Health. Savings. Accounts. See the difference.

Transcription

1 Health Savings Accounts See the difference.

2 Better manage and control your rising healthcare costs and premiums with a Seven Seventeen Health Savings Account.

3 As an employer, providing healthcare benefits is increasingly important in attracting and retaining the best employees. At the same time, premiums and administrative costs continue to skyrocket. To continue offering quality healthcare coverage, employers have been looking at ways to shift part of the cost increases to employees. One of the means by which employers are achieving this cost reduction is by offering employees a High-Deductible Health Plan (HDHP) combined with a Health Savings Account (HSA). An HSA allows you, the employer, and/or your employees to make deposits into an account on a tax-advantaged basis. Money deposited into an HSA earns dividends taxfree. Employees can make tax-free withdrawals from the account to pay for qualified medical expenses. Any unused funds are carried forward from year to year, with no use it or lose it rules. Now with a Seven Seventeen HSA and an HDHP, you may lower your health insurance costs and still provide the type of coverage that your employees and their families need. To get started, you must first be enrolled in a qualified high-deductible health insurance plan. Seven Seventeen can supply you with some names of insurance companies that offer quality HDHPs for your review and evaluation*. Regardless of your choice of an HDHP provider, Seven Seventeen can provide your employees with an HSA. Seven

4 Seventeen representatives can come to your place of business to open the HSAs for your employees. What are the advantages of combining an HDHP and an HSA? Employer Advantages Switching to an HSA-qualified HDHP for your employees may allow you to pay substantially lower health insurance premiums. Because there are two components of the plan, premiums and account funding can be decided independently and reviewed annually, leading to lower fixed costs of your health insurance plan. Instead of paying 100% of insurance dollars to a carrier, you can deliver the benefit dollars directly to employees by funding the account or the accounts can be entirely employee-funded. Because ownership and control of the HSA belongs to the employees, it gives them an incentive to get involved with healthcare decisions, leading them to seek the best prices for healthcare. Employee Advantages Contributions to the HSA are made with pre-tax dollars, while earnings and withdrawals for qualified expenses are not taxed**. The HSA is portable so it stays with the employee if he or she should leave the company.

5 Why choose a Seven Seventeen HSA? Our HSA is a high-rate tiered checking account the higher the tier, the higher the dividend rate. The tiers are as follows: $ $ $1, $4, $5, $9, $10, $24, $25, Accounts can be opened with as little as $5.00. Dividends are paid on all balances. Payroll deductions can be made into the account. Account holders can pay their healthcare expenses by writing unlimited checks from their Seven Seventeen HSA checking account. An HSA debit card will soon be available for added convenience. Funds in the HSA roll over from year to year, so there s no need to worry about using the balance up by year-end. The account can be managed with CALL24 telephone banking or NetWorth24 online banking. There s no set-up or annual fee. There s a low monthly maintenance fee of $2.75***. Part of the funds will soon be able to be invested in an HSA Certificate (late in 2007).

6 Frequently Asked Questions What is a High-Deductible Health Plan (HDHP)? An HDHP is a health insurance plan that does not cover first dollar medical expenses. In order to qualify for an HSA, in 2007, the annual health insurance deductible for individuals must be at least $1,100, with annual out-of-pocket expenses not exceeding $5,500**. For families, the annual deductible must be at least $2,200, with annual out-of-pocket expenses not to exceed $11,000**. These amounts are adjusted annually for inflation. In addition, the employee cannot be covered by any other health insurance that is not an HDHP, nor be enrolled in Medicare, and cannot be claimed as a dependent on someone else s tax return**. Does the employer own the employee s HSA? Does the employer control how the money is spent? No. The funds in the HSA are fully owned by the employee. It is the employee s responsibility to keep track of amounts deposited and spent from the account. Does the employer need to make sure the HSA is used for qualified medical expenses? No. It is the employee s responsibility to make sure they are using the funds properly.

7 Does the employer have any responsibilities in regard to the employees HSAs? If an employer chooses to make contributions to an HSA, there are some obligations that must be met. Specifically, the employer is required to determine if employees covered by HSAs are eligible individuals based on the health plans offered by the employer and the maximum allowable contribution. Employers are also responsible for determining whether an employee is age 55 or older and is eligible for catch-up contributions. Please consult your attorney and tax advisor for details. Must the employer contribute the same amount to every employee s HSA? Employer contributions must be comparable. They must be in the same dollar amount or percentage of the employee s deductible for all employees in the same class. Contribution levels for full-time vs. part-time employees and employees with self-only coverage vs. family coverage can be varied. Again, consult your attorney and tax advisor for details. Employer contributions are not wages for Federal Income Tax purposes.

8 How much can be contributed? An HSA owner simply determines his or her contribution limit based on contribution limits specified in the Internal Revenue Code Section 223 for either self-only coverage $2,850 for 2007 or family coverage $5,650 for Contributions can be made in a lump sum or in any amounts and frequency until the maximum annual limit is met. Additionally, if the employee is 55 or older and has not enrolled in Medicare, he or she is eligible to make a catch-up contribution. If ineligibility is determined, the HSA owner is subject to a 10% tax penalty. What are the catch-up contribution limits? Individuals age 55 and older can make additional catch-up contributions of $800 in 2007, $900 in 2008, and $1,000 in 2009 and later years**. Can funds be rolled over from other tax-deferred accounts into an HSA? An HSA owner may take a one-time (once in a lifetime) tax-free distribution from his or her IRA, and transfer that amount to an HSA. The amount eligible for deposit to the HSA is subject to the HSA contribution limits. This provision does not apply to SEP or SIMPLE IRA distributions**.

9 Who can contribute to an HSA? The employee, their family members and the employer, are all allowed to make contributions to an employee s HSA. However, the total contributions must fall within the acceptable limits. Contributions can be made as late as April 15 of the following year. What can employees use their HSA for? The funds in the HSA must be used for qualified medical expenses. Some of these expenses include health insurance plan deductibles and co-payments; diabetic supplies; eye exams; eyeglasses and contact lenses; hearing aids; orthodontia, dental cleanings and fillings; over-the-counter medicines; prescription drugs; physical therapy; and more. More information about what is a qualified medical expense is available from IRS Publication 502 (available at What if the employee uses their HSA for a non-qualified expense? If the money in the HSA is used for anything other than qualified medical expenses for the employee, their spouse or a dependent, the expenditure will be taxed. For individuals who are not disabled or over age 65, a 10% tax penalty may apply.

10 Can an employee use their HSA to pay for medical care for a family member? Yes. Funds may be withdrawn to pay for the qualified medical expenses for the employee, their spouse and their dependents. What happens to the HSA when employees turn 65? Once employees turn 65, they can continue to use the HSA for their qualified medical expenses. They can also use the funds for other expenses, although the amount withdrawn will be taxable as income. There are no other penalties. If employees retire and have retiree health benefits, they can also use the account to pay for their share of retiree medical insurance premiums. Can an employee use an HSA to pay for Medicare? If the employee subsequently enrolls in Medicare, he or she can use the account to pay Medicare premiums, deductibles, copays, and co-insurance under any part of Medicare. However, they cannot continue to make contributions to their HSA after they enroll in Medicare. The employee cannot use their HSA to purchase a Medicare supplemental insurance or Medigap policy. More information is available from the U.S. Department of the Treasury Frequently Asked Questions:

11 Start reducing your healthcare costs now. Simply call one of our Seven Seventeen marketing representatives for more information on setting up Seven Seventeen Heath Savings Accounts for your employees. Please call 330/ or 330/ *Seven Seventeen does not endorse any insurance providers. **The Department of the Treasury may make changes to this program at any time and amounts and limits are adjusted annually for inflation. This brochure is intended to provide general information concerning the federal tax laws governing HSAs. It is not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances or under your state tax laws. For specific information, you are encouraged to consult your tax or legal professional. IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, the instructions to IRS Form 8889, and the IRS s website, may also provide helpful information. ***Fees: monthly maintenance fee $2.75; refund excess contribution $20; stop payment $30; research $10 per 1/2 hour minimum per employee, plus copy charges at 15 per page; copy of debit card receipts $20. Please refer to our full pricing schedule for other related fees.

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