Health Savings Account Frequently Asked Questions

Health Savings Account Frequently Asked Questions (for Core 60 Medical Plan Members) The Health Savings Account (HSA) is a great way to save for health care expenses incurred today or in the future for Associates who elect the Core 60 Medical Plan option. CarMax will make contributions to your HSA, and you can contribute too! The HSA program is administered by WageWorks. BNY Mellon will serve as the custodian for your account. Read on to learn about the CarMax HSA and how you can use it to cover your health care expenses as a Core 60 Plan member. What is an HSA? An HSA is a health care spending account that you can contribute to with pretax dollars. Think of your HSA as a 401(k) for eligible health care expenses. It lets you set aside money from your paycheck and place it in a savings account used for eligible expenses. The interest grows tax-free. You can use the funds to pay for eligible health care expenses for you, your Spouse, and other tax dependents. Or, you can save the funds for the future. Best of all, since you own your HSA, you keep any accumulated balance in your account, even if you change health plans or leave CarMax. Common eligible health care expenses include: Deductibles and coinsurance Prescription drugs Glasses, LASIK eye surgery, and contact lenses Dental and orthodontic care To view a list of common eligible expense items, visit wageworks.com. As with a Health Care Flexible Spending Account (Health Care FSA), HSA participants use pretax funds deposited into an account to pay for out-of-pocket, eligible health care expenses. However, unlike a Health Care FSA, any unspent money remains in your HSA until you use it. HSAs also differ in that they re portable: you can take your money with you if you leave CarMax or even if you leave the CarMax Medical Plan. How does it work? Your HSA is an interest-earning account, which you can draw from at any time. This account is insured by the Federal Deposit Insurance Corporation (FDIC). HSA funds can be used for eligible expenses both before and after you meet your deductible, and unused money can stay in the account or be placed in an investment account. Once your account reaches $1,000, you can invest any portion of your account over $1,000 in designated investment funds. If you choose to place funds in an investment account, your HSA becomes two linked accounts an interest-bearing cash account and an investment account subject to the gains and losses of your investment(s). A service fee will be deducted from your cash account each month this is a fee for maintaining your investment account. There are no fees associated with the cash portion of your HSA. Health Savings Account FAQ page 1 of 9

What are some of the benefits of an HSA? Tax savings Money put into your HSA can reduce your taxable income. Tax-free earnings Money kept in your HSA earns tax-free interest each month. HSA ownership You decide how to spend or save your HSA funds. If you change jobs or health plans, you keep your funds. You can even name a beneficiary to inherit your account. No use-it-or-lose-it rule If you don t use the money in your account by the end of the Plan Year, it continues to roll over into the next year. Less paperwork You don t have to submit documentation each time you use your HSA. Simply save your receipts in case you need to show the Internal Revenue Service (IRS) that you used the funds for eligible expenses. Investment options Whenever you have a balance of more than $1,000 in your HSA, you can invest your funds. It s a great way to save money for health care costs down the road, even in retirement. Eligibility Am I eligible for an HSA? You must be enrolled in the CarMax Core 60 Medical Plan option to contribute to the HSA. According to (IRS) rules, you can contribute to your HSA as long as you are not covered under any other health plan that is not an HDHP. Here are some examples of rules prohibiting participation in an HSA: You cannot have other health coverage that pays for out-of-pocket expenses before you meet your plan deductible You (or your covered Spouse) cannot have a general-purpose Health Care Flexible Spending Account (Health Care FSA) You cannot be eligible for benefits under any other plan that is not a High Deductible Health Plan (HDHP) You (or your covered Spouse) cannot have Medicare or Veterans Affairs (VA) health benefits You cannot be claimed as someone else s tax dependent Are there any income limits affecting my eligibility? No. My Spouse has a health policy through his/her employer. Am I eligible for an HSA? If you are not covered under your Spouse s health insurance and you are otherwise qualified, you are eligible to have an HSA. However, if your Spouse participates in a Health Care FSA, you would not be eligible to contribute to an HSA. Even though you are not covered by your Spouse s health insurance, the IRS has determined that your Spouse s FSA is considered to be other insurance that makes you ineligible for an HSA. An exception to this rule exists for Limited Purpose FSAs (that cover Vision and Dental expenses only) and you would be eligible for an HSA if you or your Spouse have a Limited Purpose FSA. Health Savings Account FAQ page 2 of 9

What if I am only eligible part of the year? If you enroll in an HDHP mid-year, you can contribute up to the full applicable federal limit, including a full catch-up amount if you are over the age of 55, so long as you start your HDHP coverage no later than December 1 of that year. In this case, however, you ll be subject to a testing period. The testing period requires that you maintain HSA eligibility for a period beginning on December 1 of the year you started and ending on December 31 of the next year. Otherwise, you may not contribute the full amount in that first year. Contributing to Your HSA CarMax contributes to your account and you can too! The total amount of contributions from all sources to your HSA account each year cannot be higher than $3,350 per individual and $6,750 per family. This means that when you combine CarMax s $200 contribution for individual coverage ($400 for two-person coverage and $600 for family coverage) with all other contributions your payroll deductions and lump-sum contributions the total cannot be higher than these amounts. These limits have been set by the IRS for the 2016 Plan Year. Coverage Level CarMax Contribution You May Contribute Maximum Allowed Contribution to Your Account Associate Only $200 $3,150 $3,350 Associate plus Child $400 $6,350 $6,750 Associate plus Spouse/ Domestic Partner $400 $6,350 $6,750 Associate plus Children $600 $6,150 $6,750 Family $600 $6,150 $6,750 If you decide to contribute, you can do so in the following ways: Have the amount deducted from your paycheck before taxes. Contribute a lump sum on an after-tax basis. Do this by writing a check or arranging a wire transfer of funds from your bank. Simply contact WageWorks customer service for instructions. NOTE: You can deduct any eligible contributions from your income when you file your annual tax return. Consult your tax advisor. Roll over an amount from an IRA to your HSA. This is a one-time rollover that you can complete at any time. You should contact your financial services agent and/or tax advisor to complete this type of rollover. The rollover amount will count toward your annual contribution limit. If you have an HSA somewhere else, you can transfer those funds to the HSA linked to the Core 60 Plan option. If you are over the age of 55, you can contribute up to another $1,000 annually (beginning with the Plan Year in which you reach age 55) as a catch-up contribution. Catch-up contributions are also withheld from your pay on a pretax basis. You can change your contribution amount at any time during the year. Health Savings Account FAQ page 3 of 9

How is my contribution determined? Your eligibility to contribute to an HSA each month is generally determined by whether you have HDHP coverage on the first day of the month. Your maximum contribution for the year is the greater of: (1) the full annual contribution, or (2) the prorated amount. If you are no longer an eligible individual as of a given month, both your HSA contribution and your catch-up contribution apply pro rata based on the number of months of the year you were an eligible individual. The prorated amount is 1/12 of the maximum annual contribution for the type of HDHP coverage you have times the number of months you have that type of coverage. If your contribution is greater than the prorated amount, and you fail to remain covered by an HDHP for the entire following year, the extra contribution above the prorated amount is included in income and subject to tax penalties and/or IRS fees. Examples: 1. If you have family Core 60 coverage from March 1, 2016 until August 31, 2016 and then cease having HDHP coverage, you re allowed an HSA contribution of 6/12 of $6,750 or $3,375 for the Plan Year. 2. If you have family Core 60 coverage from March 1, 2016 until August 31, 2016, and have self-only HDHP coverage from September 1, 2016 to February 28, 2017, you are allowed an HSA contribution of 6/12 x $6,750 plus 6/12 of $3,350 or $5,050 for the Plan Year ending February 28, 2017. Remember to consider contributions from all sources when calculating your maximum contribution for the year, such as CarMax s contribution ($200 per covered member, up to $600) and other contributions (your payroll deductions and lump sum contributions). Can I fund my account at the family level if I have single coverage? No. If you have single coverage, you are limited to the individual HSA contribution limit. You may use your HSA funds to pay for the qualified expenses of tax-dependent family members; however, the amount you may contribute to your HSA is limited by the level of your insurance coverage. Do I need to fund my entire HSA all at once or can I fund it over time? You can fund your account over time or all at once. Also, one of the large benefits for Associates is that contributions are tax-free; individuals contributions are made on a pretax basis (or are deductible if made post-tax). CarMax contributions are not taxed because they qualify as employerprovided coverage for eligible health care expenses. Please note that contribution limits are based on the calendar year. Health Savings Account FAQ page 4 of 9

How do I make additional contributions after I ve opened an HSA? Simply send a check to WageWorks (your HSA administrator). WageWorks will send the funds to BNY Mellon, your HSA custodian. Mail your check to: WageWorks P.O. Box 9813 Providence, RI 02940-8013 Log in to your account at wageworks.com and go to the Help section to access the HSA Contribution Form. Include this form with your check it tells WageWorks the tax year of the contribution (remember: you can make a current or prior tax year contribution between January 1 and April 15). You must also include the type of your contribution (regular or rollover) and your account number. If you prefer, you can write these pieces of information on the check or in a separate letter instead of using the HSA Contribution Form. What is a catch-up contribution? Eligible individuals who are over the age of 55 are allowed to make additional catch-up contributions to their HSAs. The catch-up contribution for 2016 is a maximum of $1,000, which may need to be prorated if you are not enrolled in an HDHP for the full year. Can both spouses make a catch-up contribution? Yes, but only if each spouse has a separate HSA. The catch-up amount cannot be combined and put into one HSA. I am over age 65 and covered under an HDHP. Can I still contribute to my HSA? As long as you have not enrolled in Medicare Part A or B and you are otherwise eligible, you may contribute to your HSA. Once you enroll in Medicare, you may no longer contribute to your HSA. For most individuals, this means you will no longer be eligible when you reach 65. Your maximum contribution for the year that you turn 65 would be the number of months of that year that you were not enrolled in Medicare Part A or B times the applicable federal limit (remember to include the catch-up amount in the federal limit). When do I have to make my contribution? You can make your HSA contribution until your tax filing due date (April 15 of the year following the tax year for most people). Health Savings Account FAQ page 5 of 9

Using Your HSA How can I use my HSA? You can use your HSA in the following ways: 1. Save money for future qualified expenses (even in retirement) and pay current eligible expenses out of your pocket. Any balance you haven t used by the end of the Plan Year remains in your account. Also, the cash portion of your account will continue to earn interest free of federal taxes as long as you have money in it. 2. Pay your provider directly from your account using the WageWorks Debit Card, or make a payment from your HSA to a designated provider. Reimburse yourself for what you already paid out of pocket by moving funds from your HSA to a linked bank account. Any of these options will help you pay your out-of-pocket costs quickly and easily. Please note that if you pay for non-qualified expenses from your account. Withdrawals may be subject to income tax and, if you are under age 65 and not disabled, an additional 20 percent penalty. You can find more information at www.irs.gov, but you should also consult your tax advisor to learn about the rules in your state. To see a full explanation of the qualified expenses that are allowed by the IRS, see Publication 502 at www.irs.gov. How do I save money with an HSA? An HSA can help you save in three ways. First, as you add funds into your account, your contributions reduce your annual taxable income. Second, the funds you withdraw to pay for qualified expenses remain untaxed. Third, you save again when funds in your HSA earn interest tax free. What do I need to know about HSA fund investment? The funds in your HSA are FDIC-insured. Those funds also earn interest. Once you have at least $1,000 in your HSA, you can open an investment account. Mutual funds and other investments are not FDIC-insured. Invested funds are subject to risks, including changes in value and the possible loss of the amount you invested. How can I access my HSA funds to make payments? Once funds are available in your account, you can: Use your WageWorks Card your account debit card to pay for eligible expenses Pay for an eligible expense out of pocket, then request reimbursement from your HSA Use online bill payment to pay your provider directly from your HSA Health Savings Account FAQ page 6 of 9

How can I access my account? You can access your account 24/7 at wageworks.com/carmax or via the WageWorks mobile app. The app is free and available for most smartphones. When you access your account, you can: View account balances and transaction details Make contributions to your HSA Withdraw funds from your HSA for eligible expenses Pay your health care provider directly from your HSA If I leave my job or retire, what happens to my HSA? Your HSA belongs to you, regardless of your employment. If you leave your job and elect to stay in the medical plan under Consolidated Omnibus Budget Reconciliation Act (COBRA), you may even pay your COBRA premiums from your HSA. What expenses are covered by my HSA? In general, you can use your HSA funds to pay for any qualified health care expense. Qualified expenses are defined by the IRS (see IRS Publication 502) and include: Acupuncture and chiropractic treatments Ambulance costs Artificial limbs Crutches Doctor visits Dental expenses Vision care (eyeglasses, contacts, LASIK eye surgery) Hearing aids Long-term care Prescriptions To see a full list of eligible expenses, visit wageworks.com. Can I use my HSA to pay for health insurance premiums? Generally, you cannot treat insurance premiums as qualified expenses unless the premiums are for: 1. Long-term care insurance (subject to IRS-mandated limits based on age and adjusted annually; see IRS Publication 502 Long-Term Care) 2. Health care continuation coverage (such as coverage under COBRA; see IRS Publication 502 COBRA Premium Assistance) 3. Health care coverage while receiving unemployment compensation under federal or state law 4. Medicare and other health care coverage if you are 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap) Health Savings Account FAQ page 7 of 9

Items 2 and 3 can be for your Spouse or tax dependent who meets the requirement for that type of coverage. For item 4, if you, the account holder, are not 65 or older, Medicare premiums for coverage of your Spouse or a tax dependent (who is 65 or older) generally are not qualified expenses. Can I withdraw funds from my HSA at any time? Yes. However, if the funds are withdrawn for any expense other than a qualified health care expense, the IRS will impose a 20 percent penalty tax, in addition to income taxes. After you reach age 65, you can withdraw the funds without penalty but the amounts withdrawn will be taxable as ordinary income. You cannot borrow against future contributions, and you must have sufficient funds available in your HSA at the time you make a request for withdrawal. If you anticipate large expenses early in the Plan Year, you may need to pay for them out of your own pocket. HSA contributions are usually available on your payday. However, be sure to check your account to confirm the deposit, since contributions are sometimes not available until the next business day. How can I invest my HSA funds? Once you have accumulated at least $1,000 in your HSA, you can invest your funds in money markets, mutual funds, and stocks that your account custodian makes available to you. Log in to your account to see the available investments. As the initial funds in your HSA may need to be used for medical expenses, we recommend you maintain a small balance in your HSA and wait to consider more liquid investments until you have a good estimate of your needs. HSA funds that you ve invested must be liquidated before they are available to pay expenses. Do I have to track the expenditures made using funds from my HSA? Yes. You are required to maintain a record of the expenses sufficient to demonstrate to the IRS that the distributions were for qualified health care expenses. Are there any limits on the amount I have to spend or on the amount I can carry over to subsequent years? No, there are no limits on spending your cash balance and the entire balance can be carried over from year to year. Can I transfer funds from my IRA into an HSA? Yes, the law allows a one-time transfer of IRA assets to fund an HSA. The amount transferred may not exceed the amount of one year s contribution and individuals must be otherwise eligible to open an HSA. Transfers are not taxable as IRA distributions; however, amounts transferred into an HSA from an IRA are not deductible. See IRS Publication 969 for details. How do I access my HSA funds after age 65? Once you reach age 65, your funds can be withdrawn at any time and are only subject to ordinary income tax (for ineligible expenses). However, you may avoid any tax by continuing to use the funds for qualified expenses. For those aged 65 or older, premiums for Medicare Parts A or B, Medicare HMO, and employee premiums for employer-sponsored health insurance can be paid from an HSA. Health Savings Account FAQ page 8 of 9

How do I submit a mileage claim? The IRS has changed mileage reimbursement rates for medical care based on the date the service is incurred. Mileage for travel to/from eligible health care on or after January 1, 2016 is $.23 per documented mile. Include the following information with your mileage claim: Date of service Type of service (doctor visit, trip to pharmacy, etc.) Actual mileage and rate (example: 16 miles round trip @ $.23/mile) Total amount being requested (16 X $.23 = $3.68) WageWorks Pay Me Back form or Explanation of Benefits (EOB) insurer claim receipt. Both must match the service and date the service was provided as listed in other information submitted as part of your mileage reimbursement claim. Many online mapping services will detail your route and mileage from home to service provider. This is helpful (but not required) when submitting mileage reimbursement claims. Health Savings Account FAQ page 9 of 9