Table of Contents. Health Savings Account FAQs

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1 Table of Contents GENERAL HEALTH SAVINGS ACCOUNT QUESTIONS QUESTION: WHAT IS A HEALTH SAVINGS ACCOUNT (HSA)? QUESTION: WHY IS SCHOOL DISTRICT 27J USING HEALTH SAVINGS ACCOUNTS AND HIGH DEDUCTIBLE HEALTH PLANS? QUESTION: HOW CAN SCHOOL DISTRICT 27J AFFORD TO CONTRIBUTE MONEY TO EMPLOYEES HEALTH SAVINGS ACCOUNTS? QUESTION: WHAT ARE THE 2016 HSA CONTRIBUTION LIMITS PER THE IRS? QUESTION: I WAS ENROLLED ON THE HIGH DEDUCTIBLE HEALTH PLAN DURING THE PLAN YEAR JULY 1, 2015 THROUGH JUNE 30, 2016 BUT CHANGED TO THE KAISER DHMO PLAN OR ADDED CHOICE DEDUCTIBLE COINSURANCE (ACDC) PLAN EFFECTIVE JULY 1, DO I CONTINUE TO RECEIVE FUNDING IN MY HSA ACCOUNT FROM SCHOOL DISTRICT 27J? QUESTION: DO CONTRIBUTIONS TO AN HSA DECREASE MY PERA HIGHEST AVERAGE SALARY (HAS) USED IN THE CALCULATION OF RETIREMENT BENEFITS? QUESTION: WHAT HAPPENS TO MY HSA IF I GET DIVORCED? QUESTION: IS THE MONEY IN A HSA AVAILABLE UP FRONT LIKE IT IS IN A FLEXIBLE SPENDING HEALTH CARE REIMBURSEMENT ACCOUNT? QUESTION: DO I HAVE TO SPEND A CERTAIN AMOUNT OF MONEY ON HEALTH CARE IN ORDER TO BE ABLE TO WRITE OFF CONTRIBUTIONS TO MY HSA? QUESTION: IS THERE A BENEFICIARY FOR MY HSA ACCOUNT? QUESTION: WHAT HAPPENS TO MY HSA IF I DIE? QUESTION: WHAT HAPPENS TO MY HSA IF I LEAVE SCHOOL DISTRICT 27J? ELIGIBILITY QUESTION: WHAT MUST I DO TO QUALIFY FOR A HEALTH SAVINGS ACCOUNT? QUESTION: CAN I HAVE AN HSA IF I AM ON TRICARE (MILITARY) INSURANCE? QUESTION: I AM ENROLLED ON MEDICARE, CAN MY EMPLOYER AND/OR I CONTRIBUTE MONEY TO MY HSA? QUESTION: CAN I ALSO HAVE A FLEXIBLE SPENDING HEALTH CARE REIMBURSEMENT ACCOUNT (FSA) IF I HAVE A HEALTH SAVINGS ACCOUNT? QUESTION: I WAS ON A HIGH DEDUCTIBLE HEALTH PLAN LAST YEAR AND COULDN T HAVE A FLEXIBLE SPENDING (FSA) HEALTH CARE REIMBURSEMENT ACCOUNT. NOW I AM ENROLLED ON THE KAISER DHMO PLAN OR ADDED CHOICE DEDUCTIBLE COINSURANCE (ACDC) PLAN AND AM ALLOWED TO HAVE A HEALTH CARE FSA. HOW MUCH CAN I CONTRIBUTE TO MY FSA? QUESTION: WHAT IS THE LAST MONTH RULE AND TESTING PERIOD? USING YOUR HEALTH SAVINGS ACCOUNT QUESTION: WHAT IF I HAVE A LARGE MEDICAL EXPENSE EARLY IN THE PLAN YEAR, BEFORE I VE HAD A CHANCE TO BUILD UP FUNDS IN MY HEALTH SAVINGS ACCOUNT? QUESTION: WHAT IS THE DIFFERENCE BETWEEN MY KAISER ID CARD AND MY HSA BANK CARD? QUESTION: CAN I USE MY HSA FUNDS TO PAY FOR MEDICAL CARE INCURRED UNDER MY SPOUSE S MEDICAL PLAN? 1

2 QUESTION: IF I HAVE A HEALTH SAVINGS ACCOUNT (HSA) WITH DISTRICT 27J BUT MY CHILDREN ARE COVERED UNDER A DIFFERENT HEALTH PLAN, CAN I USE MY HSA DOLLARS TO PAY FOR THEIR MEDICAL EXPENSES INCURRED UNDER THE OTHER HEALTH PLAN, SUCH AS CO-PAYS AND CO-INSURANCE AMOUNTS? QUESTION: CAN WE USE A HEALTH SAVINGS ACCOUNT (HSA) TO PAY FOR MEDICAL EXPENSES THAT AREN T ALLOWED UNDER OUR HEALTH PLAN, SUCH AS LASIK SURGERY? QUESTION: WILL I RECEIVE A BANK STATEMENT FOR MY HSA BANK ACCOUNT? QUESTION: SHOULD I USE THE DEBIT OR CREDIT FUNCTION ON THE HSA BANK CARD? HEALTH SAVINGS ACCOUNT (HSA) FUNDING AND TAX ADVANTAGES QUESTION: CAN I DEPOSIT A LUMP SUM AMOUNT OF MONEY INTO MY HSA IF I KNOW THAT A LARGE MEDICAL EXPENSE IS COMING UP? QUESTION: IF I ADD A DEPENDENT TO MY HIGH DEDUCTIBLE HEALTH PLAN MID-YEAR AND I CHANGE TO A FAMILY STATUS ON THE INSURANCE, DO I GET AN ADDITIONAL $3,000 FROM SCHOOL DISTRICT 27J IN MY HSA ACCOUNT? QUESTION: CAN I TRANSFER MY HSA BALANCE INTO ANOTHER BANK ACCOUNT? QUESTION: WHAT IS THE INTEREST RATE EARNED ON THE HSA? QUESTION: WHAT HAPPENS TO MY HSA FUNDS ONCE I TURN 65? QUESTION: WHAT HAPPENS IF I DON T USE ALL OF THE FUNDS IN MY HSA THIS YEAR? QUESTION: MAY I USE MY HSA TO PAY FOR THE MONTHLY PREMIUMS TO COVER MY DEPENDENTS? QUESTION: IF I OR ONE OF MY DEPENDENTS OBTAIN HEALTH INSURANCE THROUGH ONE OF THE COLORADO MARKETPLACE HEALTH PLANS, CAN I USE MY HSA TO HELP THEM PAY FOR ANY MEDICAL COSTS THEY INCUR, SUCH AS CO-PAYS OR CO-INSURANCE? 2

3 General Health Savings Account Questions Question: What is a Health Savings Account (HSA)? Answer: Per IRS rules, Health Savings Accounts (HSAs) are special bank accounts for adult individuals covered by high-deductible health plans (HDHPs) allowing them to save money tax-free for out-of-pocket medical expenses. Generally, an adult who is covered by a high-deductible health plan (and has no other first-dollar coverage under another medical plan) may establish an HSA. It can also be used for dental and vision out-of-pocket expenses. Important features of the HSA include: Funds are held in a bank account in YOUR name. If you do not spend all of the funds deposited into your HSA, you do not lose them - they roll forward to future years. It is triple-tax protected: funds are deposited pre-tax; interest earned is tax-free; and you are not taxed when you withdraw the funds to pay for medical expenses. Fully portable: if you leave the school district, switch to a non-hsa qualified health plan, or retire, the funds go with you and you can use them for future medical expenses. Contributions to the HSA do not decrease your PERA highest average salary for the calculation of your retirement benefits. No special accounting or sending in receipts required. You can only use the money that is available in your HSA bank account, so just swipe your HSA Bank card (or make an online transfer) to pay your medical expenses! When you turn 65, you can withdraw the HSA funds as cash and they will be considered taxable income; OR you can keep them in the HSA and continue using the funds for healthcare expenses only tax-free! Question: Why is School District 27J using Health Savings Accounts and High Deductible Health Plans? Answer: School District 27J is committed to providing employees with great benefits both now and in the future. We know that your health and the health of your family are important to you. Here are some key advantages of High Deductible Health Plans and HSAs: 3

4 The premiums for high deductible health plans with HSAs increase at about half the rate of traditional medical plans like PPOs and HMOs. High deductible health plans are not only successful at controlling health care costs; they also make you a better consumer of health care. Studies show that HDHP members have higher quality visits with their physicians and tend to comply more with recommended care. This is because instead of making multiple visits to the doctor because they only cost a co-pay, members on HDHPs understand that the full cost of the office visit costs $100 or more and therefore want to make the most of their visit by asking more questions, requesting generic drugs or alternative treatments, and following the advice of their physicians more carefully. Finally, high deductible health plans with HSAs are also the only kinds of plans that can actually improve with time because your unspent HSA dollars roll forward into future years and you never lose the HSA funds. So if you stay healthy, you can build up the money in your HSA so that you have no out of pocket costs on your health plan in future years. Since the HSAs are so well funded at 27J, the HDHP is the less expensive plan, but has much lower out of pocket maximums than the DHMO and the ACDC plans. In other words, you get better overall protection, at a lower cost on the HDHP. Question: How can School District 27J afford to contribute money to employees Health Savings Accounts? Answer: When deductibles are increased, premiums decrease. The savings from decreased premiums are directed into your Health Savings Account by School District 27J. Question: What are the 2016 HSA contribution limits per the IRS? Answer: HSA contribution limits for calendar year 2016 are $3,350 single / $6,750 families. These limits include both employer and employee contributions to your HSA. Note that if you are 55 or older, you may contribute an ADDITIONAL $1,000 to your HSA whether you have single or family status on your health plan. Question: I was enrolled on the High Deductible Health Plan during the plan year July 1, 2015 through June 30, 2016 but changed to the Kaiser DHMO Plan or Added Choice Deductible Coinsurance (ACDC) Plan effective July 1, Do I continue to receive funding in my HSA account from School District 27J? Answer: No. Because the Kaiser DHMO and Kaiser ACDC Plans are not considered qualified high deductible health plans according to the IRS, School District 27J can no longer send money to your health savings account. You will not be able to make the full 2016 IRS maximum contribution to your 4

5 Health Savings Account if you change to the Kaiser DHMO or ACDC Plan effective July 1, 2016, or leave the health plan before January 1, The IRS rules give you until April 15 to make a pro-rated contribution to your HSA for the number of months you were enrolled on a high deductible health plan in the prior calendar year. For example: Family Status 2016 IRS Annual Maximum HSA Contribution: Pro-Rated HSA allowed amount for 6 months enrollment in HDHP in 2016: District 27J 2016 HSA Contribution amount (5 months Jan-May: Personal allowed HSA Contribution for 2016 based on 6 months enrollment on HDHP: Single $3,350 $1,675 $1,250 $425 Family $6,750 $3,375 $2,500 $875 Note: Per IRS rules, if you enroll on the Kaiser DHMO Plan or the Added Choice Deductible Coinsurance (ACDC) Plan, the District cannot send funds to your HSA. You may, however, make personal contributions to your HSA up to the amounts listed above. (If you leave the high deductible health plan at any month other than June 30th, your maximum allowed contribution might be different than the amounts listed above. Please contact HSA Bank at to help you determine your maximum contribution). If you have made personal contributions to your HSA in excess of the amounts listed in the Personal Allowed Contribution column, then you may remove those funds in order to avoid a 20% penalty and 6% excise tax on those additional funds. Please refer to the HSA Bank website ( for the Excess Contribution Removal Form. If you change to the Kaiser DHMO Plan or the Added Choice Deductible Coinsurance (ACDC) Plan, any funds you have remaining in your HSA are not lost! You may use the funds in your HSA to pay your outof-pocket expenses on the Kaiser DHMO Plan or ACDC Plan, or for any other qualified medical expense listed in IRS publication 213(d) until the funds in your HSA are gone. You may NOT use HSA funds to pay your medical premiums on the Kaiser DHMO plan or ACDC Plan. IRS rules do allow for Medicare premiums to be paid out of HSA funds. Question: Do contributions to an HSA decrease my PERA Highest Average Salary (HAS) used in the calculation of retirement benefits? Answer: NO. Unlike contributions to a Flexible Spending Account, contributions to an HSA do NOT decrease your PERA highest average salary. Because these funds have a triple-tax advantage, it s in 5

6 your best interest to fund your HSA to the IRS annual limit each year. For calendar year 2016, the total contribution limits are: $3,350 single / $6,750 family. Question: What happens to my HSA if I get divorced? Answer: Any money in an HSA account, like any other asset, will be evaluated as part of the divorce settlement. The transfer of an individual's interest in an HSA to that individual's spouse or former spouse under a divorce or separation will not be considered a taxable transfer. The recipient spouse or former spouse may continue to avoid taxation on the account as long as it is maintained as an HSA. Question: Is the money in a HSA available up front like it is in a Flexible Spending Health Care Reimbursement Account? Answer: District 27J s contribution to an employee s HSA account will be made in twelve (12) equal monthly installments ($250 for individual coverage or $500 for family coverage) on the last business day of each month. Any additional amounts you elect to deposit over the course of the year are not available until the money is deposited just like a standard checking or savings account. For example, if you are enrolled as a single and want to contribute $300 to your HSA over the course of the year via payroll deduction, $25.00 ($300 divided by 12 months) will be taken out of your paycheck pre-tax each month and deposited into your HSA. Only once those funds are deposited can you actually use them to pay for medical expenses. Note that these funds will be deducted from your paycheck on the last business day of the month. Because the funds can only be spent once deposited in your HSA account, this eliminates the need to submit receipts in order to get your money back. Question: Do I have to spend a certain amount of money on health care in order to be able to write off contributions to my HSA? Answer: No. Unlike the IRS rule for taking tax reductions when your medical expenses exceed 10% of your adjusted gross income, there is no minimum amount of money that you must spend on healthcare in order to make pre-tax contributions to your HSA. The only requirement is that you are enrolled in a qualifying high deductible health plan when you contribute to your HSA. A qualifying high deductible health plan must have an aggregate annual deductible of at least $1,300 single / $2,600 family for ALL non-preventive services. Question: Is there a beneficiary for my HSA account? Answer: During the HSA Bank enrollment process (or at any time during the year) you may establish a beneficiary for your HSA account. If you do not establish a beneficiary, your HSA will go to your estate upon your death. Question: What happens to my HSA if I die? 6

7 Answer: If you die and have funds in your HSA, the funds will be transferred to your named beneficiary. If the beneficiary is your spouse, then the account is transferred as an HSA and can be used for qualified medical expenses. Any withdrawals or expenses that are non-qualified medical expenses are subject to income tax rules and penalty, if your spouse is under the age of 65. If your beneficiary is not your spouse, then the HSA ceases to be an HSA and is considered taxable income to the beneficiary or estate. Question: What happens to my HSA if I leave School District 27J? Answer: If you leave employment at School District 27J or if you enroll on an insurance plan elsewhere, the money in your HSA goes with you. The School District cannot take back any unused funds. The Health Savings Account belongs entirely to you, and once funds are deposited they are yours to keep. For this reason, funds are being deposited monthly and not in an up-front lump sum. This ensures that School District 27J funds are spent mostly on employees who remain with the District throughout the year. This will allow the fund to remain stable over the years and continue to provide you with rich benefits. 7

8 Eligibility Question: What must I do to qualify for a Health Savings Account? Answer: If you have enrolled on the Kaiser High Deductible Health Plan, then you may be eligible for a Health Savings Account. You are eligible for a Health Savings Account unless you answer YES to any of the following five (5) questions (per IRS rules): 1. Are you enrolled in Medicare or any other health plan that is not a qualified high deductible plan? (A qualified HDHP has an aggregate annual deductible of at least $1,300 single or $2,600 family for ALL non-preventive services it may be called an HSA qualified plan by your insurer). 2. Will you be covered as a dependent on someone else s tax return? 3. Will you have received Veteran s Administration medical services in the past three (3) months? 4. Are you or your family enrolled in TRICARE (military insurance)? 5. Will you or your spouse have a Flexible Spending Medical Reimbursement Account (FSA) that will reimburse you for your medical expenses, including those subject to the deductible? If you answered YES to any of the above five (5) questions, you are not eligible to open or contribute to a Health Savings Account at this time, per IRS rules. In this case, you may wish to terminate any duplicate coverage so that you become eligible to open a HSA, or you may want to consider enrolling in the Kaiser DHMO plan or Added Choice Deductible Coinsurance (ACDC) plan during the next annual open enrollment period. If you answered NO to all of the above five (5) questions, then you qualify to open a Health Savings Account at HSA Bank, receive District 27J HSA contributions (deposits), and make your own voluntary, personal, pre-tax contributions to your HSA account. Question: Can I have an HSA if I am on TriCare (military) insurance? Answer: No. Currently TriCare does not offer eligible high deductible HSA health plans (an aggregate annual deductible of at least $1,300 single / $2,600 family), which means that if you are on TriCare now, you must choose between having a School District 27J health plan or stay on TriCare only. Veteran s Administration (VA) benefits are treated differently, however. The rule is that you can become 8

9 eligible to open and contribute to a Health Savings Account once three (3) months have passed since you last received benefits under the VA plan. If you again receive VA benefits in the course of the year, you become ineligible to contribute to a HSA until another 3 months pass without receiving VA benefits. If you are on TriCare, you do have a few additional options: 1. You could consider enrolling in the Kaiser DHMO Plan or the ACDC Plan during the annual open enrollment period or due to a qualifying event. DHMO and ACDC plan members are not eligible for a health savings account. Therefore, you will be allowed to have double coverage on both the Kaiser DHMO or ACDC Plan and TriCare. 2. You could also enroll in the Kaiser High Deductible Plan but you will not be eligible for the District Health Savings Account (HSA) funding (deposits), nor would you be able to contribute personal funds to an HSA. You would still have comprehensive protection, and free preventive screenings. Per the Colorado State Coordination of Benefits law, your health coverage through School District 27J is always primary, and TriCare likely would not pick up coverage until after you have met your annual deductible or if you use an out-of-network provider. Question: I am enrolled on Medicare; can my employer and/or I contribute money to my HSA? Answer: No; if you are enrolled in Medicare the IRS does not allow you to contribute to a Health Savings Account (HSA). Enrolled in Medicare means any part of Medicare including the free Part A hospitalization. You must drop your Medicare Part A coverage if you would like to have a Health Savings Account. You can still participate in the school district group insurance and receive medical plan benefits, but you would not be eligible to receive the HSA funding from School District 27J, nor would you be able to contribute additional funds to an HSA. This is because you are already receiving government subsidized healthcare, so it would be unfair for you to also receive the additional benefits of a triple-tax advantaged HSA. If you are eligible for Medicare but not enrolled, then you can contribute to the HSA. 9

10 Question: Can I also have a Flexible Spending Health Care Reimbursement Account (FSA) if I have a Health Savings Account? Answer: No. Per IRS rules, if you have a Health Savings Account, then you cannot have a Flexible Spending Account (FSA) other than to pay for childcare services (a FSA Dependent Care Account.) Keep in mind that you can use your HSA funds to pay for medical services, prescription drugs, dental, vision and hearing expenses. In addition, funds that you don t use in an HSA roll forward to the next year so you never lose them this is not true with a Flexible Spending Account. And finally, HSA contributions do not decrease your PERA Highest Average Salary (HAS), so it makes sense to direct the funds you would have put into an FSA into an HSA instead. If your spouse in enrolled in a Health Care / Medical Flex Spending Account offered by his / her employer, you SHOULD NOT reimburse any of your medical expenses through that FSA if you are contributing to an HSA. This is considered double dipping in the eyes of the IRS. Question: I was on a high deductible health plan last year and couldn t have a Flexible Spending (FSA) Health Care Reimbursement Account. Now I am enrolled on the Kaiser DHMO Plan or Added Choice Deductible Coinsurance (ACDC) Plan and am allowed to have a Health Care FSA. How much can I contribute to my FSA? Answer: The maximum you can contribute to your Health Care FSA is $2,400 ($200 per month) for the plan year July 1st to June 30th, or a minimum of $30 per month. You must enroll on a Flexible Spending Account during the annual open enrollment period (during the month of May each year), within 30 days of your hire date or within 30 days of a qualifying event. You are allowed to make the full contribution to the Flexible Spending Account so long as you are no longer contributing to a health savings account. Question: What is the Last Month Rule and Testing Period? Answer: These two (2) IRS rules define how much you are allowed to contribute to your HSA during your first year enrolled on a high deductible health plan. This is important for District 27J employees to understand, since most employees do not begin benefits on January 1st, but at some other point during the calendar year (the beginning of the plan year is July 1 st ). The IRS annual HSA limits, however, runs on a calendar year (January 1 December 31) and thus contributions to an HSA are based off of the calendar year. Per the IRS web site ( Last-month rule. Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same High Deductible Health Plan coverage for the entire year as you had on the first day of that last month. 10

11 Testing period. If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. For example, December 1, 2015, through December 31, If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA account that would not have been made except for the last-month rule. You include this amount in your income in the year in which you fail to be an eligible individual. This amount is also subject to a 20% additional tax. The income and additional tax are shown on Form 8889, Part III. Example: A single District 27J employee enrolls in a qualified high deductible health plan (HDHP) effective July 1, 2015 and opens a health savings account. This employee then funds the full calendar year 2015 IRS HSA maximum contribution amount, or $3,350 in calendar year 2015 (while only enrolled in a HDHP for 6 months during 2015.) Effective July 1, 2016, this employee decides to change from the high deductible health plan to the Kaiser DHMO Plan or the Kaiser Added Choice Deductible Coinsurance (ACDC) Plan. Per IRS rules, participants enrolled in the Kaiser DHMO Plan or the Kaiser ACDC Plan are not eligible to make contributions to a Health Savings Account. This employee has failed the Testing Period because he/she would need to remain on a High Deductible Health Plan (HDHP) through December 31, 2016 in order to have been allowed to contribute the maximum calendar year 2015 HSA amount. The amount that would have to be included as 2015 income would be $1,675 as follows: 11

12 2015 IRS HSA Contribution Limit (includes both employer & employee contribution amounts): Employee s total 2015 HSA contribution (includes both employer & employee contribution amounts): Number of months enrolled in a HDHP in calendar year 2015: Month employee left the HDHP Plan: Allowed HSA contribution amount for 2015 (6 months only) Amount to be included as income for calendar year 2015: $3,350 $3,350 6 months: July through December July 1, 2016 $3,350 divided by 12 months = $ per month times 6 months = $1,675 $1,675 In this example, the employee will have to claim an additional $1,675 as income on their 2015 tax return. If they had remained on a High Deductible Plan through December 31, 2016, they would not have to claim this amount as income on their tax return, as they would have passed the Testing Period. 12

13 Using your Health Savings Account Health Savings Account FAQs Question: What if I have a large medical expense early in the plan year, before I ve had a chance to build up funds in my Health Savings Account? Answer: District 27J can give you an advance funding into your health savings account to help you meet out of pocket expenses for significant health care costs. An individual would have to incur over $5,000 in medical expenses and a family would have to incur over $10,000 in medical expenses. You must provide proof that your HSA has been depleted, along with an Explanation of Benefits that shows your responsibility on the claim(s). Please contact the Benefits Specialist in the Human Resources Office to receive an HSA Acceleration Application or visit the School District 27J Employee Benefit Forms page. Question: Can I pay for massage therapy and / or acupuncture with my HSA funds? Answer: You cannot use HSA funds to pay for massage therapy/services according to IRS code 213 (d). However, the IRS does allow you to use HSA dollars to pay for acupuncture. But, please be aware that if acupuncture is not covered under your Kaiser plan, then you will not earn deductible credit when you use your HSA card to pay for those services. Please refer to IRS Publication 502 found on the IRS web site and the District 27J Human Resources Employee Benefit Forms page for a listing of qualified medical expenses. You should also check the Kaiser Summary of Benefits and Coverage document found on the District 27J Human Resources Employee Benefit Forms page as to whether or not acupuncture is a covered service under your plan. You can also call Kaiser Permanente at the phone number found on the back of your Kaiser ID card. Question: What is the difference between my Kaiser ID Card and my HSA Bank card? Answer: Your Kaiser Permanente insurance ID card provides you with access to care at Kaiser approved facilities. The way you PAY for your medical services and prescriptions is by using the HSA Bank card. Here s how a typical office visit (non-preventive) should work when you have not met your annual deductible: 1. You visit your Kaiser doctor because you feel sick, have some symptoms or are injured. 2. You may be asked to pay for the service before leaving the Kaiser facility. You can use your HSA Bank card (if you have the funds in your HSA Account) to pay for the service. Kaiser may not ask you for payment up front, and in this case, they will bill you later. (Note: You can view the list of medical services rates on the Kaiser website ( so that you know approximately how much your visit or procedure will cost before you go to the facility). 3. You may also receive an Explanation of Benefits (EOB) from Kaiser, summarizing your visit, including the date, service provided, amount of the claim and the amount of money you paid and/or the amount of money you still owe. You may owe an additional amount if additional medical services were provided during your visit that was not included in your original payment. 4. The claim will accumulate toward your annual deductible on your Kaiser High Deductible Health 13

14 Plan. Question: Can I use my HSA funds to pay for medical care incurred under my spouse s medical plan? Answer: You may use funds in your HSA for any Qualified Medical Expense as determined by IRS code 213(d), including co-pays on other insurance plans for yourself, your spouse, or your dependents. Please note that if you and/or your employer are contributing to an HSA, you can only be enrolled in your spouse s insurance plan if his/her plan is an HSA Qualified High Deductible Health Plan. That is, your spouse s health plan must have an annual deductible of at least $2,600 (for family coverage) with no copayments or co-insurance benefits below the deductible in order for you and/or your employer to make contributions to your Health Savings Account AND have additional coverage through your spouse. If your spouse s plan has an annual deductible lower than $2,600, then you and/or your employer cannot send funds to an HSA Account (per IRS rules.) Another option is for you to be enrolled under both your spouse s plan (even if it does not have a deductible of at least $2,600) and the School District s Kaiser high deductible health plan, but you will not be eligible to open an HSA or have any money contributed into an HSA by School District 27J or by you. This is not advantageous to you. You would be facing more out of pocket costs on the School District 27J Kaiser High Deductible Plan because you would not be eligible for the HSA funding from School District 27J, and you would not be able to contribute any pre-tax funds to help you meet your deductible. In addition, the cost of adding yourself to your spouse s plan (in terms of the premium your spouse may have to pay for your coverage) is seldom worthwhile, given that your spouse s insurance will only be secondary and is unlikely to pick up substantial additional costs. In most cases, you will be better off taking the premium savings from not joining his/her plan and directing those funds, pre-tax, into your Health Savings Account. Note: Per the Colorado State Coordination of Benefits law, your health coverage through the school district is always the primary plan (and therefore pays first) and any other coverage is the secondary plan. Question: If I have a Health Savings Account (HSA) with District 27J but my children are covered under a different health plan, can I use my HSA dollars to pay for their medical expenses incurred under the other health plan, such as co-pays and co-insurance amounts? Answer: Yes, you can use your HSA dollars for your non-covered dependents as long as the expenses are Qualified Medical Expenses as defined by IRS Code 213(d). These expenses include things like dental and vision expenses; orthodontia; prescription medications, COBRA premiums, and much more. However, these expenses will NOT accumulate towards the deductible on your District 27J Kaiser high deductible health plan. Question: Can we use a Health Savings Account (HSA) to pay for medical expenses that aren t allowed under our health plan, such as Lasik surgery? Answer: Yes. Items such as acupuncture, braces, Lasik surgery and contact lenses can be paid for using your HSA Bank Card. However, not all of the HSA Qualified expenses listed on IRS Publication

15 are covered by the health plan s policy. This means that you can still pay for the item with your HSA card, but the amount may not accumulate toward your deductible. For example, Lasik surgery is not typically covered under a health plan. However, you may use your HSA Bank debit card to pay for the surgery because it is on the IRS s list of Qualified Medical Expenses. The cost of the Lasik surgery will not accumulate to the annual Kaiser deductible because it is not covered under your health plan. If, however, you have an office visit with your Kaiser general practitioner because you are sick, you may use your HSA Bank card to pay for that doctor s office visit and the amount of that visit would accumulate toward your annual health plan deductible because it is covered under the health plan policy. Note: Effective January 1, 2011, HSA funds could no longer be used to pay for over the counter medication. This change is a result of the Health Care Bill that was enacted in March Question: Will I receive a bank statement for my HSA Bank Account? Answer: Yes. You have the option to receive paper statements or online statements (through internet banking) on a quarterly basis illustrating deposits to your account, expenses paid with your HSA funds, the interest it has earned, and your current HSA balance. Paper statements mailed through the US Postal Service, will incur a charge that will be subtracted from your HSA Bank Account. Signing up for free internet banking will give you the ability to check your balance on-line, receive your statement online, 24 hours a day, 7 days a week. Question: Should I use the debit or credit function on the HSA Bank card? Answer. The general rule of thumb is to use the CREDIT function so you will not have to pay a transaction fee. If you use the DEBIT function, you will be required to enter a PIN number, thus resulting in being charged a PIN transaction fee. Health Savings Account (HSA) Funding and Tax Advantages Question: Can I deposit a lump sum amount of money into my HSA if I know that a large medical expense is coming up? Answer: Yes. Lump sum deposits into your HSA can be made at any time of the year as long as you do not exceed the IRS annual contribution limits. Lump sums are typically not arranged via payroll deduction, but rather take the form of a check or funds transfer directly into your HSA Bank Account. In the case of lump sum contributions, the tax saving is claimed as an above the line deduction on your tax return at the end of the year. You may make a lump sum contribution into your HSA up to April 15 th in the year following the year in which the expenses were incurred. 15

16 Question: If I add a dependent to my high deductible health plan mid-year and I change to a family status on the insurance, do I get an additional $3,000 from School District 27J in my HSA account? Answer: No. After enrolling dependent(s) on your high deductible health plan, the monthly contributions from District 27J will increase from $250 per month to $500 per month. For example, if you begin the plan year on July 1st as a single on your high deductible health plan, District 27J will deposit $250 per month into your Health Savings Account. If you add a dependent to your HDHP effective November 1 st (due to a qualifying event such as marriage, birth, adoption, or loss of coverage through a spouse s medical plan) then your monthly HSA deposits from District 27J will increase to $500 per month effective November 1st. If you change from single to family status, the IRS allows you to contribute up to the full annual HSA limit for families ($6,750 in 2016) as long as you have family status as of December 31, In other words, in the example above, this employee could contribute a total of $6,750 in calendar year 2016 (through a combination of District 27J contributions and personal funds) to the HSA even though they only had family status in November and December of On the other hand, if you begin the calendar year with family coverage and switch to single coverage in the middle of the calendar year, you can only contribute a pro-rated amount of the family coverage contribution maximum and a pro-rated amount of the individual coverage contribution maximum. Example of a change from family to single coverage on June 1st: Family Status: Months of year: 2016 Allowed Contribution: Family coverage January May (5 months) 5/12ths of $6,750, or $2, Single coverage June December (7 months) 7/12ths of $3,350 or $1, Total 2016 HSA Contribution for this example: $4, (Note: In the above example, the 2016 HSA allowed contribution of $4, is a combination of both District 27J contributions to your health savings account and your own personal funds. Question: Can I transfer my HSA balance into another bank account? Answer: Yes. If you withdraw your HSA funds for anything other than qualified medical expenses you will pay tax and a 20% penalty on the withdrawal amount. After the age of 65 you may withdraw the funds but they will be taxed as income; however, you will not incur a penalty. Question: What is the interest rate earned on the HSA? 16

17 Answer: It depends on how/where you have your money invested in the HSA. During the first few years of an HSA, most individuals keep their funds in a money market account that bears nominal interest. Over time, as the HSA grows, you may want to consider investing in other funds such as stock and bond mutual funds that are made available through your Health Savings Account bank. Question: What happens to my HSA funds once I turn 65? Answer: If you have built up funds in your HSA before age 65 and then retire, you take that fund of money with you. You can leave it in your HSA Account and continue using it for qualified medical expenses taxfree OR you can withdraw the funds as cash, which would be considered taxable retirement income. Note that you are not required to withdraw those funds as cash. You may no longer make contributions to an HSA; however, after the age of 65 you can pay Medicare premiums with your Health Savings Account once you enroll in Medicare. Question: What happens if I don t use all of the funds in my HSA this year? Answer: If you don t use all of your HSA funds this year, they will roll forward into the next year (you keep them!) You will not lose the HSA funds even if they are funds contributed by School District 27J. Although you can remove the funds or use them for non-medical expenses, we strongly advise against this, as doing so will incur tax and penalty if you are under the age of 65 (per IRS rules.) If you are age 65 or older, you can take the funds out as cash and you won t incur a penalty, but the funds will be treated as taxable income. Question: May I use my HSA to pay for the monthly premiums to cover my dependents? Answer: No, the IRS prohibits the use of HSA funds for paying insurance premiums except for: 1.) Qualified long-term care insurance; or 2.) Health insurance while you are receiving federal or state unemployment compensation; or 3.) Continuation of coverage plans, like COBRA, required under any federal law 4.) Medicare premiums. Question: If I or one of my dependents obtains health insurance through one of the Colorado Marketplace Health Plans, can I use my HSA to help them pay for any medical costs they incur, such as co-pays or co-insurance? Answer: Yes, you can use your health savings account to pay expenses your dependents incur on other health plans, even if they are covered under a Marketplace health plan or under other insurance (such as your spouse s insurance). The expenses must be qualified medical expenses such as those included in IRC Code Section 213(d). 17