Are HSA (Health Savings Accounts) for you and or your company.
These plans require some form of management by the company and or individual considering an HSA plan.
1) Systematic Savings to allow money available for future expenses.
2) Understanding of how to choose a provider. Doing the research and using available PPO networks.
3) Knowning what are fare costs for services, negotiating discuounts for cash and other monetary payment management.
4) Taking responsibility for ones health condition and factors of maintaining good health.
These plans require a greater awarness of health, health care, providers and costs. One way is to use a 3rd party administrator to review costs and make sure that the best discounts where achieved, as well as have a system to review providers and costs of services.
Plans are not the same as a regular health plan, but with higher costs of plans and more exposure to the expenses of health care they do offer tax advantages not found in traditional plans.
The following will assit you with a great understanding of HSA plans.
How much you can save with an HSA....
HSA's
The following are key facts about H S A’s. For more information, please read the complete list of frequently asked questions below.WHAT IS AN HSA?Think of H S A’s as "medical" IRAs. They are tax-free accounts that individuals with high-deductible insurance policies can fund and use to pay for medical expenses. Because they are tax-advantaged and balances can accumulate over time, H S A’s can also be used to accumulate wealth. In addition, H S A’s are owned by the individual account holder and therefore portable.Since inception in January 2004, H S A’s are quickly gaining in popularity among individuals and employers. Key facts from several recent studies indicate strong interest:
Of employers surveyed, 73% said they were very or somewhat likely to offer H S A’s by 2006. ~ Mercer Human Resource Consulting
Among these employers, 21% said employees are inquiring about H S A’s. Among larger employers, 42% of employees expressed interest. ~ Mercer Human Resource Consulting
Among small business owners, 73% found the concept of H S A’s appealing. ~ National Small Business Association H S A’s appeal to all income groups. A recent Health Insurance study shows nearly 50% of HSA purchasers make less than $50,000.
HSA ExampleWHO IS ELIGIBLE FOR AN HSA?To be eligible for an HSA, the subscriber must be covered only by an HSA compatible, high deductible health plan, be under 65 years of age, and must not be a dependent on another person's tax return.A high deductible health insurance plan is one with an annual deductible of at least:$1,000 for individuals $2,000 for families Annual out-of-pocket expenses cannot exceed $5,000 for individuals or $10,000 for families WHO CAN CONTRIBUTE & HOW MUCH IS ALLOWED?Individuals and employers can contribute to H S A’s. The maximum annual contributions are equal to the deductible amount of the high deductible plan or $2,600 for individuals and $5,150 for families.WHAT ARE THE INVESTMENT OPTIONS WITH AN HSA?H S A account holders can invest contributions in passbook savings, money market funds, mutual funds, stocks and bonds.HOW CAN FUNDS BE USED?H S A funds can be used to pay for a variety of health care services many that are not traditionally allowed under other plans. For a complete list, see the FAQ section of this site.
Frequently Asked Questions
The following summary of the laws and regulations concerning health savings accounts is presented for informational purposes only. Please consult your tax or legal advisor for more detailed information.
Eligibility Requirements
WHAT IS A HEALTH SAVINGS ACCOUNT?The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 added section 223 to the Internal Revenue Code to permit eligible individuals to establish health savings accounts (H S As) for taxable years beginning after December 31, 2003. An H S A allows individuals to pay for qualified health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. An H S A is similar to an Individual Retirement Account ("IRA"). Like an IRA, an H S A is established for the benefit of an individual, is owned by that individual, and is "portable." Thus, if the individual is an employee who changes employers or leaves employment, the H S A stays with the individual. However, an IRA cannot be used as an H S A nor can you combine an IRA and an H S A in a single account.WHO IS ELIGIBLE FOR AN HSA?To be eligible for an HSA, you must be covered by a high deductible health plan and you must not be covered by other health insurance. (This restriction does not apply to specific injury insurance and accident, disability, dental care, vision care, or long-term care insurance.) In addition, you cannot be eligible for Medicare nor can you be claimed as a dependent on someone else's tax return. You are also ineligible for an HSA if, while covered under a high deductible health plan, you are also covered (whether as an individual, spouse, or dependent) under a health plan that is not a high deductible health plan.WHAT IS A "HIGH DEDUCTIBLE HEALTH PLAN"?A high deductible health plan is a health insurance plan that has an annual deductible of at least: (1) $1,000 for individual (self-only) coverage or (2) $2,000, for family coverage (coverage of more than one individual). The annual out-of-pocket expenses amount that is required to be paid out under the health plan cannot exceed $5,000 for individual coverage or $10,000 for family coverage. Out-of-pocket expenses include deductibles, co-payments, and other amounts the participant must pay for covered benefits, but do not include premiums. High deductible health plans can have first dollar coverage (no deductible) for preventive care and higher out-of-pocket expenses (co pays & coinsurance) for non-network services.(The dollar amounts described above are subject to annual cost of living adjustments.)WHO CAN OFFER A HIGH-DEDUCTIBLE HEALTH PLAN?A high-deductible health plan may be offered by a variety of entities, including insurance companies and health maintenance organizations (HMOs).ARE HAS’S ALLOWED UNDER A CAFETERIA PLAN?If a high-deductible health plan is offered as part of a cafeteria plan, it can be used to establish your eligibility for an H S A. (A cafeteria plan or flexible benefit plan is an employee benefit plan that permits employees to choose from a variety of benefits, including health and accident insurance, cash, tax advantages, and retirement plan contributions.)
Establishing an H S A
HOW DO YOU ESTABLISH AN HSA?If you are an eligible individual, you can establish an HSA with a qualified H S A trustee or custodian, in much the same way that individuals establish IRAs with qualified IRA trustees or custodians. No permission or authorization from the Internal Revenue Service ("IRS") is necessary. The trustee or custodian may require you to complete a written HSA custodial or trust agreement.CAN YOU REVOKE YOUR HSA CUSTODIAL AGREEMENT?You may revoke a Custodial Agreement at any time. Please refer to the custodial agreement of your custodian as to revocation and terms.
Contributions to H S A’s
WHO MAY CONTRIBUTE TO AN HSA?Contributions to H S A plans can be made by an eligible individual, an employer, or both. Contributions made by the individual are deductible from the individual's adjusted gross income. Contributions made by the individual's employer are excluded from the individual's income and are not taxable to the individual. Certain other persons can also make contributions to an H S A on behalf of an eligible individual. Contributions from all sources are aggregated for purposes of applying the maximum annual contribution limit described below.HOW DO YOU MAKE CONTRIBUTIONS TO AN HSA?Contributions to an HSA must be made in cash or its equivalent. Custodian of your H S A, will accept contributions by check or via the Automated Clearing House (ACH) Network. Custodians will also accept rollovers or transfers of assets from a medical savings account ("MSA"), as permitted by the Internal Revenue Code.HOW MUCH CAN YOU CONTRIBUTE TO AN HSA?The maximum contribution for any year is the lesser of the amount of the high-deductible health plan's annual deductible or $2,600 for an individual or $5,150 for a family. (These dollar limits will be adjusted for inflation each year.) These annual contribution limits apply regardless of whether the contributions are made by an individual, the individual's employer, or both. For every month you have an H S A eligible health plan, you may contribute 1/12 (one twelfth) of your maximum annual H S A contribution.WHAT IS THE TAX TREATMENT OF AN ELIGIBLE INDIVIDUAL'S H S A CONTRIBUTIONS?Contributions to your HSA, up to the applicable maximum contribution, are deductible from your adjusted gross income, whether or not you itemize deductions.WHAT IS THE TAX TREATMENT OF EMPLOYER CONTRIBUTIONS TO AN HSA?Employer contributions to an employee's HSA are excludable from the employee's gross income, up to the maximum contribution limit for that employee. Although the employee cannot deduct the employer's HSA contributions, the contributions are not taxable to the employee nor are they subject to withholding from wages for income tax or other employment taxes.IS THERE A DEADLINE FOR CONTRIBUTIONS TO AN HSA FOR A TAXABLE YEAR?Contributions for any taxable year can be made in one or more payments, at any time prior to the deadline, without extensions, for filing your federal income tax return for that year, but not before the beginning of that year. For calendar year taxpayers, this deadline for contributions is generally April 15 following the year for which the contributions are made.Sterling HSA will treat any contribution made between January 1 and April 15 as a contribution for the current taxable year unless you provide written notice to Sterling HSA at the time of such contribution that the contribution is for the preceding taxable year.WHAT HAPPENS WHEN HSA CONTRIBUTIONS EXCEED THE MAXIMUM AMOUNT THAT MAY BE DEDUCTED OR EXCLUDED FROM GROSS INCOME IN A TAXABLE YEAR?An "excess contribution" (a contribution made by you or your employer that exceeds the amount allowed by law) is not deductible by you or your employer and is included in your gross income if made on your behalf by your employer. An excise tax of 6% for each taxable year is imposed on excess individual and employer contributions.If the excess contributions for a taxable year and the net income attributable to such excess contributions are paid or distributed to you before the deadline (without extensions) for filing your federal income tax return for the taxable year, then the net income from the excess contributions is included in your gross income for the taxable year in which the distribution is received. However, the excise tax would not be imposed on the excess contributions nor would the distribution of the excess contributions be taxed. Allowable rollover contributions do not count in determining whether an excess contribution has been made.ARE ROLLOVER CONTRIBUTIONS TO HSA's PERMITTED?Rollover contributions from M S A’s and other H S A’s into an H S A are permitted. Rollover contributions to your H S A need not be in cash and are not subject to the annual contribution limits. Rollovers from an IRA, a health reimbursement arrangement ("HRA"), or a health flexible spending arrangement ("FSA") to your H S A are not permitted.CAN YOU PLEDGE ANY PART OF YOUR HSA AS SECURITY FOR A LOAN?Any portion of your H S A that you pledge as security for a loan will be treated as a distribution for the year the pledge is made. The amount pledged is includable in your gross income and a 10% premature distribution penalty tax on the pledged amount may also be imposed.WILL AN HSA PROVIDE TAX ADVICE IN CONNECTION WITH YOUR HSA?As custodian, an H S A custodian is not required to provide tax advice concerning your H S A. It is your sole responsibility to determine the tax consequences of establishing an HSA. Please discuss any questions you may have with your tax advisor.
Distributions from H S A’s
WHEN CAN YOU RECEIVE DISTRIBUTIONS FROM YOUR HSA?You are permitted to receive distributions from your H S A at any time.IN WHAT FORM CAN YOU TAKE DISTRIBUTIONS FROM YOUR HSA?You may take distributions from your Sterling HSA account by utilizing an custodian’s H S A's bill-paying service, by debit card transaction, or any other method permitted from time to time by an H S A custodian of your account.HOW ARE DISTRIBUTIONS FROM AN HSA TAXED?Distributions from an H S A used exclusively to pay for the qualified medical expenses of you or your spouse or eligible dependents are generally excludable from gross income. The amount of any distribution not used exclusively for such qualified medical expenses is includable in your gross income and may be subject to an additional 10% premature distribution penalty tax on the amount includable. This 10% penalty tax does not apply to distributions made after your death, disability, or attainment of age 65.WHAT MEDICAL EXPENSES ARE ELIGIBLE FOR TAX-FREE DISTRIBUTIONS FROM YOUR HSA?At present, qualified medical expenses include the following, but only to the extent these expenses are not covered by insurance or otherwise:· Abdominal supports · Abortion · Acupuncture · Air conditioner (when necessary for relief from difficulty in breathing) · Alcoholism treatment · Ambulance · Anesthetist · Arch supports · Artificial limbs · Autoette (when used for relief of sickness/disability) · Birth control pills (by prescription) · Blood tests · Blood transfusions · Braces · Cardiographs · Chiropractor · Christian Science Practitioner · Contact Lenses · Contraceptive devices (by prescription) · Convalescent home (for medical treatment only) · Crutches · Dental treatment · Dental x-rays · Dentures · Dermatologist · Diagnostic fees · Diathermy · Drug addiction therapy · Drugs (by prescription) · Elastic hosiery (by prescription) · Eyeglasses (by prescription) · Fees paid to health institute prescribed by a doctor · FICA and FUTA taxes paid for medical services · Fluoridation unit · Guide dog · Gum treatment · Gynecologist · Healing services · Hearing aids and batteries · Hospital bills · Hydrotherapy · Insulin treatment · Lab tests · Lead paint removal · Legal fees · Lodging (away from home for outpatient care) · Metabolism tests · Neurologist · Nursing (including board and meals) · Obstetrician · Operating room costs · Ophthalmologis· Optician · Optometrist · Oral surgery · Organ transplant (including donor's expenses) · Orthopedic shoes · Orthopedist · Osteopath · Oxygen and oxygen equipment · Pediatrician · Physician · Physiotherapist · Podiatrist · Postnatal treatments · Practical nurse for medical services · Prenatal care · Prescription medicines · Psychiatrist · Psychoanalyst · Psychologist · Psychotherapy · Radium therapy · Registered nurse · Special school costs for the handicapped · Spinal fluid test · Splints · Sterilization · Surgeon · Telephone or TV equipment to assist the hard-of-hearing · Therapy equipment · Transportation expenses (relative to health care) · Ultra-violet ray treatment · Vaccines · Vasectomy · Vitamins (by prescription) · Wheelchair · X-rays For more information, see IRS Publication 502: Medical and Dental Expenses.
HSA ExampleMUST AN HSA DETERMINE WHETHER HSA DISTRIBUTIONS ARE FOR QUALIFIED MEDICAL EXPENSES?A custodian of an HSA is not required to determine whether distributions from your HSA are used for qualified medical expenses. It is your sole responsibility to make that determination. You are also solely responsible for maintaining adequate records for tax purposes and for paying any taxes and penalties, which may result from any distribution. Please discuss any questions you may have with your tax or legal advisor. We keep copies of medical bills and payments made on your behalf. We can make these copies available to you, as you need them.
Death of an HSA Account Holder
WHAT HAPPENS TO YOUR HSA UPON YOUR DEATH?When you open your HSA account, you will be asked to designate one or more beneficiaries to whom distribution of your HSA will be made upon your death. You may revoke this beneficiary designation at any time and designate different individuals as beneficiaries. Any beneficiary designation you make must be delivered to HAS custodian prior to your death on a form provided by or acceptable to the custodian. If you do not make a valid beneficiary designation prior to your death, the custodian of your HSA will distribute the assets in your HSA to your estate. In some states, your spouse's consent may be necessary if you wish to name a person other than or in addition to your spouse as beneficiary or if you change an existing beneficiary designation. Please consult with your attorney before making your beneficiary designation.WHAT ARE THE INCOME TAX CONSEQUENCES AFTER YOUR DEATH?If your spouse is the named beneficiary of your HSA, your HSA becomes the HSA of your spouse upon your death, subject to the completion of documents required by Sterling HSA. The surviving spouse is subject to income tax only the extent distributions from the HSA are not used for qualified medical expenses. If your HSA passes to a person other than your surviving spouse, the HSA ceases to be an HSA as of the date of your death, and the beneficiary is required to include the fair market value of the HSA assets as of the date of your death in his or her gross income. The includable amount is reduced by any payments from the HSA for your qualified medical expenses, if such payments are made within one year after your death.If you have not made a valid beneficiary designation, your HSA ceases to be an HSA upon your death and the fair market value of the assets in your HSA, as of the date of death, is includable in your gross income for the year of death.WHERE CAN I GO FOR ADDITIONAL INFORMATION?For additional guidance on H S A’s, go to the U.S. Treasury's HSA Website.
http://www.treas.gov/offices/public-affairs/hsa/Additonal information on HSA plans for business and individuals available at
www.amsinsure.com .
