Health Savings Accounts

A Health Savings Account (HSA) is a tax-advantaged medical savings account available to individuals enrolled in a high deductible health plan. Funds put into an HSA aren't subject to federal income tax at the time of deposit.

The demand for HSAs is growing as employers and individuals realize the advantages of consumer-driven health care. The eFlexHSA is fully integrated with all of our pre-tax benefit plans. It's easy to open, easy to use, and easy to manage. To open an HSA, individuals must first have a qualifying high deductible health plan (QHDHP).

Employer Advantages

• Flexibility in controlling benefit costs
• Employee retention and attraction
• Tax savings on every dollar employees put into the plan

Employee Advantages

• Tax savings (either pre-tax by the employer or with personal tax deduction)
• Budgeting for current or future medical expenses
• May use the funds as claims are incurred or save for future medical expenses
• Tax-free interest or investment earnings
• Enhanced morale

Easy to Open

• A simple paperless environment for employees
• No minimum balance is required when opening an HSA

Easy to Use

• It's a seamless solution: employees have complete access to all their benefits accounts (e.g., HSA and limited FSA) on one platform
• A single login gives employees online access to their HSA as well as their investment options
• Employees can access their HSA dollars by making a secure, online request for distribution or by using their eFlex Card

Easy to Manage

• An array of mutual funds, including an interest-bearing account, gives employees competitive investment choices that are attractive to both novice and experienced account holders
• HSA contributions are automatically swept into the employees' investment accounts when they meet the necessary cash account balance; no need to manually move funds between accounts
• HSA deposits are held by Healthcare Bank

HSA Conditions

• The employee must participate in a QHDHP
• The HSA is "owned" by the employee
• The employee decides how much to contribute based on his/her out-of-pocket expenses
• Employer and employee contributions combined may not exceed the IRS maximum contribution (see below)
• No claims substantiation; claim substantiation is maintained by the employee
• Eligible claims may be reimbursed at the point of purchase or at a later date as determined by the employee
• Anybody may contribute to an employee's HSA; typically, 50 percent of employers contribute to employee HSAs
• Employer contributions may be made in one lump sum at the beginning of the plan year or pro-rated throughout the year
• HSA funds are not available to employees until there are actual funds in their accounts
• HSA funds may be used for the employee, spouse and dependent children

Contributions

Contributions to the HSA may be made by the employer and/or employee. In fact, contributions may be made by any person. The preferred tax treatment, however, will only be recognized by the employee. Some studies show that employers can save 20 to 30 percent in premiums with a QHDHP. The employer may choose to use all or a portion of those savings as HSA contributions. Contributions must follow the comparability rules or the Section 125 non-discrimination rules if run through the Premium Only Plan (POP) or Flexible Spending Account (FSA).

If an employee terminates employment, he/she maintains ownership of the HSA. However, if an employee doesn't enroll in a QHDHP after leaving employment, he/she may continue to use HSA funds for eligible medical expenses, but can no longer contribute to it. An employee must enroll in another QHDHP to contribute to the HSA.

Tax Treatment

There are two ways to receive a tax credit for HSA contributions:
1) The employer may pre-tax employee contributions through a Section 125 (i.e., POP or FSA);
2) The participant may use an above-the-line deduction when filing taxes. If the tax credit is through a Section 125, the document must state it accordingly. A self-employed individual of an S Corporation or LLC cannot pre-tax an employee HSA contribution through a Section 125.

Investment Options

A unique feature of the HSA is the ability to invest in stocks, bonds and mutual funds. We recommend that employees discuss investment options with a bank or professional advisor.

Allowable Expenses

Employees may budget for miscellaneous out-of-pocket medical expenses using their HAS account. Participants must retain receipts for anything purchased with HSA dollars in case they're audited by the IRS. If HSA funds are used for anything other than a qualifying expense, penalties will apply.

Funds may be used for previous years' expenses provided the HSA account was opened at the time the expense was incurred. There's no time limit on reimbursements. Account balances "roll forward" from year-to-year.

eFlex Card

The eFlex Card works like a credit card, except it has a stored value instead of a credit limit. The stored value is the employee's available balance under the eFlexFSA. The eFlex Card is valid from year-to-year. There's an expiration date on the card. When the expiration nears, a new card will automatically be ordered to replace the current card. There are no transaction fees or pin numbers with the eFlex Card. Employees simply swipe the eFlex Card at the provider location and choose the "credit" option. Funds are instantly withdrawn from the FSA and paid to the provider. No filing claims and no more waiting for reimbursement. The card is merchant coded. Every merchant who accepts VISA is assigned one of roughly 1,000 merchant codes. The codes are listed according to industry (e.g., restaurant, pharmacy, dental office). Only valid merchant codes are "open" to the card, which means if someone tries to use the card at a restaurant or gas station, it would be declined. It will also decline payment for non-covered expenses, like vitamins.