts HSAs are portable, earn interest, and can be invested HSAs usually funded by employees with some level of employer funding for eligible employees HSAs have federal mandated design parameters (e.g., deductible and out-of-pocket limits) 100% After Out-of-Pocket Maximum Preventive Care and Preventive Rx (100%) In-Network Insurance (example: 80%) Out-of-Network Insurance (example: 60%) Pharmacy (example: 80%) Member Responsibility Deductible Health Savings Account (employer and/or employee funded)

Health Savings Plans Overview of Account-Based Plans Who owns the account? Employee Who funds the account? Contributions are deposited into the account by employee and/or employer Do funds accrue interest? Yes, interest accrues tax-free Do unused funds roll over to the next year? Yes Is the account portable between employers? What type of health plan is compatible with the account? Only qualified High-Deductible Health Plans (HDHP) like the Colliers Health Savings Plans 1 and 2 3

Health Savings Plans Overview of Account-Based Plans What expenses qualify for reimbursement? Qualified medical expenses as defined by IRS Publication 502; Some non-medical expenses are allowed and taxed as income with a 20% penalty until age 65 (after age 65 no penalty) Are contributions tax-free? Contributions to the HSA are tax-free and distributions can be taken out tax-free as long as they are spent on qualified medical expenses. What are the contribution limits? IRS announces annual contribution limits Who owns the account value? Once money is contributed into the HSA, those dollars immediately belong to the account holder. 4

Refer to IRS Publication 969 for more information about HSAs. Health Savings Plans Overview of Account-Based Plans HSA Can I access the full amount at the beginning of the plan year for expenses? No, only funds available in the account can be distributed Can this fund be used in conjunction with other funds? HSAs can be used only with a limited-purpose FSA for dental & vision expenses; or a post-deductible FSA (medical expenses reimbursed only after deductible is met) Who is responsible to substantiate that funds are used for qualified expenses? Employees bear the responsibility of substantiation Refer to IRS Publication 969 for more information about HSAs.

Two Components of a Health Plan High deductible health insurance plan (HDHP) design driven by IRS requirements Deductible is either employee only OR family based on enrollment Tax-advantaged banking account (HSA) Employer chooses bank (and usually pays associated fees) Employee opens up the account if eligible to make / receive contributions Funding by employer and / or employee Account belongs to employee and is fully portable

HSA Rules Contributions going into an HSA are tax-free1 if: You are covered by a qualified HDHP like the Colliers Health Savings Plans You are not covered by a non-HDHP (includes spouses FSAs) You are not entitled (eligible AND enrolled) to Medicare You are not claimed as a dependent on someone else’s tax return Distributions are tax-free and can be used for: Qualified medical, prescription drug, dental, and vision expenses (Pub 502) for you, your spouse, & dependents claimed on your tax return Premiums for: Long-term care insurance Coverage while receiving unemployment benefits COBRA premiums Post-65 premiums EXCEPT Medicare Supplement (such as Medigap) policies 1 Rules apply to the person whose account is receiving contributions

2016 Health Plan Requirements and HSA Limits Set Annually by IRS IRS Design Requirements 2016 Minimum Deductible – Single $1,300 Minimum Deductible – Family $2,600 Maximum Out of Pocket (OOP) – Single (plan design can have a lower OOP) $6,550 Maximum Out of Pocket (OOP) – Family (plan design can have a lower OOP) $13,000 HSA Contribution Maximum – Single $3,350 HSA Contribution Maximum – Family $6,750 HSA Catch-up Contribution (age 55 or older) $1,000 Total amount that can be contributed by or on behalf of an employee for the calendar year

Tax Savings of your Health Savings Account Triple tax savings Contribution dollars going in are not taxed for federal purposes. May be subject to state tax in some states, including California Earnings in the HSA are not taxed Distributions for qualified expenses are not taxed ** Mercer studies show 2% trend reduction from addition of HSA

Health Care (HC) Related Tax Summary 401(k) Health Care (HC) Related Other Pre-Tax Roth HRA HSA HC FSA Dep. FSA Contributions tax deductible for employee N/A Tax-free growth of investments Tax-free distribution