Health Savings Accounts (HSA)
1. What is a Health Savings Account?
A Health Savings Account, or HSA, is a tax-exempt account with a financial institution in which funds accumulate to pay for medical expenses. They were created in response to the rising cost of health care with the intent to give the consumer back the control of their health care costs as part of a movement towards consumer-driven health-care.
2. Why Would a Company Consider a HSA?
HSA’S give financial incentives for employers of all sizes to provide health insurance benefits to their employees and allow them to save money on a pre-taxed basis for their medical expenses. HSA’S allows companies to enjoy tax reductions while having affordable health insurance premiums.
3. How Does a HSA Work?
Before a health savings account can be opened, a qualified High Deductible Health Plan (HDHP) must be in place to cover the individual or family. An HDHP provides health coverage for an individual or family with an affordable premium. The guidelines for an HDHP are determined by the Internal Revenue Service each year. To determine if your plan qualifies, please contact your health plan representative. The current requirements of an HDHP are as follows:
Deductible Requirements Minimums for Tax Year 2013:
$1,250 for Single
$2,500 for Family
Maximum Out-of-Pocket for Tax Year 2013:
$6,250 for Single
$12,500 for Family
Annual Contribution Maximum for Tax Year 2013:
After a qualified HDHP has been put into place, an employer decides if they are going to fund a portion of the deductible for the employee. Whatever portion of the deductible is not funded by the employer, the employee has the opportunity to contribute to the HSA to make up the difference. Contributions can be made according the schedule below.
4. Contribution Schedule
Health Savings Accounts (HSA) provide tax benefits for the funds that you contribute. However, the Internal Revenue Service limits the amount you are able to contribute to an HSA for each tax year. If you contribute more than the IRS allows, you could incur tax penalties. To avoid making excess contributions, coordinate your contributions with any other contributions that are being made to your account by an employer or another third-party.
- Contributions can be made by:
- Account holders / Individuals
- Any other third party
- Contributions are tax-deductible for the account holder. Employer contributions and employee contributions through a Section 125 Plan are pre-tax.
- Contributions made to an account holder’s account belong to the account holder until the funds are used (please see the Distributions section below).
- Employer contributions must be made on a comparable basis.
- Contributions are limited to the lesser of 100% of the deductible or the IRS Contribution Limit.
5. What are the Limits?
The Internal Revenue Service (IRS) reviews and determines the HSA contribution limits on an annual basis. An account holder is able to contribute 100% of their qualified HDHP deductible up to the IRS contribution limit. The limits for 2012 are listed above. An additional catch-up contribution of $1000 is available to individuals over the age of 55 who are not enrolled in Medicare.
- Funds can be used tax-free at any time for eligible medical expenses.
- As of age 65, funds can be used for non-eligible medical expenses subject to ordinary income tax without any IRS penalty.
- Prior to age 65, funds can be used for non-eligible medical expenses subject to ordinary income tax and a twenty percent IRS penalty.
- Upon the account holder’s death, the assets in the HSA become the property of their named beneficiary. If there is no beneficiary named, the assets go to the account holder’s estate.
- If the beneficiary is a spouse, the HSA may be treated as their own account.
- If the beneficiary is a non-spouse, the HSA must be treated as ordinary income for taxation purposes.
7. Tax Advantages
Health Savings Accounts create unique tax benefits for account holders/individuals.
- Contributions are 100% tax-deductible.
- Funds grow on a tax-deferred basis, and if the funds are used for an eligible medical expense, the funds are tax-free.
- Funds roll over from year to year, and funds used after age 65 are able to be used tax-free for eligible medical expenses or at your normal tax rate for any other reason.
- Over the life of your Health Savings Account, you could save thousands of dollars in taxes.
- Federally qualified Health Savings Accounts are tax-deductible, tax-deferred and tax-free.
- Tax-deductible – Contributions to your HSA are able to be deducted from your gross income.
- Tax-deferred – HSA funds grow without being subject to taxes until they are used for non-eligible medical expenses.
- Tax-free – The funds in an HSA are completely tax-free when used for eligible medical expenses.
Strategic Banking Partner
Strategic Banking Partner for the Savings Account
HR Concepts handles all the administration and provides a local regional approach to the claims adjudication, employer interface, customer service, and employee training/education. However, the investment vehicle for the savings account needs to be offered through a qualified custodian/trustee. For this reason, HR Concepts through our current strategic business partner Lighthouse 1, has aligned our administration with Healthcare Bank.
As a national leader in the Health Savings Account market, Healthcare Bank located in Fargo, North Dakota, is dedicated to providing resources and expertise to help consumers gain control of their health care decisions.
Deposits and investments for consumer-driven healthcare accounts are held and managed by Healthcare Bank, a division of State Bank & Trust (member FDIC). State Bank & Trust is one of the Midwest’s largest privately-held financial institutions, with combined asset management of over $4 billion dollars.
Your partner in the CDH market, not your competition.
Engaged in the custodial management of CDH funds and investments since the inception of HSAs, Healthcare Bank has the knowledge and experience of the consumer-driven healthcare industry to support benefit plan administrators as you look to market and brand your own CDH solutions.
Healthcare Bank’s benefit banking solutions are unique from national competitors, as they serve to leverage the strengths of the administrator while Healthcare Bank remains a silent partner, supporting your HSA custodial needs.
Initial Setup / Installation / Take-Over
1. Initial Consultation
Whether you have a HSA program or not, HR Concepts will take the time necessary to analyze and develop the right HSA program to fit your company’s budget and benefit needs. We will integrate with your existing benefit programs and implement our procedures, which you customize, to keep your employees satisfied.
2. Interface With Existing Broker / Benefit Consultant
After we have analyzed your current Health Insurance design, HR Concepts will interface with your existing broker / benefit consultant to research available health plans and their costs.
3. Setting Up Of The Systems
In order to process the claims efficiently and accurately, HR Concepts, along with your input, will design the best procedures in order to manage claims. Your Health Insurance plan design and outline of benefits will be inputted into our systems and if your company chooses to utilize the debit card, the cards will be ordered and programmed.
1. Enrollment Forms / Materials
HR Concepts will provide you with a customized outline of Health Plan Letter that will be given to the employees during the enrollment process.
2. Enrollment Meetings
Upon the initial setup or takeover, HR Concepts will provide enrollment meetings and education sessions to introduce the HSA to the employees. After this initial time, HR Concepts will conduct enrollment meetings for employees annually and when there is a significant amount of new hires.
On-Going Administration Services
1. Daily Claims Administration
HR Concepts provides employers with a HSA Debit card for each employee. These cards are considered VISA Cards, however, they can be programmed to only be used at predefined locations. If an expense can not be put through on the card, a claim can be submitted and a direct deposit will be made by HR Concepts. A paper check can be requested for a fee.
2. Online Employee Account Balances
Employees will have access to check their balances of their HSA accounts online or via our mobile application.
3. Online Employer Account
Employers will have access to periodic plan activity and employee’s account balances via the web or by calling HR Concepts.