Health Savings Accounts What is a Health Savings Account? A Health Savings Accounts (HSA) is a tax-advantaged savings account under IRS Code Section 223 that an individual or an employee may establish and fund to save for current and future qualifying medical expenses and to help them take charge of how their health care dollars are spent. Designed to work together with a qualifying high-deductible health plan (HDHP), an HSA can be used to pay for qualified medical expenses such as doctor visits, prescriptions, and even some over-the-counter medications. The HSA is often referred to as a medical 401(k), because the account is owned by the individual or employee (it is not a group plan), earns tax free interest, rolls over from year to year, and moves with the employees wherever they go: to a new job, a change in health plan, or even in retirement. Who is eligible to set up a Health Savings Account? Individuals or employees who meet the following requirements on the first day of a month are eligible to set up and contribute to a Health Savings Account during that month. They must already be enrolled in or covered under a qualified high-deductible health plan on the first day of the month. They must not be able to be claimed as a dependent on anyone else s tax return. They are currently not entitled to Medicare benefits. They must not be enrolled in any non-qualifying health coverage. These conditions are subject to change. For more information, please visit http://www.treas.gov/offices/public-affairs/hsa/. Where can individuals open a Health Savings Account? Individuals can open a Health Savings Account with an IRS approved trustee/custodian such as a bank. Please note that banks that serve as custodians do not also offer the qualifying HDHP. (That is typically provided by a Health insurance carrier or self insured by the employer.) Even though they work together, the qualifying HDHP and the HSA are separate arrangements. Also, you may be provided access to your own HSA through your employer or through a health insurance carrier. What is a high-deductible health plan? For a health plan to be considered a high-deductible health plan, it must meet the following requirements established by the U.S. Department of Treasury: The minimum deductible must be at least $1, 100 (self-only coverage) or $2,200 (family coverage).
The annual out-of-pocket costs (including deductibles and co-pays) generally cannot exceed $5,500 (self-only coverage) or $11,000 (family coverage). Generally, no coverage can be offered below the statutory minimum deductible; however, qualifying high-deductible health plans can impose no (or a lower) deductible for certain types of services or treatments (such as preventive care and other permitted dental and vision expenses) and There are no deductibles and out-of-pocket limits for non-network services. The amounts listed are in effect for 2007. Please note that a qualifying high deductible health plan does not have to be an employersponsored arrangement. An individually issued insurance policy can also qualify if it otherwise meets the requirements. What are the advantages of a Health Savings Account? Individuals or employees who open a Health Savings Account receive the following benefits. Tax savings: Eligible individuals can save for qualified current and future medical expenses on a tax-free basis, and the funds they withdraw to pay for qualified medical expenses are also tax-free. Balance rolls over: The unused balance in the HSA carries over from one year to the next, so they generally do not lose any funds from their account. Portability: Unused funds contributed to an HSA can stay with you through all of your life changes, including a new job, new health plans, and retirement (subject to the terms of the custodial agreement). Reduced health insurance premiums: Individuals must first have a qualifying high-deductible health plan to qualify for an HSA. Since these plans have high deductibles, they usually require a significantly smaller monthly premium. Tax-free growth: Funds in the HSA can grow tax-free. Does the money in a Health Savings Account roll over year after year? Yes, your Health Savings Account savings can be carried over year after year to pay for eligible health care expenses. There are no use it or lose it restrictions. Who can contribute to a Health Savings Account? Anyone can contribute to a Health Savings Account. This includes an individual or employee, an employer, a self-employed individual, or a family member of an individual. How much can be contributed to a Health Savings Account? In accordance with IRS regulations, employees can make tax-deductible contributions to the HSA on an annual basis up to a maximum of $2,850 for individuals and $5,650 for families, plus an additional amount if you are or will be age 55 or older before the end of
the year. The amounts listed are in effect for 2007 and are subject to annual cost-of-living adjustments. How are contributions made to the HSA? There are three ways to contribute to the HSA: 1. Payroll deduction 2. After-tax contributions from a personal account 3. Rollover contributions from an existing HSA, or Archer Medical Savings Account What happens when HSA contributions exceed the maximum annual contribution amount? Excess contributions are not deductible by you and are included in your gross income if made on your behalf by your employer. In addition, excess contributions are subject to a 6% excise tax for each year they remain in your HSA. However, you may be able to withdraw any excess contributions and any attributable earnings on the funds before the due date for filing your federal income tax return for the year for which the excess contributions were made. Consult your tax advisor for more information. Who is responsible for determining the amount of eligible contributions? You are solely responsible for determining your eligibility for an HSA and the amount of eligible contributions during any year. Can I deposit funds directly from my personal bank account to my HSA? Yes, you can set up direct deposit from any personal bank account to your HSA through the self-service Web site by logging in at www.tuftshealthplan.com. Click on Schedule HSA deposits and you can select a one-time deposit or a recurring deposit. Do funds in the HSA earn interest? The HSA is an interest-bearing account. Once your balance reaches a specified minimum balance, and if an investment option is available with your HSA, you may elect to invest amounts in excess of this specified minimum in one or more of the mutual funds available to HSA holders. How does the Debit Card work? When you receive your debit card, you must activate it before using it, by calling 1-800-963-2071. You can use your debit card for qualified medical expenses only, as defined by the IRS.
You can use your Bank of America HSA debit card for doctor, dental, chiropractor, and other office visits. You can also use your debit card at the pharmacy to pay for any prescription copayments. Your debit card can also be used with any merchant who sells health care products and accepts Visa debit cards. Debit or Credit? Choose CREDIT. Even though this is not a credit card, choose this option, as your card has no PIN. Remember to save your receipts. The IRS may ask you to submit these in order to verify your tax-free withdrawals from the HSA. How can I get an additional debit card(s)? If you d like to order an additional card or cards for your spouse or qualified dependent, visit www.tuftshealthplan.com and login to access your HSA account. Select Request Additional Card and follow the on-screen instructions. You may order one additional card free of charge any additional cards cost $5 each (limit three cards per account). What happens if my card is lost or stolen? If you lose your card or if it is stolen, contact Bank of America immediately at 1-866-791-0250 or 1-866-867-0701 (for TTY users) anytime. Who controls the use of funds in a Health Savings Account? The individual account holder is in total control of deciding how to use the Health Savings Account funds, how much to contribute, when to contribute, when to spend them, and on what qualified medical expenses to spend them. The account holder is solely responsible for identifying on his/her tax return any distributions made for other than qualifying medical expenses. What kinds of expenses can be paid with a Health Savings Account? Only those expenses described as qualified medical expenses in IRS Code Section 223 can be paid with a Health Savings Account. Generally, these include, but are not limited to, the following: Standard medical services such as office visits and annual medical physicals Prescriptions, some over-the-counter medicines, and health care products Preventive and restorative dental care, as well as orthodontia for children and adults Eyeglasses, contact lenses and solutions, and laser eye surgery Co-payments, coinsurance, and deductibles Acupuncture and chiropractic services A comprehensive list of qualified medical expenses as defined by the IRS can be found at: www.irs.gov/publications/p502/ar02.html#d0e201. (Please note that some of the
expenses listed in publication 502 may not be reimbursable from your HSA. You should check with a qualified tax or legal advisor for more information.) Note: If a withdrawal is made from an HSA to pay for items other than qualified medical expenses, the IRS may impose a 10% excise tax. Certain exclusions apply. (For example, this 10% excise tax may not apply if the person is over 65, or if a distribution has been taken as a result of death or disability. You should consult with your personal tax advisor.) How can I pay a claim from my Health Savings Account? You can either get reimbursed immediately at the point of service (pharmacy, physician s office, etc.) or you can submit a claim for reimbursement through the Web site by logging in at www.tuftshealthplan.com and accessing your HSA information. You can also pay your providers from your HSA by using the online Provider Payment Service. This feature allows you to schedule a payment for qualified medical expenses, or to pay the out-of-pocket portion of any provider bills you may receive in the mail. To access this feature, simply: 1. Login to your HSA account at www.tuftshealthplan.com 2. Click on the Enter New Claim tab 3. Select HSA for account Type and click Agree 4. Select Provider Payment 5. Enter your provider information, patient number, and invoice number, then click Submit 6. Enter patient information and service dates, then click Submit Bank of America will make the requested payment(s) from your HSA (if the balance in your account is sufficient) and mail the payment directly to your provider. If you do not have online access, you may give your Provider Payment instructions to a Customer Service Representative by calling 1-866-791-0250 or 1-866-867-0701 (TTY users). What is Electronic or Check Reimbursement? Some expenses are easier to pay for out of your own pocket, and then get reimbursed for them for example, when you purchase health care products from a merchant who does not accept Visa debit cards. To access this feature, login to your HSA at www.tuftshealthplan.com and 1. Click on the Enter New Claim tab 2. Select HSA in Account Type and click Agree 3. Select Electronic Reimbursement or Check Reimbursement and click Submit
4. Verify your Electronic Deposit or Address Information and click Submit Bank of America will make the requested withdrawal(s) from your HSA (if the balance in your account is sufficient) and transfer the funds electronically to your personal account, or mail a check to your home address. Please note that there is a fee charged if you choose paper check distribution instead of direct deposit. How often are reimbursement checks processed? Checks are processed and mailed out weekly. Is there a time limit for reimbursement from the HSA? There is no time limit for filing claims for HSA accounts. You can draw funds from your HSA for qualified medical expenses as long as the account was active when the medical expenses were incurred. Can I roll over funds from another Health Savings Account? You may withdraw any or all of the funds from an existing Health Savings Account or Archer Medical Spending Account (as defined in Code Section 220) and roll them into an HSA with another custodian or trustee. However, you are required to roll the funds into a new HSA within 60 calendar days after receiving the funds. You may make one tax-free rollover contribution each 12-month period ending on the date you receive the distribution from the other HSA or MSA. You may also be able to transfer your HSA or MSA funds directly from one custodian or trustee to another without ever having direct control or custody of the funds. Trustee/custodian to trustee/custodian transfers are not subject to the 12-month limitation. Rollover and transfer contributions do not count against the maximum annual contribution amount. Who is responsible for determining whether HSA distributions are used for qualified medical expenses? You are solely responsible for determining the tax consequences of any distributions from your HSA, maintaining adequate records for tax purposes, and paying any taxes and penalties arising as a result of any such distribution. You are encouraged to consult with your legal or tax advisor concerning any questions you might have. What is a Health Reimbursement Arrangement? A Health Reimbursement Arrangement (HRA) is a special reimbursement arrangement established and maintained by employers that is funded solely by employers for purposes of paying for medical expenses not covered under the employer s health plan. HRAs are not portable from job to job like Health Savings Accounts, but the money left in an HRA at the end of one year can roll over to the next year.
What is a Health Flexible Spending Account? A Health Flexible Spending Account (FSA) is a special reimbursement arrangement established by employers to allow employees to set aside pre-tax money on an annual basis to pay for qualified medical expenses (as defined in Code Section 213(d) and Code Section 125) incurred during that year. FSAs can be offered in conjunction with any type of health insurance plan. The employee s pay is automatically reduced each pay period equal to a pro-rata share of the employee s annual election; however, the full annual election amount is available to them on the first day of coverage. Any unused contributions remaining at the end of the plan year (or following the grace period, if adopted by the employer) will be forfeited.