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Health Savings Accounts New HSA Law

Health Savings Accounts New HSA Law. This is summary information for agent use only. Assurant Health and its legal entities are not engaged in rendering tax advice. Clients should consult a qualified tax professional for tax advice.

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Health Savings Accounts New HSA Law

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  1. Health Savings Accounts New HSA Law This is summary information for agent use only. Assurant Health and its legal entities are not engaged in rendering tax advice. Clients should consult a qualified tax professional for tax advice. Assurant Health is the brand name for products underwritten and issued by Time Insurance Company, John Alden Life Insurance Company and Union Security Insurance Company. J-51497

  2. New HSA Law – Highlights • Annual contribution allowances • Proration exceptions for mid-year enrollees • One-time, tax-free transfer from IRA • One-time rollover of health FSA/HRA funds • Relief from FSA grace period • Exception to comparable-employer-contributions rule • Earlier notification of cost-of-living adjustments (COLAs) Page 2

  3. Annual Contribution Allowances Prior Law • The maximum contribution was “the lesser of” the deductible or the indexed contribution allowance for that year New Law • Effective January 1, 2007, “the lesser of” rule was eliminated • The contribution allowance is now equal to the indexed contribution allowance for the year • For 2007, the indexed contribution allowances are: • $2,850 for single coverage—regardless of deductible • $5,650 for family coverage—regardless of deductible Advantages • Allows individuals and employees to fill the “donut hole” (coinsurance out-of-pocket expenses) • Encourages participation—as employees put more funds away, employers can decrease contributions    Page 3

  4. Proration Exceptions for Mid-Year Enrollees Prior law • The contribution allowance was prorated according to the number of months of eligibility for that year New Law • Effective January 1, 2007, an exception to the proration rule allows new accountholders to be treated as HSA-eligible for the entire year if: • They are HSA-eligible by December of their first year and • They remain HSA-eligible through December of the next year Advantages • Counters the complaint that accountholders were forced to meet the full annual deductible but could not contribute the full year’s funds • Eliminates complicated contribution calculations • Encourages new-hire participation in high deductible health plans • Simplifies HSA communications   Page 4

  5. One-Time Tax-Free Transfer from IRA Prior law • Tax-free transfer of Individual Retirement Account (IRA) funds into an HSA was not allowed New law • Effective December 20, 2006, accountholders may make a one-time transfer of Individual Retirement Account (IRA) funds into an HSA • The amount transferred is subject to the annual contribution allowance • The accountholder must remain HSA-eligible for at least 12 months after the transfer Advantages • Allows accountholders to use IRA funds to jumpstart their HSA—or as an “emergency” source for contributions • Allows individuals to shift poor-performing IRA funds to HSA without adverse tax consequences  • Allows individuals to use IRA funds to offset gaps between maximum contribution amount and employer contribution  Page 5

  6. One-Time Rollover of Health FSA and HRA Funds Prior law • Tax-free transfer of Flexible Savings Account (FSA) or Health Reimbursement Arrangement (HRA) funds into an HSA was not allowed New law • Effective December 20, 2006, accountholders may make a one-time rollover of health Flexible Savings Account (FSA) and Health Reimbursement Arrangement (HRA) funds into an HSA • The transfer must occur before January 1, 2012 • The amount transferred must be no more than the health FSA and HRA balances on September 21, 2006 • The accountholder must remain HSA-eligible for at least 12 months after the rollover Advantages • Counts as a rollover contribution—it’s not counted against the annual contribution allowance • Provides an option to “losing” the funds not used in 2006 Page 6

  7. Relief from FSA Grace Period Prior law • Consumers could not establish an HSA during a Flexible Savings Account (FSA) grace period New law • Effective January 1, 2007, consumers may establish an HSA and make tax-free contributions, even while in a Flexible Savings Account (FSA) grace period, if: • There is no money remaining in the FSA or • The FSA funds are transferred into the HSA subject to the health FSA-rollover guidelines Advantages • Qualified medical expenses incurred during the FSA grace period may be reimbursed from the HSA Page 7

  8. Exception to Comparable-Employer-Contributions Rule Prior law • Employers must make comparable contributions to comparable employees New law • Effective January 1, 2007, the definition of “comparable employees” now distinguishes non-highly compensated employees from highly compensated employees • Non-highly compensated employees 1) do not own five percent or more of the business and 2) are not among the most highly paid in the company • Employers may choose to contribute a higher amount or percentage of deductible to non-highly compensated employees Advantages • Employers have more flexibility to offer a more attractive high deductible plan • Employees have more funds to meet high deductible Page 8

  9. Earlier Notification of Cost-Of-Living Adjustments (COLAs) Prior law • Cost-of-living adjustments (COLAs) were based on a 12-month period ending August 31 of the prior year. (Result: COLA notification was not made before October.) New law • Effective January 1, 2007, COLAs are based on a 12-month period ending May 31. Minimum deductibles, maximum out-of-pocket amounts and contribution allowances for the next year must be announced by June 1. Advantages • Earlier notice of HSA COLAs allows more time for: • Businesses to update systems and materials • Employers to communicate changes and • Agents and consumers to become better informed Page 9

  10. Agent Advantages More Sales HSA Season is Open NOW —and for the rest of the year Page 10

  11. Assurant Health HSA Product Line • OneDeductible HSA Plan – provides extensive coverage while offering the simplicity and convenience of a single, common deductible for all members of the family. The OneDeductible Plan is a Health Savings Account (HSA) compatible insurance plan that can be combined with a tax-favored HSA. (insurance plan also available without an HSA.) • SaveRight HSA Plan – a more economical qualified high deductible health insurance plan that allows your clients to fund the HSA with premium savings. Page 11

  12. Why Assurant Health? A portfolio that offers it all! • 12, 24 or 36 month rate guarantee. • Unlimited Maternity Benefit. • Dependents can stay in the policy. • Dental, Accident, DI, & many more benefits. • $50,000-$200,000 Enhanced Term benefit. • High compensation w/ 12 month advance. • A 10% Healthy Discount for 6 years. • FREE: My Web Page & My Sales Link • And much, much more…. Page 12

  13. Why Assurant Health? If you do not offer Assurant Health to your Clients… Someone else will! Contact Your Assurant MGA Today! LPI Companies, Inc. 1-877-700-5744 Page 13

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