HSA Overview

• There are no office co-pays and no prescription drug card. You still receive the negotiated discount from the carrier for covered procedures.
• This account is separate from the High Deductible Health Plan Insurance policy that you must have.  The premiums paid for the health insurance are in addition to the money that you contribute to this account.
• If you do not use the money that you put into the account, it rolls over to the next year.
• Contributions to your account are tax deductible as long as they are not made pre tax through payroll deduction.  Funds grow tax deferred.  If they are used for eligible medical expenses (see attached list) the withdrawals are tax free.
• If the funds are withdrawn for non-qualified medical expenses, they are subject to ordinary income tax and a 10% IRS penalty.
• Contributions can be made by employees, employers, or a third party. Contributions can be made up through April 15 for the prior year.
• Portability:  If you move employers you may take the funds with you.  If you no longer have a High Deductible Health Plan, you can continue to use the money for qualified medical expenses. However you may not make any more contributions to the account.
• Funds may not be used to pay for healthcare premiums but they can be used to pay COBRA premiums, Long Term Care insurance premiums, Medicare Parts A and B, or health premiums while you are receiving unemployment.
• Contributions can only be made for the months that someone has the policy.  If they begin the policy in May they can only contribute for 8 months, not 12.
• Once an employee reaches age 65, he/she may no longer contribute to the account.
• The caps are as follows for 2006:   
  • For single coverage, the client can contribute either the annual deductible or $2,700, whichever is less.   
  • For family coverage, the client can contribute either the annual deductible or $5,450, whichever is less.  
  • For an individual over 55 but under 65, there are catch up contributions that can be made above and beyond the regular deductible.  Those catch up amounts are:  
                    o For 2007 - $800 
                    o For 2008 - $900 
                    o For 2009 and beyond - $1,000
• These accounts do accrue interest, which must be reported but is not taxable income.  You should receive a 1099 at the end of each year as to the amount of interest that your account has accrued.
• These accounts differ from Health Reimbursement Accounts.