The Health Savings Account User Guide

Transcription

1 The Health Savings Account User Guide

2 C O N T E N T S Start Saving Now for Your Future Health Care Needs How the BlueEdge Plans and the HSA Work Together Tax Advantages of an HSA Reduce Your Federal Taxable Income With an HSA Ready, Set, Save! Deciding How Much to Save ACS/Mellon Tools and Resources Your HSA Investment Account HSAs Provide Flexible Savings Options Is an HSA Right for You?

3 Start Saving Now for Your Future Health Care Needs Aon s BlueEdge Gold and Silver medical plans feature a Health Savings Account (HSA) that allows you to set aside tax-free money for your health care needs both now and in the future. The HSA is a bank account in your name at ACS/Mellon, a leading national provider of financial services. This brochure highlights the benefits of an HSA and how it works. You can find complete details by visiting and clicking on Health Savings Accounts. An HSA offers several distinct and flexible advantages. Aon will fund a portion of your account. You don t pay federal taxes on Aon s contribution. You can also contribute on a pre-tax basis (through paycheck deductions) so your account will have even more potential to grow. You are allowed to make additional deposits directly into your HSA as long as your contributions and Aon s do not exceed annual maximum limits (see page 4 for details) defined by the Internal Revenue Service (IRS). You own the HSA and it is yours to keep even when you retire or leave Aon. You can withdraw money from your account tax free to pay for qualified medical expenses now or later on even during retirement. You may invest your account in a variety of investment options and your earnings will grow tax free. Unused funds and investment earnings are carried over, without limit, from year to year. You can designate a beneficiary (or beneficiaries) to receive your account in the event of your death. Your HSA is administered by ACS/Mellon and Aon will pay the set up fees. A monthly maintenance fee of $3.50 applies and will be deducted from your account. The fee is waived if your average monthly balance is $1,000 or more. 1

4 Who Qualifies for the HSA? If you participate in the BlueEdge Gold or Silver Plan, you qualify for the HSA. Spend it Your Way HSAs offer great flexibility you can use your HSA funds to pay for: Your eligible health care expenses; Your spouse s eligible health care expenses, whether or not he or she is enrolled in a BlueEdge Plan; and Your dependent s eligible health care expenses, whether or not he or she is enrolled in a BlueEdge Plan. Who Does Not Qualify for the HSA? The HSA is not available to you if you are covered under any other medical plan option, such as a health plan sponsored by your spouse s employer, Medicare or Tricare, or if you are claimed as a dependent on another person s tax return. Eligible HSA Expenses In addition to using the money in your HSA to pay for eligible out-of-pocket medical and prescription drug expenses, you can also use your account for the following expenses: Medical and prescription costs not covered by another plan; Over-the-counter medications; COBRA premiums; Health plan premiums while you are unemployed and receiving federal or state unemployment benefits; Qualified long-term care insurance premiums; Retiree medical coverage premiums when you reach age 65 (except Medicare Supplement policies or Medigap); Retiree health care out-of-pocket expenses; If you are age 65 or older or are disabled, you may use your HSA funds for non-medical expenses without being subject to the 10% early withdrawal penalty. 2

5 How the BlueEdge Plans and the HSA Work Together Qualifying for an HSA IRS rules determine who is eligible for an HSA. For example, you re not eligible for an HSA if you re covered as a dependent under your spouse s plan which is not a high deductible health plan. If you have questions or want to learn more, visit and click on Health Savings Accounts on the home page. The BlueEdge Plans are consumer-driven, high-deductible health programs that include comprehensive preventive care coverage. You have the option of visiting the doctor or health care facility of your choice and have access to a network of providers who offer their services at negotiated, discounted rates. The HSA feature allows you to use pre-tax dollars to pay for out-of-pocket medical and prescription drug expenses. Here s how the components of the BlueEdge Plans work together: Preventive care and wellness are covered at 100% (including certain generic prescription drugs obtained through the mail order program). You pay for non-preventive care and prescription drugs until you reach the annual deductible, but Aon helps you meet the deductible by funding a portion of your HSA. You can also contribute to the HSA on a pre-tax basis and use the money for current or future medical expenses. Once you reach the deductible, the medical plan begins paying 90% of in-network eligible expenses, or 60% for out-of-network expenses. Once you reach the out-of-pocket maximum, all eligible expenses are covered at 100%. 3

6 Tax Advantages of an HSA With an HSA, you can save on taxes in three ways: HSA Contributions Learn more about catch-up and maximum contribution amounts at Click on Health Savings Accounts on the home page. When you visit the site, be sure to review your maximum allowable HSA contribution for the year. If you contribute more than the maximum, tax penalties may apply. You can make pre-tax contributions to the account; Your HSA balance earns tax-free investment returns; and You can withdraw tax-free money to pay for qualified health care expenses. Your HSA Contributions Your maximum contributions to your HSA are based on: Your medical plan coverage level; The amount Aon contributes; and Your hire date. If you are age 55 or older, you may be eligible to contribute an additional amount to your HSA called a catch-up contribution. The chart below shows how much you can contribute for Coverage level Aon s contribution for BlueEdge Gold or Silver* Additional amount you can contribute to BlueEdge Gold or Silver Total amount you can save in 2010 in either plan Employee $500 Up to $2,550 Up to $3,050 Employee + 1 $900 Up to $5,250 Up to $6,150 Family $1,250 Up to $4,900 Up to $6,150 Age 55 and older Employee only $500 Up to $3,550 Up to $4,050 Employee + 1 $900 Up to $6,250 Up to $7,150 Family $1,250 Up to $5,900 Up to $7,150 * Aon contributes to your HSA in equal semimonthly installments throughout the plan year. This annual contribution is prorated based on your hire date. 4

7 HSA Contributions Earn Interest The money in your HSA account can work for you. Deposits go into an FDIC-insured, interest-bearing checking account (no minimum balance required) that earns tax-free interest. Interest rates vary; contact ACS/ Mellon for current rate yields. Once your account reaches $1,500, you can elect to put your money in investment options from a variety of fund families. As your account grows, you can: Transfer funds to your special investment options; Add new investment options; and Establish an automatic investment schedule, which allows you to make regularly scheduled investments each month, as long as your account has $1,500 available for payment of claims. Reduce Your Federal Taxable Income With an HSA Setting aside a portion of your pre-tax income in an HSA can increase your take-home pay. That s because you don t pay federal income or Social Security (also called FICA) taxes on your HSA savings. Most states don t tax your HSA savings either. The following example illustrates how it works. Jen, who earns $40,000 a year, enrolls for employee only coverage in the BlueEdge Silver Plan and opens an HSA. The company deposits $500 in Jen s HSA and, over the year, Jen contributes another $500 for a total of $1,000. Because neither the company s nor Jen s HSA contributions are taxable, Jen saves $150 on federal income tax for the year. Plus, any earnings on her $1,000 deposit accumulate tax free. Jen can save the money in her HSA for future health care expenses or use it to help meet her current out-ofpocket expenses. When Jen does use her HSA, she won t pay any taxes on eligible health care expenses. 5

8 Ready, Set, Save! As a member of the BlueEdge Gold or Silver Plan, you must open your HSA online so it is ready to receive Aon s contributions, as well as your own if you decide to contribute. ACS/Mellon Aon has selected ACS/ Mellon as the HSA bank. ACS/Mellon supports Aon with HSA management, customer service and a userfriendly secure Web site. They also provide a wide array of tools and resources to help you get the most from your HSA. Visit for a preview of the ACS/Mellon experience. Opening Your HSA You can open your account after enrolling in a BlueEdge Plan and will receive an notification from Aon_HR at the appropriate time. Keep in mind that neither Aon s nor your contributions will be deposited into your account until it is opened, so don t delay follow these steps to start saving: 1. Go to to activate your account. 2. Enter your user ID and password. Your user ID is your employee ID. You can find your employee ID on your paycheck. Your password is the two-digit month and day of your birth and the last four digits of your Social Security number. For example, if your birthday is November 3, 1975 and your Social Security number is , you would enter Verify that your personal information is correct. If your information is incorrect, contact the Aon Employee Service Center at Review and agree to the Electronic Access and Health Savings Account Deposit Terms. 5. Select the amount that you want to contribute to your HSA from each paycheck. If you do not want to contribute to your HSA, the default election will remain at $0. 6. Print your confirmation statement for your records. 6

9 What Happens After You Open Your Account Automatic Claims Payment Feature Streamline the payment process by activating ACS/ Mellon s automatic claims payment feature. When you activate this feature, eligible expenses are automatically paid from your account, up to your existing balance. To activate, call ACS/Mellon at , from 8:00 a.m. to 8:00 p.m., Eastern Standard Time. Allow two to three business days for your request to take effect. If you use the automatic claims payment feature, you (not Aon) are responsible for ensuring that only eligible claims are reimbursed. Ineligible HSA payments are subject to income tax and a 10% tax penalty. Please note: According to IRS rules, health care expenses incurred by a domestic partner are not eligible for HSA reimbursement. About two to three weeks after you open your account, your HSA debit card and PIN will arrive in separate mailings to your address on file. Once you receive your HSA debit card and PIN, you can request an HSA checkbook or designate a beneficiary (see below) for your account. Log on to click on the Account Services tab then print, sign and return the Master Signature Card form (the return address will be on the form). An HSA checkbook will be mailed to your home address within seven business days after ACS/Mellon receives your signed form. After your HSA is established, both you and Aon can begin contributing to your account. You contribute through payroll contributions or by sending money directly to your account and Aon deposits a portion of its annual contribution in equal semimonthly installments. Designate A Beneficiary You can designate a beneficiary to receive your HSA balance if you die. If you name your spouse as your beneficiary, the account balance is not subject to tax. Your spouse becomes the owner of the account and can use the money to pay for qualified health care expenses. If you name a beneficiary other than your spouse, your account balance is taxable to the recipient. If you do not name a beneficiary, the account is included as part of your taxable estate. Once your account is established, you can download a beneficiary designation form at Contact a tax professional if you have questions. Using Your HSA When you incur an eligible out-of-pocket expense, like your share of the cost for a prescription, you can use your HSA debit card, up to the amount available in your account. If you don t have enough in your account to cover the full cost of the expense, you can pay the difference and write yourself a check for reimbursement from your account when sufficient funds are available. For in-network doctor s office visits and most other expenses, wait until you receive your explanation of benefits (EOB) from BlueCross BlueShield before you pay your share of the cost to make sure your receive the PPO discounted rate. 7

10 Deciding How Much to Save Out-of-Pocket Costs Typically Include: Deductible Coinsurance and copays Over-the-counter medications Prescription drugs not covered by the plan One of the best ways to know how much money to deposit to your HSA is to estimate your out-of-pocket medical costs. BlueCross BlueShield and Medco s decision-making tool lets you model the effect of different HSA contribution amounts. For medical costs: Log on to and click on the Health Plan Cost Estimator. For prescription drug costs: Log on to and enter access code AONPREDED2010 If you can t access the Internet, take a look at how you and your family used your medical plan last year and ask yourself the following questions: Did I contribute more from my paycheck for my coverage and then not really use the plan? What were my out-of-pocket costs (like deductibles, coinsurance, copays and prescriptions) that I could have paid through an HSA? Out-of-pocket costs typically include: Deductible Coinsurance and copays Over-the counter medications Prescription drugs not covered by the plan As you estimate your expenses, keep in mind that the company will fund your HSA account (prorated based on your hire date) with money to help you meet your deductible: $500 for employee only coverage, $900 for employee + 1 coverage, or $1,250 for family coverage You need to manage your HSA to ensure you do not contribute more than the amount allowed by the IRS. If you contribute more than the IRS-defined annual maximum, those contributions could be subject to income tax and tax penalties. You, not Aon, are responsible for ensuring that you do not make excess contributions. 8

11 ACS/Mellon Tools and Resources ACS/Mellon s online resources make understanding, using and managing your HSA easy. Before you enroll, log on to to: Single Sign-On Feature When you log on to your account at you can connect to your HSA with one click. Managing your health and saving money on your out-of-pocket expenses has never been so easy! Get answers to the most common questions about HSAs. Calculate your maximum annual HSA contribution under different scenarios. Model your income tax savings at different contribution rates. Browse the online guide for a quick, reader-friendly introduction to the power of saving in an HSA. Skim over the basics or drill down for detailed information. After you enroll, go to to: View account activity and your monthly e-statement. Download forms for managing your account and tax reporting. Order additional HSA checks. Create personalized messages and account alerts. Open an investment account and manage your investments. Go to to elect/change the amount of your HSA contribution during the year. HSA Investment Options HSAs are unlike any other health savings option because you can invest your pre-tax contributions the same as you invest money in a 401(k) or IRA. Once your HSA checking account balance reaches $1,500, you have the oppor tunity to: Invest your savings in a variety of funds. Go to for details. Transfer additional HSA dollars from your HSA checking account to your HSA investment account or add additional investment options online anytime. Establish an automatic investment schedule, which allows you to make regularly scheduled investments each month. 9

12 Your HSA Investment Account Your HSA Investment Account offers 20 investment options from a variety of fund families like money market accounts, world stock, bond funds and real estate options. Some advantages of opening an investment account include: No Investment Minimums Once your account reaches $1,500, you can begin investing with no minimum investment required. No-Load, Highly-Rated Mutual Funds You have the freedom to manage your HSA without the worry of incurring expensive commissions. You can choose from a wide selection of highly-rated mutual funds from multiple fund families which allows you to diversify your investment account across more than one fund family. No Transaction Costs Move between mutual funds, move dollars back to your checking account or align your investments more closely with your long-term investment goals while paying for short-term medical expenses. Access to Information Take advantage of a comprehensive suite of tools to help you select investments and expand your base of investment knowledge. This feature offers you easy access to investment basics, asset allocation strategy, prospectuses, charts and detailed information about each of the available mutual funds. Investment Help Complete the risk tolerance questionnaire available online to help you better understand your investment personality. The Investment Help feature also tells you if your selected investments fall outside of their specified range of risk. Your investment account is subject to a flat monthly fee of $

13 HSAs Provide Flexible Savings Options An HSA offers valuable pre-tax savings opportunities that can meet a wide variety of individual needs, from saving for retiree medical expenses to getting an early start on a solid financial future. The examples below show how an HSA can benefit two savers with very different needs. Use the tools and resources provided in this guide to see how an HSA might benefit you. Bob is 58 years old and plans to retire in five years. He enrolls himself and his wife, Ruby, in the BlueEdge HSA Gold option so he can begin saving money in his HSA for his and Ruby s retiree medical expenses. Each year for five years, Bob contributes the maximum employee contribution amount to his HSA and uses $3,000 each year to pay for out-of-pocket health care expenses. When Bob retires, he has over $22,000 in his HSA to use for health, vision and dental care expenses for himself and his wife. The chart below shows how Bob did it: Bob s HSA Savings* Annual HSA contribution (Bob and Aon) $7,150 Annual medical expenses $3,000 Net annual HSA savings $4,150 Number of years contributing to his HSA 5 Federal tax bracket 28% State income tax 5% Rate of return on HSA savings 3% Net HSA savings $20,750 Income tax savings on HSA contributions $11,798 Earnings on HSA investments $1,944 Tax savings on HSA earnings $642 Value of HSA after 5 years $22,694 Tax savings after 5 years $12,440 * Numbers have been rounded and are based on a January 1 eligibility date and 2010 annual HSA contribution limits. 1 1

14 Erika is 23 years old and is just starting her career. She enrolls in the BlueEdge HSA Silver option and contributes $2,550 (the maximum employee contribution amount for employee-only coverage) to her HSA. She uses preventive care benefits and spends $200 on health care costs over the course of a year. At the end of the year, the value of Erika s HSA is nearly $3,000. The chart below shows how it all adds up. Erika s HSA Savings* Annual HSA contribution (Erika and Aon) $3,050 Annual medical expenses $200 Net annual HSA savings $2,850 Number of years contributing to her HSA 1 Federal tax bracket 25% State income tax 5% Rate of return on HSA savings 3% Net HSA savings $2,850 Income tax savings on HSA contributions $915 Earnings on HSA investments $86 Tax savings on HSA earnings $26 Value of HSA after 1 year $2,936 Tax savings after 1 year $941 * Numbers have been rounded and are based on a January 1 eligibility date and 2010 annual HSA contribution limits. Is an HSA Right for You? Aon is committed to a culture of health, personal responsibility and consumerism and our health and wellness package reflects that philosophy. That s one of the reasons we are providing an HSA option for our employees. Because of the tax advantages, portability and savings opportunities, HSAs are becoming popular more than six million Americans are currently enrolled in a health care plan with an HSA and the numbers are expected to increase. We encourage you to take a close look to see if contributing to an HSA is right for you. We also remind you that HSA rules can become complex in certain circumstances. If you have any questions, visit (select Health Savings Accounts) or contact a tax professional. 1 2

15 Important Note This brochure summarizes the Health Savings Account sponsored by participating subsidiaries of Aon Corporation. Complete information can be found in the official plan documents. If a discrepancy occurs, the actual plan documents will prevail. The company may change these benefits at any time. Plan provisions and eligibility for coverage do not constitute a contract of employment with any individual. 200 East Randolph Street, Chicago, IL t f /