The PSA Health Savings Program

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1 The PSA Health Savings Program Qualified High Deductible Health Plan (QHDHP) + Health Savings Account (HSA) Helps Pay for Preventive Care While Protecting Employees from Large Medical Bills Lower Monthly Premiums Versus Traditional Plans Preventative Care Services Not Subject to Deductible Rewards Fiscally Responsible Decision-Making Consumerism Helps Curb Future Healthcare Costs Helps Pay Medical Deductibles and Other Medical, Dental or Vision Expenses Deposits are Pre -Tax Under IRC Section 125 or Tax-Deductible Account Holders May Use Money Tax-Free for Qualified Expenses Accounts May Provide Tax-Deferred Growth and Retirement Income No Use it or Lose it Provision

2 PSA Insurance & Financial Services McCormick Rd., 5th Floor Hunt Valley, MD psafinancial.com This material is not intended to replace the advice of a qualified professional. As tax laws may change, please consult your advisor prior to implementing an HSA. Tax references are at the Federal level; state taxes may vary and tax consequences may differ based on individual circumstances. There is no guarantee that any savings plan will cover all expenses. Investment offerings are at the sole discretion of the bank and broker/dealer chosen by the employer. PSA Insurance & Financial Services is not responsible for these choices and makes no representations with respect to investment options offered nor the performance of the investments. The returns and principal values in investment accounts will vary, and may lose value. Consult your advisor and read the Fund prospectus to determine investment objectives, risk, charges and expenses prior to investing. Investment and Insurance Products are not FDIC or Other Governmental Agency insured and not bank guaranteed. Additional information may be found at JG110504dmt

3 The PSA Health Savings Program Qualified High Deductible Health Plans & Health Savings Accounts

4 How The PSA Health Savings Program Works Our Health Savings Program is a creative group benefit strategy that incorporates the use of a Qualified High Deductible Health Plan (QHDHP) and a Health Savings Account (HSA). The combination can result in premium and tax savings for both the employer and employee, all while providing high quality benefits. Health Savings Account Health Savings Accounts (HSAs) are tax-favored savings or investment accounts where money can be contributed, saved and grown to pay for qualified medical, dental and vision expenses or retirement. HSAs were created by Congress to encourage healthcare spending discretion amongst consumers while lowering health insurance costs. Money can be contributed to an HSA by the eligible account holder and/or the employer. Contributions made by the account holder are tax-deductible or may be eligible for pre-tax treatment under an employer s Cafeteria Plan. Contributions made by an employer are received tax-free by the employee. An HSA is an individual, not employer or group, account. The HSA is portable and stays with the employee even when changing employers. The accumulated HSA contributions remain in the HSA from year-to-year and can be grown like a traditional retirement account. There is no use it or lose it penalty or requirement. Who s Eligible to Have an HSA? The employee must be enrolled in a QHDHP (Qualified High Deductible Health Plan) and not be enrolled in or participating in any other private or public program including Medical FSAs, HRAs, non-qualified medical plans and Medicare. Tax Advantages HSAs provide a financial incentive for employees to participate in a QHDHP by allowing employees to spend accumulated HSA contributions without ever paying taxes on the money. In fact, there are no other places an employee can contribute or receive employer money tax-free and then spend it tax-free. The tax advantages are unique. Simply put, an HSA has features similar to an IRA or 401(k) except the account holder may take distribution for medical, dental and vision expenses for him or herself along with his or her legal dependents. Qualified High Deductible Health Plans The PSA Health Savings Program is a great way to enhance benefits without adding cost Pay for healthcare with pre-tax dollars Lower monthly premiums Encourages consumerism amongst employees Employees control their own health savings accounts Reduces paperwork In order to open an HSA, one must be enrolled in a Qualified High Deductible Health Plan (QHDHP) and not enrolled in any other public or private health benefit plan. QHDHPs are health insurance plans where all eligible medical expenses are subject to a plan deductible, which must be met before the benefit plan pays for any medical expenses. The one exception is preventive care, which is covered at 100%. The IRS determines the guidelines for QHDHPs. QHDHPs have lower monthly premiums than traditional plans, and in many cases the premium saved is in excess of the added liability of the deductible. For example, an increase of $1,000 in deductible expenses may reduce the annual premium by $1,000 or more. The deductible provides consumers with more incentive to shop carefully for healthcare services. In turn, this helps control future healthcare costs.

5 Contribution Guidelines Contributions to HSAs can be made on a tax-favored basis by account holders and/or their employers. If an employer contributes to an HSA, that contribution is tax-deductible to the employer. Any contributions made through payroll deductions under a cafeteria plan to an HSA are available to employees on a pre-tax basis. HSA account owners and/or their employers may make yearly contributions to fund their accounts. Current annual contribution limits are in excess of $3,000 per individual enrolled in a QHDHP and $6,000 for a family enrolled in a QHDHP. There are also additional Catch-Up amounts for HSA owners age 55 or older. Distributions Key Points Account holders can use HSA money tax-free at any time for qualified medical, dental or vision expenses of the account holder or his/her dependents regardless of the dependents participation in the QHDHP. When an HSA holder turns 65, funds can be withdrawn to pay for non-qualified expenses. Money used for non-qualified expenses is subject to ordinary income tax, but there are no IRS penalties. The PSA Process Ensures a Smooth Launch A Health Savings Program is a smart benefit option for you and your employees, but proper roll-out within your company will be crucial. This is where PSA s expertise and proven methods make all the difference. We ve helped hundreds of clients create, implement and roll out successful programs. Our methods and strategic communication materials are proven and time-tested. Make it Simple and Streamlined PSA has invested tremendous resources toward making roll-outs simple. We ve honed the process, making it easy and free of confusion. Our proprietary, customizable communication pieces are designed to answer the questions your employees will likely ask, and contain all of the information your staff needs for a successful enrollment. Employee Communications and Engagement PSA has a full-service Call Center staffed by licensed professionals who can address employee questions about QHDHPs, HSAs or other matters, including claims issues. This valuable service helps ensure your employees come to PSA with questions, rather than relying upon your executive team or human resources department. PSA s Employee Benefits staff is committed to forging a relationship with your

6 employees. We know that an informed employee is best for you, our client. That s why we invest so much time and energy into developing a process that meets the needs of your employees. We want both you and your employees to get all of the benefits available in a Health Savings Program. The PSA Process Makes It Easy Our expertise, commitment and proven methodology make all the difference STEP 1: Proper Plan Design Our team has worked with hundreds of clients and thousands of employees since Congress created these tax-favored programs in Our benefits experts will build the best plan design for your company s QHDHP making it affordable for you while providing great coverage for your employees. STEP 2: Decouple the HSA Provider from the Insurance Carrier Choosing the right bank to manage your employees HSAs is important, as all banks are not equal. PSA has relationships with some of the best banking partners in the market. We ll help select a bank that offers added benefits and is NOT directly affiliated with the insurer. We are also able to work with your existing bank if desired. STEP 3: Educate Your Employees Thoughtful and well-managed employee education is critical to achieving strong participation and a successful program. Our professionals have a deep understanding of IRS guidelines and can manage the entire enrollment process. As seasoned benefits consultants, we ll select an experienced banker and insurance company representative who are capable of clearly explaining how HSAs work for your benefit plan participants. STEP 4: Reduce Employer Headaches A well-informed, comfortable employee base is the key to high levels of satisfaction and plan participation. Our experience, attention and proven process mean no surprises or aggravation for you. Getting Started If you are ready to learn more about how your company can benefit from the easy, affordable, yet high-value benefits coverage found in the PSA Health Savings Program, contact us today at