• No monthly service fee*
• $10 minimum deposit to open
• Contributions are tax free**
• Interest grows tax free
• $1,000 minimum balance to earn interest
• Tiered rate structure; higher rates for larger balances
• Withdrawals are tax free when used for qualified medical expenses***
• HSA is owned by you, not employer
• Easy access by check, Visa® debit card, online banking, teller

*A monthly dormant fee of $8 will be charged if there is there is both no activity after one year and the balance is below $500.

**If contributions are made after income was taxed, the amount deposited is tax deductible.

***Withdrawals for non-qualified medical expenses are subject to income tax and a 10% penalty. The 10% penalty is waived for persons 65 and over or who have become disabled.

HSAs were designed to help individuals save for qualified medical and retiree health expenses on a tax-advantaged basis.

Eligibility

• Must be covered under a qualified, high deductible health plan
• Must not have coverage by another type of health plan
• Cannot be claimed as a dependent on another person's tax return
• Cannot be enrolled in Medicare

Contribution Limits

Contribution limits are set by the IRS. Current 2011 contribution limits are:

• $3,050 for a single person
• $6,150 for a family
• A person age 55 or older may make an additional $1,000 in "catch-up" contributions

HDHP Details

A high deductible health plan (HDHP) is an alternative health insurance plan to a traditional HMO or PPO plan. An HDHP has a higher deductible than other health insurance plans, but once the deductible is met, an HDHP typically pays for 100% of covered medical costs. So in the long run, an HDHP usually means less out-of-pocket expenses.

The initially higher deductible can be overcome by combining your HDHP health insurance to an HSA. By accumulating funds in your HSA, you will have the cash needed to cover those costs.

Additional Benefits

• Distributions can be for the individual covered by an HDHP, their spouse (even if the spouse does not have a high deductible health plan), or a dependent.
• The account is transferrable to a beneficiary upon death (either as an HSA to your spouse or taxable if not used for qualified medical expenses, taxable as income to anyone other than your spouse or taxable as your own income at death if not designated to anyone).
• Funds in the account can be invested just like an IRA to maximize growth potential. Interest accrues tax free.
• Trustee or custodian fees can be paid from the assets in the account without being subject to tax or penalty.
• No "use it or lose it" rules like in a flexible spending account; unspent monies remain in the account until they are spent.
• There is NO time limit on when the funds have to be spent, so if your situation changes and you are no longer in a high deductible plan, the remaining funds can remain tax free year after year until they are spent.

Who is eligible for a Health Savings Account?

To be eligible for a Health Savings Account, an individual must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered "health insurance" (see next question) and will not jeopardize your eligibility for an HSA.

Can I get an HSA even if I have other insurance that pays medical bills?

You are only allowed to have automobile, dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they do not pay significant medical benefits.

Does the HDHP policy have to be in my name to open an HSA?

No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse's name.

Does my contribution depend on when I establish my HSA account or when my HDHP coverage begins?

Your eligibility to contribute to an HSA is determined by the effective date of your HDHP coverage. Your annual contribution depends on your HDHP coverage. If you are not covered on December 1, your contribution depends on the number of months of HDHP coverage you have during the year (technically, the months where you have HDHP coverage on the first day of the month). For 2007 and forward, if you are covered on December 1, you are treated as an eligible individual for the entire year. However – if you cease to be an eligible individual during 2008, the excess over the prorated contribution is included in income and subject to a 10 percent additional tax. The amount you can contribute is not determined by the date you establish your account. However, medical expenses incurred before the date your HSA is established cannot be reimbursed from the account.

Can my employer contribute to my HSA?

Contributions to HSAs can be made by you, your employer, or both. All contributions are aggregated to determine whether you have contributed the maximum allowed. If your employer contributes some of the money, you can make up the difference.

Do my contributions provide any tax benefits?

Your personal contributions offer you an "above-the-line" deduction. An "above-the-line" deduction allows you to reduce your taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.

If my employer contributes to my HSA, does that also provide me any tax benefit?

If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).

Can I make contributions through my employer on a "pre-tax" basis?

If your employer offers a "salary reduction" plan (also known as a "Section 125 plan" or "cafeteria plan"), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you can do so, you cannot also take the "above-the-line" deduction on your personal income taxes.

Can I claim both the "above-the-line" deduction for an HSA and the itemized deduction for medical expenses?

You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.

I turned 55 this year. Can I make the full "catch-up" contribution?

If you had HDHP coverage for the full year, you can make the full catch-up contribution regardless of when your 55th birthday falls during the year. If you did not have HDHP coverage for the full year, you must prorate your "catch-up" contribution for the number of full months you were "eligible", i.e., had HDHP coverage. However, if you are covered on December 1, you are treated as an eligible individual for the entire year and get the full contribution.

If both spouses are 55 and older, can both spouses make "catch-up" contributions?

Yes, if both spouses are eligible individuals and both spouses have established an HSA in their name. If only one spouse has an HSA in their name, only that spouse can make a "catch-up" contribution.

How do I know what is included as "qualified medical expenses"?

Unfortunately, we cannot provide a definitive list of "qualified medical expenses." A partial list is provided in IRS Pub 502 (available at www.irs.gov). There have been thousands of cases involving the many nuances of what constitutes "medical care" for purposes of section 213(d) of the Internal Revenue Code. A determination of whether an expense is for "medical care" is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word "primarily."

What happens if I don't use the money in the HSA for medical expenses?

If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty.

Can I use the money in my HSA to pay for medical care for a family member?

Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse, or a dependent without tax penalty. This is one of the great advantages of HSAs.

Can I pay my health insurance premiums with an HSA?

You can only use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer.

Can I purchase long-term care insurance with money from my HSA?

Yes, if you have tax-qualified long-term care insurance. However, the amount considered a qualified medical expense depends on your age. See IRS Publication 502 for the amounts deductible by age.

I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free?

Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

What happens to the money in a Health Savings Account after you turn age 65?

You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or "Medigap" policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.