Health Savings Account (HSA) Bank Account Frequently Asked Questions & Answers As of October 2014

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1 Health Savings Account (HSA) Bank Account Frequently Asked Questions & Answers As of October 2014 The following provides general information to help answer frequently asked questions about the Health Savings Account (HSA) Bank Account available to eligible MHE employees who participate in 2015 in either of MHE s two qualified high deductible health plans (also known as HDHPs ): 1) CDHP Medical Option (CDHP is short for Consumer-Director Health Plan), and 2) the Premium CDHP. Employees living in an area with no adequate network coverage are eligible for two similar plans known as the 1) Out of Area CDHP and 2) Out of Area Premium CDHP. Collectively, we will refer to these plans as the MHE CDHP Medical Options. All the MHE CDHP Medical Options are considered to be qualified high deductible health plans ( HDHPs). The terms you and your as used in this summary refer to an employee or former employee of the MHE who meets the eligibility requirements to establish an HSA Bank Account. Although an HSA Bank Account is available when you elect the an MHE CDHP Medical Option (and the CDHP Medical Options are a component plan of the MHE Group Health Plan, which is covered by a law referred to as ERISA ), the HSA Bank Account is not intended to be an employee benefit plan under ERISA and the benefits provided under the HSA Bank Account are not covered by ERISA. Once you establish your HSA Bank Account with Optum Bank, you will receive additional information about managing your HSA Bank Account directly from Optum Bank. If there is any inconsistency between this document and the materials provided by Optum Bank, the materials provided by Optum Bank will control. MHE cannot provide you with tax advice. Rules about HSA Bank Account eligibility and tax advantages are very complex. You are encouraged to consult with your tax professional about your individual situation and to learn more. Table of Contents GENERAL INFORMATION... 3 How do I qualify for an HSA Bank Account?... 3 What makes a health insurance plan a qualified high deductible health plan (HDHP)?... 3 What are the tax benefits of an HSA Bank Account?... 4 What types of medical expenses can be paid from my HSA Bank Account?... 5 Can I use my HSA Bank Account to pay for health expenses even if I am no longer enrolled in an MHE CDHP Medical Option. 5 Can I use my HSA Bank Account to pay for health insurance premiums?... 5 Whose medical expenses can be paid for from my HSA Bank Account?... 6 I have employee-only coverage; can I pay for expenses from my HSA Bank Account for my spouse if he/she is covered by another medical plan such as Medicare?... 6 Can I use the HSA Bank Account to pay for dental and vision expenses?... 6 Can I use the HSA Bank Account to pay for OTC (over-the-counter) drugs?... 6 Can I have a Flexible Spending Account (FSA) if I have an HSA Bank Account?... 7 Can OTC drugs be paid under the Limited Purpose FSA if I have an HSA Bank Account?... 7 What happens if I use my HSA Bank Account to pay for non-qualified medical expenses?... 7 What if I need assistance or have questions about my HSA Bank Account?... 7 OPENING AN HSA Bank Account... 7 How do I establish my HSA Bank Account?... 7 Do I have to open my HSA bank acount with Optum Bank or can I elect another bank?...8 What are the advantages of opening an HSA bank account through Optum Bank?...8 Who is the HSA Bank Account custodian?... 9 CONTRIBUTIONS TO AN HSA Bank Account... 9 Who can contribute to my HSA Bank Account?... 9 What are the IRS-mandated HSA Bank Account contribution limits?... 9 What is the maximum tax-deductible amount I can contribute to an HSA Bank Account?... 9 Can I make the maximum tax deductible contribution if I join an MHE CDHP Medical Option in the middle of the year? Once I turn age 55, can I contribute the full catch-up amount (i.e., $1,000) to my HSA Bank Account for that year? Page 1

2 Health Savings Account (HSA) Bank Account Frequently Asked Questions & Answers As of October 2014 Can catch-up contributions be made through pre-tax payroll contributions? If my spouse or other family members are covered by a different health plan, does this affect my contribution limit? If I elect to contribute to an HSA Bank Account, when will my contributions begin? What happens to my HSA Bank Account contributions if I leave MHE? What happens to my HSA Bank Account contributions if I cease to participate in an MHE CDHP Medical Option? What happens to my HSA Bank Account contributions if I am on a leave of absence? When and how do I make changes to the initial HSA Bank Account contribution election? How do I determine what my 2015 contribution should be? How can I contribute funds to my HSA Bank Account? How do I contribute post-tax funds in addition to my pre-tax payroll contributions..11 Can I make pre-tax payroll contributions to my own HSA (not established with Optum Bank)? Can I make up contributions to my HSA Bank Account in the event that I miss a payroll contribution? If I join an MHE CDHP Medical Option mid-year, can I make up the annual contributions? What happens if I contribute too much to my HSA? What are my responsibilities as an account holder? What if I have more than one HSA? Can I contribute to an HSA Bank Account while on COBRA? Can I use HSA Bank Account funds to pay for my COBRA premium? INVESTMENT OPTIONS STATUS CHANGES Can I change my contribution to the HSA Bank Account during the year? How can I update my address or other account information? What happens if I have a status change during the year and change my coverage under the an MHE CDHP Medical Option from employee-only coverage to family coverage (or vice versa)? What happens if I m no longer participating in medical coverage under an MHE CDHP Medical Option? Can I cash out my HSA Bank Account if I m no longer enrolled in an HDHP? BENEFICIARIES Should I designate a beneficiary when I open my HSA Bank Account? How do I designate (or update) my HSA Bank Account beneficiary? In the event of my death, what happens to my HSA Bank Account funds? TAX REPORTING Are there any tax forms that I will receive to prepare my taxes at year-end? Can I make a contribution designated for the prior tax year? ACCOUNT STATEMENTS Will I receive statements regarding my HSA Bank Account activity? How can I request a copy of a previous monthly statement? Page 2

3 GENERAL INFORMATION How do I qualify to make contributions to an HSA Bank Account? To be eligible for HSA Bank Account contributions (an HSA-eligible employee ), you must satisfy several requirements on a monthly basis: You must have health coverage under a qualified high deductible health plan (HDHP), such as an MHE CDHP Medical Option, as of the first day of the month in which you make an HSA Bank Account contribution. You cannot be covered under another health plan that is not an HDHP (such as your spouse s plan), unless the health plan provides very limited coverage such as dental or vision. You are not enrolled in Medicare (e.g., Part A or Part B). You are not enrolled in TRICARE or TRICARE for Life, a military benefits program. You cannot have received Veterans Administration (VA) benefits at any time in the past three months. (Note that permitted coverage or preventive care benefits from the VA will not disqualify an otherwise-eligible individual.) You are not eligible to be claimed as a dependent on someone else s tax return. You are not covered by a general purpose health care Flexible Spending Account (including under your spouse s plan) for the tax year in which you will claim your HSA Bank Account deposits as tax deductions. You are, however, eligible to participate in a limited purpose flexible spending account concurrent with your participation in an HSA. What makes a health insurance plan a qualified high deductible health plan (HDHP)? An HDHP is an insurance plan that generally does not pay for the first several thousand dollars of medical expenses (i.e., your annual deductible ), but will generally cover you for a percentage of eligible expenses (the percentage you pay is known as coinsurance) after meeting the deductible. These plans also include a safety net that covers eligible expenses at 100% if out of pocket expenses reach a certain limit. An HSA Bank Account is available to help you pay for the expenses the HDHP does not cover. There are some key features of an HDHP as required by federal law that make it unique, as compared to other more traditional health insurance. These features currently include: Minimum annual deductible of not less than $1,300 for employee-only coverage and $2,600 for coverage of the employee and any family members (2015 amounts shown; amounts may be adjusted annually by the IRS). o o Under the MHE CDHP Medical Option and the MHE Out-of-Area CDHP Medical Option, the annual in-network deductible for 2015 is $2,500 for employee-only coverage and $5,000 for coverage for you and any family members. The annual out-of-network deductible for 2015 is $5,000 for employee only coverage and $10,000 for coverage for you and any family members. Under the MHE Premium CDHP Medical Option and the MHE Out-of-Area Medical Option, the annual in-network deductible for 2015 is $1,300 for employee-only coverage and $2,600 for coverage for you and any family members. The annual out-of-network deductible for 2015 is $2,600 for employee only coverage and $5,200 for coverage for you and any family members. The family deductible applies if you enroll one or more family members for coverage. If you elect employee plus spouse, employee plus child or family coverage, any combination of eligible expenses will satisfy the combined family deductible. The plan will not begin to pay a percentage of covered expenses (also called coinsurance) for any individual covered family member until the total family deductible is met. Annual out-of-pocket expenses for in-network services (including deductible and coinsurance, but not paycheck contributions) cannot exceed $6,450 for employee-only coverage and $12,900 for coverage for an employee and Page 3

4 any family members (2015 limits shown; limits may be adjusted annually by the IRS). There is no mandatory limit on out-of-pocket expenses incurred out-of-network. o Under the MHE CDHP Medical Options, the HDHPs sponsored by MHE, the annual out-of-pocket maximum for 2015 is tiered based on your salary and coverage level as follows (the out-of-pocket maximum for the Out-of-Area CDHP mirrors the in-network out-of-pocket maximum of the CDHP Medical Option and the out-of-pocket maximum of the Out-of-Area Premium CDHP mirrors the innetwork out-of-pocket maximum of the Premium CDHP: CDHP Medical Option Out of Pocket Maximums In-network Out of network Employee only Family Employee only Family <$35K $4,000 $8,000 $8,000 $16,000 $35K to $55K $4,000 $8,000 $8,000 $16,000 $55K to $85K $5,000 $10,000 $10,000 $20,000 $85K to $130K $5,500 $11,000 $11, $130K to $200K $6,000 $12,000 $12,000 $24,000 $200K+ $6,000 $12,000 $12,000 $24,000 Premium CDHP Medical Option Out of Pocket Maximums In network Out of network Employee only Family Employee only Family <$35K $2,500 $5,000 $5,000 $10,000 $35K to $55K $2,500 $5,000 $5,000 $10,000 $55K to $85K $3,000 $6,000 $6,000 $12,000 $85K to $130K $3,500 $7,000 $7,000 $14,000 $130K to $200K $4,000 $8,000 $8,000 $16,000 $200K+ $4,000 $8,000 $8,000 $16,000 All eligible expenses, including prescription expenses, apply toward the deductible, before coinsurance begins. However, HDHPs can pay for qualified preventive care services, which are not subject to the annual deductible, and are paid on a first-dollar basis. All eligible out-of-pocket expenses, including the deductible, apply toward the annual out-of-pocket maximum. Once the annual out-of-pocket maximum is reached, there is no more coinsurance. What are the tax benefits of an HSA Bank Account? Contributions to your HSA Bank Account are tax-deductible up to statutory limits (see page 9). Interest and other earnings on account balances are also tax-free, as are withdrawals from your HSA Bank Account for qualified medical expenses. While contributions to HSA Bank Accounts were created by the federal government and are federal income tax free, states can choose to follow the federal tax treatment guidelines or establish their own. Currently, three states, Alabama, California and New Jersey, subject contributions and earnings to an HSA Bank account to state income tax. Page 4

5 What types of medical expenses can be paid from my HSA Bank Account? Available funds in your HSA Bank Account can be used to pay for qualified medical expenses that apply toward your MHE CDHP Medical Option annual deductible and coinsurance. You can also pay for other qualified medical expenses defined by the IRS (even if those expenses are not covered under the HDHP, such as the HSA medical option). Qualified medical expenses are listed based on IRS Code Section 213(d) and are updated periodically. IRS Publication 969, Health Savings Account and Other Tax-Favored Health Plans, explains that qualified medical expenses are those that would generally qualify for the medical and dental deduction. This publication is available on The following list provides some examples of qualified medical expenses. As always, consult your tax advisor should you require specific tax advice. Qualified medical expenses include: Acupuncture Drugs (prescription only) Psychiatric care Alcoholism treatment Ambulance Chiropractor Contact lenses Dental treatment (x-rays, filings, braces, extractions, etc.) Doctor s office (including physicians, surgeons, specialists or other medical practitioners) visits and procedures Drug addiction treatment Eyeglasses and exams (for medical reasons) Fertility enhancements Hospital services Laboratory fees Nursing home and services Operations/surgery (excluding unnecessary cosmetic surgery) Physical therapy Psychologist Special education (for learning disabilities) Smoking cessation programs (including nicotine gum or patches) Weight-loss program (to treat a specific disease diagnosed by a physician) You may withdraw money from your HSA Bank Account to pay or reimburse yourself for qualified medical expenses at any time after you establish your HSA. (Establishment date refers to the later of the date you opened your HSA Bank Account or the effective date of the HDHP. The establishment date hinges upon both the HSA Bank Account and the HDHP being in place.) There is no time limit on when a distribution from your HSA Bank Account must occur. However, for the distribution to be excludable from your gross income, you must keep sufficient records to later show that the distributions were exclusively used to pay for or reimburse qualified medical expenses that were incurred after the establishment date of your HSA, that the qualified medical expenses have not been previously paid or reimbursed from another source and that the medical expenses have not been taken as an itemized deduction in any prior taxable year. Records should be kept for 7 years. Can I use my HSA Bank Account to pay for health expenses even if I am no longer enrolled in the HSA medical option? While you must be enrolled in a high deductible health plan (HDHP), such as an MHE CDHP Medical Option, to contribute to the HSA bank account, you can still use the contributions in this account to pay for unreimbursed eligible health expenses even if you are no longer enrolled in an HDHP. Can I use my HSA Bank Account to pay for health insurance premiums? Although the HSA Bank Account cannot be used to pay for most health insurance premiums, some exceptions apply. The following premiums may be treated as qualified medical expenses and reimbursed from HSA Bank Account funds on a tax-free basis: Qualified long-term care insurance premiums (up to amounts allowed by the IRS). COBRA health care continuation coverage contributions. Page 5

6 Health plan coverage while an individual is receiving unemployment compensation. For those age 65 or older, Medicare premiums (for Parts A, B or D; Medicare HMO coverage) and out-of-pocket expenses, other than Medigap coverage, and the individual s share of premiums for employer-sponsored retiree health insurance. Whose medical expenses can be paid for from my HSA Bank Account? In a given year, you may use your HSA Bank Account funds to cover qualified medical expenses for: 1. You and your same or opposite-sex spouse/domestic partner/ union partner, or each of his or her covered child (ren) if he/she or they qualify as your federal tax dependent, as described below; 2. Any dependent you claim on your tax return; and 3. Any person you otherwise could have claimed as a dependent on your tax return except that: o o o The person filed a joint return, The person had gross income above a certain amount. In 2012, that amount was $3,800, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else s tax return in that year. It s important to note that eligibility for dependents is aligned with tax dependent eligibility, as opposed to medical plan eligibility. That means your dependents for purposes of the HSA Bank Account can be enrolled for coverage under a different medical plan (including through Medicare). They are not required to be enrolled in an MHE CDHP Medical Option. In addition they are not required to participate in another HDHP or health plan in order for their expenses to be eligible for reimbursement. Note for employees covering adult children and domestic partners/civil union partners: Keep in mind that you can generally cover your child under an MHE CDHP Medical Option until the end of the month in which he or she turns 26, and you can also cover your domestic partner and your domestic partner s children under an MHE CDHP Medical Option You will receive an MHE employer contribution (provided your base salary is less than $200,000) and you can make your own tax-free contributions to your HSA Bank Account with Optum Bank based on the level of medical coverage you elect. However, unless any of these individuals is your dependent as described in 1-3 above, you cannot use your HSA Bank Account funds to cover any of his or her health expenses. As an alternative, these individuals can (as long as they are not otherwise disqualified from making a contribution) open their own HSA bank account, make their own contributions to their HSA Bank Account (up the limit based on the level of coverage under the HSA Option) and request reimbursement for eligible health care expenses from their own HSA Bank Account. I have employee-only coverage; can I pay for expenses from my HSA Bank Account for my spouse if he/she is covered by another medical plan such as Medicare? Yes. Even if you enroll in employee-only coverage, you may pay for eligible expenses for your spouse (as defined under federal law) and other eligible tax dependents as long as their expenses are not otherwise reimbursed. However, you can only make a contribution up to the annual contribution limit that applies to employee-only coverage.. Can I use the HSA Bank Account to pay for dental and vision expenses? Yes. Can I use the HSA Bank Account to pay for OTC (over-the-counter) drugs? OTC drugs or medications (other than insulin) are not eligible for reimbursement from an HSA, unless you have a doctor s prescription. Examples of OTC medications include cold and flu medicines, pain relievers and sleep aids. If Page 6

7 you have a prescription for an OTC drug or medication, you can use your Optum Bank Mastercard debit card for the purchase. Be sure to keep the receipt and the doctor s prescription for tax filing purposes. Can I have a Flexible Spending Account (FSA) if I have an HSA Bank Account? If you are actively contributing to an HSA, you cannot participate in a general purpose FSA, but you can contribute to a Limited Purpose FSA, which can only be used to reimburse dental or vision expenses. Dependent Care Flexible Spending Accounts are allowed. Can OTC drugs be paid under the Limited Purpose FSA if I have an HSA Bank Account? No. The Limited Purpose FSA can only be used for dental and vision expenses. What happens if I use my HSA Bank Account to pay for non-qualified medical expenses? Any amounts you use for purposes other than to pay for qualified medical expenses prior to age 65 are taxable as income and subject to a 20% additional penalty. This applies to: Medical expenses that are not considered qualified under federal law, like elective cosmetic surgery; Other types of health insurance; Medical expenses incurred before you began participating in the HSA Bank Account (i.e., before the HSA Bank Account establishment date); Premiums for Medicare Part A, B or D or a Medicare HMO prior to reaching age 65 (even if you are enrolled in Medicare due to a disability or have end-stage renal disease); and Distributions not used to pay for the qualified medical expenses of you or your eligible dependents. The 20% additional penalty does not apply after you, as the primary account holder, become eligible for Medicare at age 65. In addition, it does not apply in cases of distributions made after your death or disability. You are responsible for determining whether or not your distribution is used for qualified medical expenses. Neither MHE nor Optum Bank determines whether HSA Bank Account distributions are used for qualified medical expenses. You make that determination and should maintain records supporting your distribution. You are responsible for reporting non-qualified distributions on your taxes. You may redeposit into your HSA Bank Account funds used in error for non-qualified expenses by submitting a completed withdrawal correction form, available through Otherwise, as the HSA Bank Account holder, you would need to report this on your tax return for the corresponding tax year. What if I need assistance or have questions about my HSA Bank Account? Log on to your account through or call Optum Bank at Customer service representatives are available Monday-Friday, 8:00 a.m. to 8:00 p.m., Eastern Time. OPENING AN HSA BANK ACCOUNT How do I establish my HSA Bank Account? If you enroll for medical coverage under one of MHE s CDHP Medical Options for 2015 and you are not enrolled in Medicare, you will be automatically signed up for a HSA bank account with Optum. During the enrollment process you will also be asked whether you would like to make your own contributions to this account. Once MHE informs Optum Bank to open an account in your name, your information will be reviewed and, as required by federal law, your identity will be verified by Optum Bank before an account can be opened in your name, using the information you provide during the Open Enrollment process (including your name, home address, date of birth and Social Security number). If Optum Bank cannot verify your identity, it will make up to three attempts to contact you by Page 7

8 mail and/or phone for additional documentation. If Optum Bank is not able to verify your identity, it will not open an HSA Bank Account in your name at that time. Your contributions generally begin with the first paycheck of the month following the establishment date of your HSA Bank Account or the first paycheck of 2015 if your account is established during 2015 Open Enrollment and you meet the verification requirements described above. IMPORTANT: If you are an active employee as of 12/31/14 and eligible for an MHE employer contribution, your full annual employer contribution will be deposited to the HSA account in early January. Any additional contributions you may be eligible to earn (up to $400 in 2015) through MHE s Wellness Program, HealthyU, will be deposited periodically throughout the year as you meet the criteria for having successfully completed these programs. If you are a new hire in 2015, you will be eligible for a pro-rated employer contribution to your account during 2015, based on the quarter in which you were hired as follows: January 1 March 31 ¾ of the total employer contribution April 1 June 30 ½ of the total employer contribution July 1 September 30 ¼ of the total employer contribution October 1 December 31 st no employer contribution New hires in 2015 will also be eligible to participate in HealthyU wellness activities and earn incentives, to be deposited in the HSA, for completing wellness activities. Note that many banks offer HSAs. As a participant in an HDHP, you are permitted to open your HSA Bank Account with the bank or custodian of your choice. Reach out to the bank or custodian of your choice for information and enrollment instructions. However, in order to make pre-tax HSA Bank Account contributions from your paycheck and for MHE to make its contributions, you must establish an HSA Bank Account with Optum Bank. MHE will only pay for the set-up fees and monthly maintenance fees of your HSA Bank Account with Optum Bank as long as you are an active employee and stay enrolled in an MHECDHP Medical Option. MHE will not pay account-related fees for retirees, those on Long-Term Disability or former employees who participate in the HSA Bank Account under COBRA. Do I have to open my HSA Bank Account with Optum Bank or can I elect another bank? You can elect to open an HSA Bank Account on your own, as long as you are enrolled in an HSA-compatible HDHP like the MHE CDHP Medical Option. However, you will not be permitted to make pre-tax paycheck contributions to an HSA Bank Account from your paycheck and MHE will not make any HSA Bank Account contributions on your behalf. The same applies to the Optum Bank account set-up and monthly maintenance fees paid by MHE on your behalf. You can consider setting up a direct deposit to your own HSA; however, the deduction would be on a post-tax basis and taken as a federal tax deduction when you file your taxes for that year. (Check with your tax advisor for state regulations that may affect you.) What are the advantages of opening an HSA Bank Account through Optum Bank? MHE will make its annual contribution, plus any additional, wellness related incentives, and pay your account set up and quarterly fees to the Optum Bank HSA; MHE will not make its contributions to an HSA at another institution. In addition, your HSA Bank Account payroll contributions to the Optum Bank HSA are made on a pre-tax basis, meaning that you will not pay federal, FICA, and in many cases, state and local income taxes on this money. Any contributions you make to an HSA at another institution will need to be made on a post-tax basis and taken as a federal tax deduction when you file your taxes for that year. (Check with your tax advisor for state regulations that may affect you.) Page 8

9 Who is the HSA Bank Account custodian? If you enroll in an HSA Bank Account with Optum Bank, Optum Bank is the custodian of your HSA. As the custodian of your HSA, Optum Bank will manage your account. CONTRIBUTIONS TO AN HSA BANK ACCOUNT Who can contribute to my HSA Bank Account? Anyone can contribute to an eligible individual's HSA Bank Account; however, it is your responsibility as the account holder to ensure that your HSA Bank Account contributions do not exceed the IRS-mandated limits described below. The contributor should write a check payable to you, the HSA Bank Account holder. If you bank with Optum Bank, fill out a contribution/deposit form (available through then attach the form and mail it according to the form s instructions. Keep in mind that some important rules apply to contributions made on a post-tax basis; check with Optum Bank for details. What are the IRS-mandated HSA Bank Account contribution limits? There are limits set by the IRS (adjusted annually) on how much you can contribute tax-free to an HSA Bank Account in a calendar year. Those limits apply to employee contributions, along with any contributions made on your behalf including those annual contributions and wellness incentives made on your behalf by MHE. For 2015, the contribution limits are: $3,350 (minus the salary-based annual company contribution made by MHE if you enroll for employee-only coverage in a CDHP Medical Option); or $6,650 (minus the salary-based annual company contribution made by MHE if you enroll yourself and any other family members for coverage in a CDHP Option). If you are age 55 or older, you are also permitted to make an additional annual catch-up contribution of $1,000. It is your responsibility to monitor that your own contributions plus those made by MHE do not exceed the annual limit. You can adjust your own contributions by choosing the Enroll Now. Once you reach the enrollment portal, choose Go to Health Savings Account. What is the maximum tax-deductible amount I can contribute to an HSA Bank Account? Up to the IRS-mandated limits described above, contributions to an HSA Bank Account are tax deductible. These limits apply to Company contributions and employee contributions combined. You can also make additional contributions to your HSA Bank Account on a post-tax basis to take as a federal tax deduction when you file your taxes for that year. Keep in mind that the IRS-mandated HSA Bank Account contribution limits described above apply, along with some specific rules. Consult with Optum Bank for additional details. Can I make the maximum tax- deductible contribution if I join an MHE CDHP Medical Option in the middle of the year? Even if you are not HSA-eligible for the full year in 2015, you may still elect to contribute to your HSA the entire annual contribution amount for 2015 (including the additional catch-up contribution, if eligible), as opposed to the sum of the monthly contribution limits for the months in which you were an HSA-eligible employee, if you remain HSAeligible for all of 2016 (referred to as the testing period ), unless you cease to be covered because of your death or disability. If you do not remain covered by an HDHP for the 12-month period following the end of the tax year in which you first enrolled in the HDHP, you will be subject to income tax and a 10% penalty tax on any amount of the annual contribution limit that you would not normally have been permitted to make had you not made the make up contribution. The 10% penalty is included in your income in the year in which you fail to remain HSA-eligible. Page 9

10 Once I turn age 55, can I contribute the full catch-up amount (i.e., $1,000) to my HSA Bank Account for that year? Yes. If you are age 55 or older, you can contribute the entire catch-up amount for the year as long as you were eligible for HSA Bank Account contributions on the first day of each month in that year. You can also make additional catch-up contributions to your HSA Bank Account on a post-tax basis to take as a federal tax deduction when you file your taxes for that year. Keep in mind that the annual IRS-mandated HSA Bank Account contribution limit for catch-up contributions applies to pre-tax and post-tax contributions combined. Consult with Optum Bank for additional details and to learn about related rules. Can catch-up contributions be made through pre-tax payroll contributions? Yes. Catch-up contribution amounts (allowed for employees age 55 and over) can be deducted through payroll on a pre-tax basis or they can be made directly to your HSA Bank Account on a post-tax basis, as described above. If my spouse or other family members are covered by a different health plan, does this affect my contribution limit? Your HSA Bank Account contribution limits are determined by the medical coverage level you elect under a high deductible health plan, such as an MHE CDHP Medical Option. If you elect employee-only coverage under an MHE CDHP Medical Option, you can contribute up to $3,350 (minus any Company contribution) to the HSA Bank Account in If you cover yourself and any other family members, you can contribute up to $6,650 (minus any Company contribution) to the HSA Bank Account in If your spouse is covered by a separate high deductible health plan, then your combined contributions are limited to no more than the annual family coverage limit. If I elect to contribute to an HSA Bank Account, when will my contributions begin? Employee contributions to an HSA Bank Account begin on the first pay period following the establishment of your HSA, and will be collected through payroll deduction. If you complete your HSA Bank Account application during the Open Enrollment period in November 2014, your payroll contributions will begin with the first paycheck that follows January 1, What happens to my HSA Bank Account contributions if I leave MHE? Your HSA Bank Account is an individually owned account and is yours to keep even if you leave MHE. Your payroll contributions will cease at the end of the month in which you leave MHE for any reason, including retirement, and are no longer employed as an active employee. If you continue to be covered by a qualified HDHP, you may continue to contribute to your HSA Bank Account on a post-tax basis, although important rules apply. Contact Optum Bank to learn more. An account maintenance fee of $3.00 per month will be deducted from your HSA Bank Account each month that you continue to maintain an account balance after you leave MHE. You may withdraw your HSA Bank Account funds at any time, subject to the tax implications that apply to health savings accounts. Your HSA Bank Account will continue to earn interest, at rates set forth by Optum Bank, and earnings (to the extent applicable). What happens to my HSA Bank Account contributions if I cease to participate in an MHE CDHP Medical Option? Your payroll contributions will cease at the end of the month in which you cease to be enrolled in an MHE CDHP Medical Option, and MHE will make no additional contributions to your HSA Bank Account. However, you can continue to use the balance in your HSA Bank Account for eligible health expenses. So long as you remain actively employed by MHE, MHE will continue to pay on your behalf the account maintenance fee charged by Optum Bank. Page 10

11 What happens to my HSA Bank Account contributions if I am on a leave of absence? Taking an approved leave of absence (other than long-term disability) does not affect your HSA Bank Account eligibility as long as you continue to participate in an MHE CDHP Medical Option. If you are on an unpaid leave of absence, no HSA Bank Account payroll contributions will be taken for the months in which you receive no pay. However, a company contribution will be made in January 2015, if you are eligible. You may make a post-tax lump sum contribution at your discretion to make up for any missed payroll contributions, but you are not required to do so. When you return from an unpaid leave, your HSA Bank Account payroll contributions will not restart automatically. You will have to actively re-elect to make contributions. When and how do I make changes to the initial HSA Bank Account contribution election? You can increase or decrease the amount of your contribution to an HSA Bank Account at any time for any reason on (click the Enroll Now button, and once you reach the Enrollment Portal, choose Go to Health Savings Account.) Be sure to keep in mind the IRS-mandated HSA Bank Account contribution limits described on page 9. Your payroll contributions will change in the month following the date you make the change online. How do I determine what my 2015 contribution should be? It is up to you to determine what level of HSA Bank Account contribution makes sense for you based on your personal tax situation, your health care needs and your overall financial strategy. You may reference the Maximum Contribution Calculator on for additional assistance in determining your maximum contribution for the year. When you enroll in an MHE CDHP Medical Option during the 2015 Open Enrollment period, you will specify your 2015 contribution to the HSA Bank Account, if any. If you do not elect to make a contribution during the 2015 Open Enrollment period, so long as you are an HSA-eligible employee, you can elect to begin contributing at any time during the year.. You are permitted to make additional post-tax contributions at any time directly to your HSA Bank Account and take a federal tax deduction when you file your taxes for that year. The IRS-mandated contributions continue to apply, along with some important rules. Contact Optum Bank for additional details. In addition, be sure to check with your tax advisor for state regulations that may affect you. How can I contribute funds to my HSA Bank Account? If you participate in an HSA Bank Account with Optum Bank, you can contribute to the HSA Bank Account through pre-tax payroll deductions. You can also make post-tax contributions at any time directly to your HSA Bank Account up to the IRS mandated contribution limits (including your pre-tax contributions and contributions from MHE) and take a federal tax deduction when you file your taxes for that year. (Check with your tax advisor for state regulations that may affect you.) You may also make a once in a lifetime contribution using amounts from an IRA up to IRS mandated contribution limits (including your own pre-tax contributions and contributions from MHE). You are allowed to make one rollover contribution from another HSA each year. To do so, the rollover must be completed within 60 days after you receive your distribution from the other HSA. You may also make direct trustee-to-trustee transfers from a prior HSA to Optum Bank. There is no limit to the amount of transfers you make each year. Eligible rollovers and transfers do not count toward your HSA Bank Account calendar-year contribution limit. How do I contribute post-tax funds in addition to my pre-tax payroll contribution? You can mail a check with a Contribution/Deposit Form to Optum Bank. Follow instructions on the form, which can be accessed on You can also use the econtribute option on myuhc.com to make an HSA Bank Page 11

12 Account contribution by transferring funds electronically from your personal bank account to your HSA Bank Account at Optum Bank. Can I make pre-tax payroll contributions to my own HSA (not established with Optum Bank)? No. MHE will not facilitate pre-tax payroll deductions for an HSA Bank Account established through a custodian who is not Optum Bank. You may set up a direct deposit to your own HSA; however, the deduction would be on a post-tax basis. Can I make up contributions to my HSA Bank Account in the event that I miss a payroll contribution? Yes. You have until April 15 to make additional HSA Bank Account contributions and designate them to apply to the prior tax year (up to your annual limit). Remember, however, that your total contribution, along with any contributions from MHE, may not exceed the IRS-mandated HSA Bank Account limit. In addition, contact Optum Bank for information about some important related IRS-mandated rules that may apply. If I join an MHE CDHP Medical Option mid-year, can I make up the annual contributions? If you enroll in an MHE CDHP medical option after January 1, you are permitted to contribute up to the entire annual contribution limit (including the additional catch-up contribution) if: You were enrolled in an HDHP on December 1; and You remain enrolled in the HDHP through the end of the next calendar year. The IRS-mandated contributions continue to apply, along with some important rules. Contact Optum Bank for details. In addition, be sure to check with your tax advisor for state regulations that may apply. What happens if I contribute too much to my HSA? You can send a completed Withdrawal/Distribution Form, which is available on to Optum Bank. There is no penalty as long as excess contributions and all income earned on those excess contributions are withdrawn from the HSA Bank Account before your tax-filing deadline (generally April 15 of the following year). Instead, the excess contributions and interest earned on them will be taxed as income without additional penalty. However, failure to withdraw excess contributions will result in those funds being taxed as income with an additional 6% penalty. What are my responsibilities as an account holder? It is each individual account holder s responsibility to ensure that HSA Bank Account contributions do not exceed the maximums mandated by the IRS and to comply with any related HSA Bank Account rules. It is also the account holder s responsibility to make sure that his/her distributions are for qualified medical expenses. What if I have more than one HSA? You may contribute to all your HSAs, but the total annual contributions to your accounts cannot exceed the IRSmandated maximum contribution. Contributions from MHE, family members or any other person must be included in this total. Can I contribute to an HSA Bank Account while on COBRA? Yes, as long as the COBRA plan you are enrolled in is an HSA-compatible HDHP, like the MHE CDHP Medical Options. If you are no longer receiving a paycheck, you can make post-tax contributions to your HSA Bank Account. MHE will not make contributions to your HSA Bank Account if you are eligible for COBRA because you are no longer receiving a paycheck from MHE. Page 12

13 Can I use HSA Bank Account funds to pay for my COBRA premium? Yes, COBRA premiums may be reimbursed from HSA Bank Account funds on a tax-free basis. INVESTMENT OPTIONS Since your HSA Bank Account is your personal account, is not part of the MHE Group Health Plan and is not administered by MHE, you should contact Optum Bank at or speak to an Optum Bank customer service representative at , Monday-Friday between 8:00 a.m. and 8:00 p.m., Eastern Time, for information regarding administration of your HSA Bank Account, including, for example, how it will be invested, how it will accrue interest, whether and how you can roll over distributions to it and the like. STATUS CHANGES Can I change my contribution to the HSA Bank Account during the year? Yes. You can adjust your HSA Bank Account pre-tax payroll contribution at any time during the year at to take effect in the month following the date of the change. However, you cannot change your medical coverage under an MHE CDHP Medical Option or the Limited Purpose FSA until the next Open Enrollment period, unless you experience a qualifying status change. How can I update my address or other account information? To update your account information, call Optum Bank at What happens if I have a status change during the year and change my coverage under an MHE CDHP Medical Option from employee-only coverage to family coverage (or vice versa)? Your annual HSA Bank Account contribution limit is based on whether you enroll only yourself or if you enroll yourself and any other family members for coverage in an MHE CDHP Medical Option, as described on page 9. If your coverage under an MHE CDHP Medical Option changes during the year due to a status change, your annual HSA Bank Account contribution limit is adjusted accordingly, starting in the month following your status change. It is your responsibility to adjust your HSA Bank Account contribution if that is your intent. Remember, you can change your HSA Bank Account contribution at any time during the year at MHEbenefits.com. Company contributions to your account are adjusted quarterly starting the month following your change status. What happens if I m no longer participating in an MHE CDHP Medical Option? You can continue to spend any funds in your HSA Bank Account to pay for qualified medical expenses. However, you can no longer make contributions to your HSA Bank Account or receive employer contributions from MHE. All applicable monthly account fees will apply. So long as you remain actively employed by MHE, MHE will continue to pay on your behalf the account maintenance fee charged by Optum Bank. Can I cash out my HSA Bank Account if I m no longer enrolled in an HDHP? Even if you are no longer enrolled in an HDHP and thus prevented from making additional contributions to your HSA, you can still utilize the funds in your account to pay for qualified medical expenses. You can also cash out your HSA, but the proceeds from your account are fully taxable and you may be subject to an additional penalty if the proceeds are not used to pay for qualified medical expenses. If you are age 65 or older, you will not be subject to the additional penalty. Page 13

14 BENEFICIARIES Should I designate a beneficiary when I open my HSA Bank Account? Yes, HSA Bank Account funds belong to you. Therefore, a beneficiary (or beneficiaries) should be designated to receive your funds in the event of your death. How do I designate (or update) my HSA Bank Account beneficiary? Once your account is established with Optum Bank, you can download the Designation of Beneficiary form through In the event of my death, what happens to my HSA Bank Account funds? What happens to your HSA Bank Account when you die depends on whom you designate as the beneficiary. If your spouse is the designated beneficiary of your HSA, the account will be treated as your spouse's HSA after your death. Otherwise, the account stops being an HSA, and the fair market value of the HSA Bank Account becomes taxable to your designated beneficiary (or beneficiaries) in the year of your death. If your estate is the beneficiary, the value is included on your final income tax return. TAX REPORTING Are there any tax forms that I will receive to prepare my taxes at year-end? Yes. For tax purposes, there are three important forms. Samples are available through IRS Form 1099-SA: This form provides you with the total distributions that were made from your HSA. If you did not receive any distributions during the year, you will not receive a 1099-SA. IRS Form 5498-SA: This form provides you with the contributions you made to your HSA Bank Account in a tax year. Since account holders have the right to make contributions to their HSA Bank Account until April 15 of the following year, this form is generally sent out in May from Optum Bank. IRS Form 8889: This is the HSA Bank Account contribution form for you to complete and attach to your IRS 1040 Form. Also, MHE will send you a W-2 showing the amount of any pre-tax contributions you made to your HSA Bank Account and any contributions MHE made to your HSA. Please consult your tax advisor for further information regarding your specific situation. Can I make a contribution designated for the prior tax year? Until the tax deadline (generally April 15), you can choose to make additional HSA Bank Account contributions and designate them to apply to the prior tax year, as long as you were enrolled in an HDHP (such as an MHE CDHP Medical Option) on or before December 1 of the prior year. Remember, however, that the IRS-mandated contribution limits continue to apply, along with some important rules. Contact Optum Bank for details. In addition, be sure to check with your tax advisor for state regulations that may apply. Page 14

15 ACCOUNT STATEMENTS Will I receive statements regarding my HSA Bank Account activity? You will be able to download monthly electronic statements. If you would like a paper copy of the current month s mailed to your home free of charge, contact Optum Bank s customer service (Monday-Friday, 8:00 a.m. to 8:00 p.m., Eastern Time) Fees may apply if you request previous months statements, How can I request a copy of a previous monthly statement? You can view, download and print 18 months of prior months statements on You can request to have monthly statements mailed to your home for a fee. Page 15

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