1. November 5, 2015 PAIU HRBA Conference HRA, HSA, FSA Overview

2. Agenda Introduction Health Reimbursement Accounts Health Savings Accounts Flexible Spending Accounts Issues to Consider 2

3. Organization Structure 3

4. U.S. Retirement Partners-USRP Largest National Independent K-12 Employee Retirement & Benefit specialist  Work with 4,000 school districts  Over 1,000,000 clients Pennsylvania  Retirement Planning- Kades~Margolis Corp.  Employee Benefits Consulting- USEBSG Leading Employee Benefits Technology Platform ACA Compliance Administration Innovative Value Based Benefit Solutions 4

5. HRAs, HSAs, FSAs  HRA- Health Reimbursement Accounts  HSA- Health Savings Accounts  FSA- Flexible Spending Accounts All share the common characteristic that they enable the use of pre-tax dollars to be used to pay for certain health related expenses The main differences are in how the accounts can be funded and in restrictions on using the accounts 5

6. HRAs  Used to reimburse employees eligible health care expenses not covered by another health plan  Pre-Tax contributions can be made by employer only  Administered by employer or a 3 rd party  Significant flexibility on eligible expenses but must be defined in Plan Document  Unused funds may “rollover” year over year to incent participants to conserve spending including post- employment 6

7. HRAs (continued)  There is no limit for contributions to an HRA  Funding is on a “pay as you go” basis  Often used in conjunction with an increase in employee out of pocket costs for certain services (Hospitalizations, Complex Diagnostics, ER, Specialty RX etc.)  Employee or dependent does not need to be covered by employer medical plan 7

8. HSAs  Pre-Tax contributions can be made by employer or employee through payroll deduction or in a lump sum  Must only be covered by a qualified High Deductible Health Plan (HDHP) to be eligible to contribute- Minimum Plan Deductible $1,300 Single/ $2,600 Family  Can not be enrolled in Medicare and contribute  Administered by a bank, credit union or insurance company but account is owned by participant even if they are no longer employed  Funds typically accessed through a debit card 8

9. HSAs (continued)  Funds can be used for qualified medical, dental or vision expenses such as copays, deductibles or other out of pocket expenses  Unused funds “rollover” year over year and can have a wide variety of investment options  Limit for contributions in 2015 $3,350 for Single coverage (No change 2016) and $6,650 with dependents ($6,750 in 2016)  Additional “catch up” contribution of $1,000 if 55+ until enrolled in Medicare  Penalty for early withdrawal prior to 65 or disabilty is 20% plus taxes 9

10. FSAs  Also called Cafeteria Plans or 125 Plans  Contributions typically made by employee only through payroll deduction and are not subject to employer or employee payroll taxes  Administered by employer or 3 rd party  Funds can be used for qualified medical, dental or vision expenses such as copays, deductibles or other out of pocket expenses (IRS Publication 502)  Funds must be used during plan year or they are forfeited- “Use it or Lose it” (some grace period or carry over rules may apply) 10

11. FSAs (continued)  Limit for contributions in 2015 and 2016 is $2,550 but employers can set a lower limit  Participants are responsible for expense eligibility if audited  A Dependent Care FSA can allow funds to be used for Day Care or Senior Care expenses- Federal cap is $5,000 annually per household  Other FSAs can be set up for parking/transit reimbursement ($255 per month for parking and $130 for transit in 2016) 11

12. Issues to Consider  Employer and Employee contributions to HRAs, HSAs and FSAs may all be subject to Cadillac Tax  HRA- Certain fees attributable to the ACA are required to be reported and paid by an employer or an administrator on their behalf  FSA- An employee has access to their entire annual contribution at the start of the plan year and does not have to repay the amount if they are terminated/quit  FSA- Any unspent employee contributions beyond the plan year or any grace period are forfeited to the employer plan- “Use it or lose it” 12

13. Issues to Consider (continued)  HSA/FSA- An individual can not establish an HSA if they or their spouse is already covered under a general purpose (medical) FSA  Employers that establish a qualified High Deductible Plan during the plan year of the FSA must recognize that employees participating in the medical FSA would not be eligible to contribute to an HSA  If there is a grace period in the FSA, a participant would have to wait until all funds were used or the end of the grace period to begin HSA contributions 13

14. Questions & Answers 14

15. Thank You! 15 Paul J. Miller, CEBS Managing Director U.S. Employee Benefits Services Group 940 West Valley Rd., Suite 1200 Wayne, PA 19087 Direct Dial: 610-971-1080 ext. 160 Mobile: 610-246-2729 Email: pmiller@usebsg.compmiller@usebsg.com