Considering a Health Savings Account?

2 Basic HSA Plan Concept Part 1: High Deductible Health Plan Part 2: Health Savings Account Made by: Employer, Employee, and/or other party HSA Concept Intended to cover serious illness or injury Can pay for eligible expenses not covered by the health plan For 2009SingleFamily Min. Deductible $1,150$2,300 Max. Out of Pocket $5,800$11,600 For 2010SingleFamily Min. Deductible $1,200$2,400 Max. Out of Pocket $5,950$11,900 For 2009SingleFamily Max. Contribution $3,000$5,950 For 2010 SingleFamily Max. Contribution $3,050$6,150 Individuals can contribute the maximum regardless of their deductible.

3 HSA Eligibility  Covered by qualified high-deductible health plan (HDHP)  Not covered by any other non-HDHP  Not claimed as a dependent on another person’s tax return.  Not enrolled in Medicare *Section 152 of the Internal Revenue Code excludes spouses from the definition of dependent.

4 What is the catch-up contribution? Accountholders who are age 55 or older and not enrolled in Medicare can make catch- up contributions. YearCatch-up Amt $1,000 Note: Spouses of accountholders who are 55 or older and meet the IRS eligibility requirements can open their own HSA and make a catch-up contribution.

5 What are Qualified Expenses?  A Qualified Expense is generally a medical expense incurred for you, your spouse or your dependents.  A complete list is provided in IRS Publication  As described in IRS publication over-the counter medications are also considered eligible expenses for HSA purposes. Note: HSA does not provide tax advice. Please consult a qualified tax advisor with questions.

6 Other eligible medical expenses  Premiums for long-term care insurance  Limited to amount listed in 213(d)(10)  Premiums for "COBRA”  Premiums for coverage while receiving unemployment compensation  Premiums for individuals over age 65  Retirement Health Plan Premiums  Medicare Premiums

7 Tax Treatment of HSAs… For Employees/Accountholders  Contributions  Excluded (pre-tax) or deducted (after tax) from federal taxable income  Earnings  HSAs grow in the same tax- deferred manner as IRAs

8 Tax Treatment of HSAs (Continued) For Employees/Accountholders  Distributions  Withdrawals for qualified medical expenses are always tax- free. After age 65, funds may be withdrawn for any reason without penalty, subject to regular income tax.  Upon death of accountholder  If the spouse is the beneficiary, the HSA may transfer to the spouse’s name and remain a tax-favored account  If the beneficiary is not the spouse, the funds are paid to the beneficiary as a taxable transaction  If the HSA does not have a beneficiary, the funds are paid to the estate of the accountholder

9 Tax Savings Example Contribution$3,000 per year for 25 yrs Annual medical expenses$500 per year Tax Bracket28% (Federal) Average interest rate2% TAX SAVINGS ON CONTRIBUTIONS = $17, TAX SAVINGS ON DEFERRED GROWTH = $4, ACCOUNT BALANCE AT THE END OF 25 YEARS = $80, For illustrative purposes only. Actual savings may vary. Visit and click on Calculate Savings for a personalized estimate.

10 HSAs, HRAs, FSAs HSAHRAFSA Account Owner EmployeeEmployerEmployee Funding Employee, Employer, Other Employer Employee, Possible Employer Roll Over Year-To-Year Yes Generally No No PortableYes Generally No No

11 Advantages of an HSA For an Employee  Funds roll over year to year  No need to “use it or lose it”  Tax benefits on the contributions, earnings, and distributions  Potential for increased take-home pay  Long-term investment opportunity

12 Savings Account Option  Interest bearing “bank” account  Accounts are opened as an FDIC-insured bank account through Webster Bank, N.A.  Current interest rate and annual percentage yield information is available on our website, or by calling (800)  Interest Rate and APY are subject to change, at our discretion, at any time. Fees may reduce earnings.

13 Self-Directed Investment Option  TD Ameritrade Corporate Services  Access to stocks, bonds and over 11,000 mutual funds  Trades are made online or over the phone  Transfer funds from your HSA to your investment account:  Online through Internet Banking  By calling the Client Assistance Center Investment products are not FDIC insured, are not a deposit or other obligation of or guaranteed by the bank, and are subject to investment risks including possible loss of the principal amount invested.

14 Mutual Fund Selection  Devenir Investment Advisors  Selection Options  Employer can offer our standard selection of historically top-performing mutual funds  For an additional fee, employers can select mutual funds similar to their 401(k) offering  Trades are completed online through HSA Bank’s Internet Banking system Investment products are not FDIC insured, are not a deposit or other obligation of or guaranteed by the bank, and are subject to investment risks including possible loss of the principal amount invested.

15 Accountholder Communication and Reporting  Account statements  Periodic account inserts with valuable legislative information, account features, and more  IRS reporting  Year-end status report  1099-SA (distributions)  5498-SA (contributions)  Online Account Access through Internet Banking  Account balance and transaction history (Up to 18 mo. for convenient tax reporting)  View cancelled checks  Year-to-date information (Including a breakdown of contributions by source.)  Ability to download transaction history to Quicken or Money  confirmation of account opening and ongoing activity  Online address changes  Access to Online Contributions

16 Calculation Tools  Is an HSA Right for Me  Allows you to compare a traditional health plan and an HSA qualified plan to determine potential savings  Future Value Calculator  Calculates tax savings on contributions and tax-deferred growth as well as the future value of your Health Savings Account HSAFORM

17 Account Support  Toll-free Bankline  24-hour account access via touchtone phone (800)  Toll-free Client Assistance Center (800) a.m. – 9 p.m., Central Time, Monday – Friday  Toll-free Spanish Language Assistance Line (866) a.m. – 9 p.m., Central Time, Monday – Friday

18 Thank You for Considering…