Health Savings Account (HSA)

1. Health Savings Account (HSA) Town of Medfield

2. What is a Health Savings Account? • A HSA is a tax-advantaged medical savings account available to employees who are enrolled in a high-deductible health plan (HDHP). • The funds contributed to an account are not subject to federal income tax at the time of deposit. • HSA funds roll over and accumulate year-to-year if they are not spent. • HSAs are owned by the Employee, not the Employer • HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. • Allows contributions by the Employer and/ or the Employee

3. Eligibility • You must be enrolled in a High Deductible Health Plan (HDHP) • A HDHP is defined as the following: • Minimum annual HDHP for 2018 is $1,350 for an individual and $2,700 for a family • Annual HDHP out-of-pocket maximum for 2018 is $6,650 for an individual and $13,300 for a family • Cannot provide first dollar coverage, with certain exceptions – preventive care, dental, vision, limited-purpose FSA • You must be a US Citizen, a Permanent Resident, or a Legal Alien • You cannot be enrolled in Medicare • When you become Medicare-eligible you can remain enrolled in the HDHP, but must stop your contributions to the HSA. You can still use the HSA for all eligible expenses. • You cannot be enrolled in an FSA plan with your spouse. You may enroll in the HSA once the FSA plan ends. • Expenses are eligible for reimbursement if incurred after the effective date of the HSA. This may be different than the effective date of your medical plan.

4. Annual contribution limits • 2018: $3,450 individual (+$50 from 2017) • 2018: $6,900 family (+$150 from 2017) • 2018 Catch Up Contribution for employees over the age of 55 - $1,000 • Employer contributing $600/$1,200 when you open the account the 1st plan year only • Employees can contribute the difference between the IRS Maximum and Employer Contribution

5. How Does the HSA work? • You and your Employer can deposit money into your HSA, up to an annual per person or family limit set by the IRS. You can use money in your HSA to pay for insurance deductibles and medical care/supplies like dentistry, ophthalmology, and prescription drugs. • When you enroll, an account will be created for you at Healthcare Bank, a division of State Bank & Trust—a $4 billion financial institution. You’ll be given access to a secure, easy-to-use web portal where you can track your account balance, view your investment accounts, and submit requests for reimbursement. • You will receive a convenient VISA debit card to make it easy to access the money in your HSA. The card contains the current value of your HSA, and you can use it to pay for qualified medical expenses not covered by your health insurance. When you use the card, the cost of your eligible expenses will be automatically deducted from your account. Just swipe and go. It’s that easy! • You do not have to submit receipts in order to receive a reimbursement. However, you will still need to keep receipts and documentation for each year’s federal tax return (Form 8889 attached to Form 1040), as required by the IRS.

6. What are some eligible expenses?*Subject to change based on IRS Guidelines.

7. Triple Tax Savings • HSAs are unique—with triple tax advantages: • Tax-deductible contributions • Tax-free accumulation of interest and dividends • Tax-free distributions for qualified medical expenses • With an HSA, taxpayers receive a 100% income tax deduction on annual contributions. They may withdraw HSA funds tax-free to reimburse themselves for qualified medical expenses, and they may defer taking such reimbursements indefinitely without penalties. • Tax Implications • If you use HSA funds for ineligible expenses prior to turning 65. The amount used would be subject to Income Tax and a 20% penalty. • If you use HSA funds for ineligible expenses when 65 or older. The amount used would be subject to Income Tax only, not the 20% penalty.

8. Benefits of a HSA! • It is YOURS. Funds in your HSA contributed by you and/or your Employer stay with you wherever you go, even if you change jobs. • Reduces your taxable Income. The money is tax-free, both when you put it in and when you take it out to cover qualified expenses. • Funds grow. If you maintain a minimum balance of $2,000, your additional funds may be invested in mutual funds yielding tax free earnings. • Helps you plan for your future. Until you turn 65, withdrawals used for eligible expenses are tax-free. After you turn 65 or if you become disabled, your HSA becomes similar to an IRA. Withdrawals used for non-eligible expenses will be taxed at your regular income tax rate but you will not incur any penalties.

9. Investing with your HSA • Enrolling in an HSA can help you save money in several ways. Choosing a high-deductible health plan helps you reduce your monthly insurance premiums. You can use these savings to fund your HSA. • Money you keep in your HSA can be invested in mutual funds with no taxes to you on qualified withdrawals, interest, or growth.* *A $2,000 minimum balance is required to move money into investment funds.

10. Integrated Investments Powerful Features • Account Information • Balance by Investment • Personal Rate of Return • Fund Performance • Transaction Detail • Fund Activity Summary • Pending/Activity history • Manage My Account • Investment Elections • Realign Investments • Transfer Investments • Automatic Rebalance • Automatic Sweep

11. Saving and Earning with your HSA! • The long-term benefits of a Health Savings Account are shown in the illustration, which represents a $3,000 annual contribution with a 5% annual rate of return on mutual fund investments. • *This illustration shows the typical savings of a single person with a high-deductible health plan and an HSA. Results may vary depending on tax brackets, etc. • This illustration shows the typical savings of a single person with a high-deductible health plan and an HSA.

12. The HRCTS Advantage We’ve made it simple for Employees! • No minimum balance • FDIC insured cash and interest bearing account • Attractive investments • Industry leading investment options • No fees for trades • Convenient 24/7 self-service • Intuitive participant Portal • Online enrollment • Single sign-on to investments • Seamless, flexible fund access • Integrated debit card • Online access to accounts • Automatic, intuitive 2-way sweep

13. Employee Experience Focused! • Mobile • Allows employees to: • Check available balances • View account activity • Drill into claim transactions and contributions • Access convenient customer service contact info • Submit claims • Upload receipts using device’s camera Participant Portal Robust online portal empowers participants, providing everything they need to know about their account with an industry-leading design that enables quick and easy navigation of content • Convenient 24/7 Self-Service • Participant Portal • Mobile application • Integrated investment management • Flexible Payment Options • Participants can choose from: • Debit card, which increases participant satisfaction by reducing paperwork. • Participant-initiated payment on Participant Portal

14. You have options Sara goes to the doctor Sara receives bill from provider and matching EOB showing amount owed Pay bill with Debit Card Sara has options! Use Online Participant-Initiated Payment Provider submits expense to health plan Pay bill with after-tax dollars and submit for reimbursement Health plan processes claim and applies discounts Pay bill with after-tax dollars and leave money in HSA to accrue interest

15. Online Tax Forms • Form 8889 – Participant files with taxes • Form 1099 – Distributions • Distributed by February 1st • Form 5498 – Contributions • Distributed by March 1st • Must include yearly total of contributions and form 8889 with tax forms

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