FSA, HSA, HRA & MoreIn Depth Review and Coordination of Plans

1

• FSA, HRA, and HSA Plan (duh)

• From a Plan Sponsor Point of View

• Design and Implementation

• Who Can Participate

• Rules and Operations

• HIPAA, ERISA, COBRA, PHSA

• What are medical expenses?

So what are we going to talk about?

Cafeteria Plans

• What is a cafeteria plan? It’s not food. It’s a program that employers can use to help employees pay for certain expenses, like health insurance and dependent care, with a serious tax advantage!

• The simplest form is a premium only plan. More complex designs include FSAs.

Tax Codes...zzzzzz!• The tax advantages of these plans fall under specific

codes, including:

• Code section 106 basically allows that the value of coverage under an employer-provided accident or health plan, is generally excludable from an employee’s gross income.

• Code Section 105 allows that when a health plan is funded by an employer, the reimbursements that the employee receives are also excludable from gross income.

• Code Section 129 - Dependent Care Expenses,

• Are there more tax codes? Does a bear....well you know the answer, don’t you?

Flex Spending Accounts• Health Care FSA - reimburses for

eligible medical care that is not reimbursed/reimbursable by another plan.

• Dependent Care FSA - reimburses for expenses incurred for the care of a qualifying individual to allow the employee to be gainfully employed.

Setting up a Cafeteria Plan• Determine the plan you want (objectives, etc).

• When to start the plan (match health insurance plan year).

• Costs and Risks - Uniform Reimbursement Rule.

• Will the plan have debit cards?

• Will premiums be automatically pre taxed? If so - make sure this is drafted as well - along with automatic rollovers. The HCFSA and DCFSA should be set up to require the participant to re enroll each year.

• Create the documents and have an attorney review them.

• Adopt the Plan - Board Resolution - before the effective date.

• Distribute Plan Documents and enrollment materials to employees.

HCFSA Enrollment• Educate, inform, excite and motivate employees

about their benefit options!

• Participants estimate and elect their contributions.

• NDT is performed and hopefully the plan is good.

• The dollar amount elected is divided into equal amounts and withheld pre tax during the entire plan year.

• As participants incur expenses, they are submitted for reimbursement or the PayPro BenefitsCard is used to pay for the expense directly from their flex account (yeah, that was a plug).

• Things participants must know:

• Participants enroll once per year - the elections are generally irrevokable.

• All expenses must be incurred during the plan year (optional 2 1/2 month extension may apply if so drafted in documents)

• Use or lose rule may be in place - or the sponsor may choose to design the plan with a $500 carryover/rollover if funds aren’t used in the plan year.

• Expenses must be for medical care

• Section 213(d) indicates medical care is treating, alleviating, diagnosing, or preventing a disease, abnormality, or deformity. Or for the purpose of affecting the function or structure of the body. (rough def) Medical care does not include expenses that are merely cosmetic or for the general well being of an individual.

!

• Isn’t there a big list of “Eligible” or “Ineligible” health care expenses? Nope. It depends upon the facts and circumstances.

• Domestic Partner Premiums or Medical Expenses are not eligible unless the DP is a Tax Dependent.

• LTC Premiums are not eligible under an FSA. Same with Health Ins Premiums.

• Claims cannot be self substantiated. Use a TPA!

• Use caution when referring to publication 502 - it was created for a different purpose - not flex.

Tax Deduction or Pre Tax• Enter your AGI Here $50000

• multiply that by 10% = $5000

• if your expenses were $5500, you’d get a $500 deduction. That’s icky

• If your expenses were $3500 - that’s a ZERO deduction

• Pre tax all you can (get the man)

Health Care Reform• Healthcare reform took away OTC drugs &

medicines (boo!).

• Added coverage for dependent children up to the age of 27.

• 2013 PPACA Limits HCFSA to $2500 (subject to inflation, $2550 as of 2016)

• $2550 per employee per employer plan

• ER contributions not included in the max above!

• (not per household, or per person)

DCFSA• DCFSA isn’t really a part of today - but just as a reminder,

that category has a $5000 max per household, per plan year, and per calendar year.

• The care must be for a qualifying individual and be an employment related expense.

• If the caregiver cleans up the house but is primarily there for the well being of the qualifying individual, it may still qualify.

• Summer day camp is ok - overnight camp is not.

• Paying a caregiver to care for your children so you can take a vacation (from them or just in general) is not considered ‘employment related.’ But perhaps you can have a doctor write you a prescription for a vacation? NO!

“Special” FSAs - the New Kids• New FSA plans set up because of Health

Savings Accounts:

• “Pure” post deductible FSA (health plan ded);

• Limited Purpose - dental and vision only;

• or you can use the “IRS Statutory Minimum Deductible” because it’s probably lower than the HDHP deductible, it’s been $1200 per individual/$2400 per family in 2011 and 2012. (IRS S. 223).BUT this is tricky!

Who Can/CannotParticipate• These plans are for bona fide employees. Those

individuals not eligible to participate include:

• More than 2% shareholders in an S Corp, (as well as their spouses/family members);

• Partners in a Partnership (as well as their spouses/family members);

• Family pets are not eligible;

• Members of an LLC are generally ineligible (assuming 2%+).

Who Can Contribute to FSAs

• Both the employer and the employee can contribute to the plan

• Employer contributions can be a match, seed, one time contribution or year to year.

• Employer contributions do not affect the HCFSA limits - that only applies to employee contributions

• “Experience Gains” may be used for next plan year contributions by the employer. Tricky - Use caution.

More Details

• Plan Run Out Period - 2 1/2 Month Extension - $500 Rollover

• Run out period is the time in which expenses can be submitted for reimbursement (claims incurred during plan year).

• The Optional Extension allows for expenses incurred AFTER the plan year ends to be accepted for up to 75 days.

• Or the newest plan design option is to allow unused funds to be carried over to the next plan year, with a max of $500. This is popular, easy to explain and will likely increase participation

Experience Gains? Losses• Unlike an HSA - which is portable and belongs to the

individual, unused FSA dollars remain with the employer.

• IRS regulations and ERISA requirements must be considered. What can you do with the monies....Common uses:

• Defray plan administration expenses;

• Use it to offset Experience Losses;

• Reduce salary reduction amounts for following year*

• increase the annual coverage amount (applying gains to current elections);

• Return to employees in the form of cash.**

• *guidance needed **rarely used.

FSA and COBRA• The FSA is subject to COBRA!

• If you have a participant terminate with a positive balance in the FSA - their participation ceases upon the date of their termination.

• Perhaps they have claims they’ve not yet submitted. Or they may not have incurred any expenses to-date. COBRA is an option they elect to have access to their flex dollars.

• They can elect and pay “premiums” equal to their monthly payroll deduction, plus 2%, and have access to their election amount - less any reimbursements already received.

• In reality, they could elect COBRA, incur expenses & submit them for reimbursement - and then cancel COBRA. It’s just like insurance - they have access or coverage for their full amount.

• Yes, it does increase the risk to the employer. Risk on both sides.

Health Savings Acccounts

• HSAs are tax-favored IRA-type trust or custodial accounts that can be contributed to by, or on behalf of “eligible individuals” who are covered by certain high-deductible health plans (HDHP) to pay for certain medical expenses of the eligible individuals and their spouses and tax dependents.

• Code Section 223 contains the required deductibles and out of pocket maximums the HDHPs must meet.

• The great news is that the carriers have often determined whether a plan is HSA Compatible or a Qualified HDHP.

• The HSA is held in a custodial account.

• The participant can pay for medical expenses out of the HSA, or reimburse themselves for expenses out of the HSA.

• Unlike HRA’s (but like FSAs) Funds can typically not be used for payment to a health insurance plan for the HDHP or other coverage.

• LTC and COBRA Premiums (for account holder or spouse or tax dependent) are eligible expenses. So are the Medicare A B C & D premiums for account holders over 65.

• Also for the spouse or employe that is age 65+ a deductible health insurance other than a Medicare supplemental policy may be eligible.

• The claims are self substantiated - no separate claims administrator is necessary!

• The HSA belongs to the accountholder. Employer contributions belong to the HSA accountholder as well. PERIOD.

Simple explanation

HSA History and Facts• HSAs first became available in 2004.

• The rules governing HSAs are found primarily in Code Section 223.

• They are different than HRAs and the older Archer MSAs, in that HSAs can be funded on a pre tax basis through a cafeteria plan.

• HSAs are gaining popularity. In 2011 a survey reported that 23% of all employers that offer health benefits offer their workers high-deductible health coverage and a health reimbursement arrangement (HRA) or an HSA-qualified HDHP. This was up from 12% in 2009. It’s even greater amongst employers that have 1000 or more workers - up to about 41% of those employers offered such plans.

• The participation of workers with health coverage that participate in these types of arrangements increased from 8% in 2009 to 17% in 2011. And more than half of the 17% were enrolled in HSA-qualified HDHP’s. There actual number of HSAs that have been opened is unknown, but I’ve seen a couple of studies that report around 3 millio. You know it’s big when it becomes one of the choices offered under the Federal Employees Health Benefits Program.

• They are referred to, informally, as super-charged tax-wise,, by Treasury Officials. Their 3-tiered savings are hard to beat.

• Tax Free Contributions

• Tax Free Growth

• Tax Free Distributions

• They can be established with or without employer involvement.

Tax Breaks for Individuals• An HSA Eligible Individual can make contributions

up to the statutory limit and get an “above the line” deduction, which means that the contributions reduce the individuals adjusted gross income before itemized or standard deductions are considered. (State taxes still apply).

• Investment earnings on HSA funds are generally tax free.

• HSA funds withdrawn for qualified medical expenses escape federal taxation entirely!

Employer Advantages

• Employers that contribute to their employees’ HSAs or offer HSAs under a cafeteria plan get a federal tax deduction for those contributions.

• Employer contributions to an employees’s HSA are treated as employer-provided coverage (Code Section 106) for medical expenses under an accident or health plan, and are excludable from an employees’ gross wages - and therefore not subject to FUTA, FICA or RRTA taxes if the employer reasonably believes that the contributions will be excludable.

Who is Eligible for HSA Contributions?

• Individuals must be covered under a qualified HDHP.

• Individuals must not have ‘other coverage’ that provides benefits below the statutory minimum deductible).

• The individual must also not be entitled to Medicare (eligible AND enrolled).

• An individual over age 65 can contribute if they meet all other requirements by have not enrolled in Medicare (A,B,C or D) or any other Medicare benefit. (delay receipt of Social Security Benefits).

• At the beginning of the month in which an individual becomes entitled to Medicare (eligible and enrolled) they become ineligible for the HSA contributions

• The individual who holds the account cannot be claimed as a tax dependent by another taxpayer.

• Full year contributions can be made to an HSA so long as the individual was HSA eligible for only a portion of the year. If you became HSA-eligible Dec 1st - you could make full yearly contributions. And you generally can contribute up to April 15 of the following year to the HSA - even if at that time of the contribution you were not eligible - so long as you were HSA eligible for a month in the previous year (you must have HSA eligibility for a 13-month testing period!)

What is a HDHP? • Its a health plan that meets statutory requirements for annual deductibles and out-

of-pocket expenses and provides “significant benefits.” The minimum and maximum herein are current as of 2012.

• Self only HDHP has a minimum annual deductible of at least $1200 before any reimbursement is made for eligible medical expenses - except for preventive care.

• Self only HDHP also has a maximum out of pocket expense limit that cannot exceed $6050.

• Family HDHP is a health plan that covers one eligible individual and at least one other individual (regardless if the other individual is an eligible individual or not).

• Minimum annual deductible for 2012 is at least $2400.

• Maximum out of pocket for 2012 cannot exceed $12,100.

• The minimum deductible and maximum out of pocket limits are adjusted for increases each year. By June of each year the IRS publishes the new cost of living adjustments that will begin on January 1st.

• If you have a plan that isn’t on a calendar plan year, you can use the adjusted limits for the calendar year in which in started.

• TRICARE and Medicaid coverage will make an individual ineligible for HSA contributions.

• In addition, medical benefits provided by the VA, Indian Health Service - or an on-site clinic at the employer may also cause the individual to be ineligible to contribute to an HSA.

“Other Coverage” causes loss of HSA Eligibility

An FSA or HRA is considered“Other Coverage” causes loss of HSA Eligibility

• If you are enrolled in a general HCFSA or HRA you are NOT eligible to contribute/open an HSA while you’re enrolled. Even if a new health plan option (HSA qualified HDHP) is offered mid-year, those individuals that are currently enrolled in the ‘regular’ FSA are not going to be eligible to open/contribute to an HSA at that time. They would need to wait until the OE of the FSA occurs and then enroll in a LPFSA.

• They can still sign up for the HDHP - it’s just the opening of an HSA that isn’t do able.

• Adult children under 27 years of age that have a HDHP and that have coverage through their parent’s general purpose FSA or HRA are also ineligible.

• And get this: An individual is NOT eligible for HSA contributions if his or her qualified medical expenses can be paid or reimbursed under a general purpose Health FSA that the individual’s spouse may be enrolled in at their workplace!

An FSA or HRA Under A Spouse or Parent can also cause loss of HSA

Eligibility

Solution?• Limited Purpose Health FSA and HRA (covers

vision, dental and preventive care expenses on a first dollar basis).

• Post deductible Health FSA or HRA- reimburses or pays for preventive care or medical expenses incurred after the statutory minimum annual deductible is met ($1200/self-only or $2400 for family HDHP.

• Maybe it’s time to set up these special FSA and HRA plans at all employers that currently have an FSA or HRA in place.

Who Can Contribute?• Contributions to an HSA can be made by the

employer, the employee, a combination of both - as well as an outside individual can make a contribution to the HSA. Hello Daddy!

• Even if the contributions are made through a cafeteria plan, the HSA employee contributions can be changed mid-year. This is different than the “irrevokable election” that is made for a FSA.

• HSA funds belong to the accountholder. If the employee terminates, the funds remain with the HSA the employee owns.

HSA Contribution Limits• Self-Only HDHP HSA Max is $3050 (as of

2011). The max is the max - regardless of who makes the contibution. But if you lose eligibility for HSA contributions at any time of the year, you can only use 1/12th of the maximum for each month you were actually eligible for the HSA contribution.

• Family HDHP HSA Max is $6150 (as of 2011). Same rules apply for caps and eligibility limits.

• HSA Contributions are limited under the “special rule” for married individual.

• If either spouse has non-HDHP family coverage that covers both spouses, then both spouses are treated as having only that family coverage and are ineligible for HSA Contributions.

• If the employee/spouse have family coverage under a qualified HDHP - they can contribute to an HSA.

• Since the HSA itself cannot be a joint account, the married individuals can contribute up to $3075 to their HSA (and can still do the catch up option).

Pre or Post Tax?• Contributions to an HSA can be paid for on a pre

or post tax basis. If it is done on a pre tax basis - it can only be done through a Section 125 Plan. The plan sponsor needs documents in order to pre tax contributions. Yay PayPro - new business!

• State tax treatment of contributions is different than Federal.

• If contributions are made on a post tax basis, the individual would take an above the line deduction on their tax return (similar to IRA).

Simplified Administration

• HSAs offered in the workplace will usually not be subject to ERISA. That’s good news because it means they are not generally subject to COBRA or HIPAA either.

• Subject to Section 125 NDT.

Who Can/Cannot Participate

• In an employer sponsored pre tax HSA, only bona fide employees can participate. Those individuals not eligible to participate include:

• More than 2% shareholders in an S Corp, (as well as their spouses/family members);

• Partners in a Partnership (as well as their spouses/family members);

• Members of an LLC (assuming 2%+).

• HSAs aren’t limited to common-law employees though. They can be set up by self-employed individuals, such as sole proprietors, partners, and more-than-2% shareholders in a Subchapter S Corporation.

• You may still be able to contribute to your HSA and take the tax deduction.....

• BUT, note that pre tax employer contributions can only be made for common-law employees and only common-law employees can make HSA contributions through a cafeteria plan.

Who Can Sponsor the Plan

Employer Contributions

• The Employer can fund the HSA. Timing of funding generally yearly, quarterly or monthly.

• If an employer makes contributions to its employees’ HSAs, those contributions must be in the same dollar amount or the same percentage of the HDHP deductible to all employees in the same employee category who are eligible under the employer’s HDHP and who have the same category of HDHP coverage.

• WHAT? Crazy IRS talk.. just keep it uniform.

Reporting - super easy

• HSA Trustees & Custodians -

• They must report HSA contributions to IRS on form 5498-SA AND they must also report to the IRS - and copied to the HSA holder - any distributions taken via 1099-SA

• HSA Holders -

• Must report contributions to the HSA and spouses HSA, as well as any contributions made on their behalf - including employer contributions on IRS Form 889 which is them filed as an attachment to IRS Form 1040.

• They also report distributions on Form 889, which is filed as an attachment to the 1040......

• Employers

• Must report contributions on IRS Form W-2 (box 12) - and the amount reported is ALL contributions made through the cafeterial plan - even those employee pre tax salary reduction.

• Employer HSA contributions that aren’t excludable from the employees’ gross income is also reported on Form W-2, but in boxes 1, 3, and 5).

• Family friends may choose to report you to the IRS if you don’t follow the rules properly. I’m just kidding. Are you awake?

Finally - last one: HRA• HRA plans have actually been around for

some time, and were mentioned as “health reimbursement arrangements” back in 2002.

• There is no specific code section that governs HRAs, but they were able to receive tax favored treatment under Code Sections 105 and 106.

• Because I’m quite sure you’re nodding off - I’ll summarize this for your benefit - yet you’ll still learn a couple of things.

HRA Basics

• ONLY the employer can contribute to the HRA.• HRA’s can only be offered with a Health Insurance Plan

- you can’t just offer an HRA only, unless it is a retiree only HRA.

• The HRA can be designed to reimburse for a little or as much as you’d like (within Section 213(d) of course).

• HRAs do not have the strict eligibility requirements that HSAs do - but you must offer a health insurance plan. There are no contribution limits. No limits?

• HRAs sound easy, right?

• The plans can be designed to allow carryover and spend downs. But no cash outs.

• Claims can be paid out of the general assets of an employer - they aren’t required to be funded - they can be paid as they are incurred.

• They can be offered with traditional FSA coverage. But, you do need to specify the ordering rules for reimbursements or payments. That is you need determine in advance which is to be exhausted before the other will kick in.

• Can’t be offered thru cafeteria plan (ER contributions only!)

COBRA, HIPAA ERISA & NDT

• HRAs are subject to non discrimination testing under Code Section 105 - which prohibits discrimination in favor of highly compensated individuals.

• They are more complex than FSA and HSA, as they are subject to HIPAA, ERISA and COBRA.

• If an employer is subject to COBRA, it must offer qualified beneficiaries who lose their HRA coverage, due to a COBRA qualifying event, the opportunity to continue their HRA for the COBRA time period. Each qualified beneficiary has an independent right to elect COBRA continuation coverage under the HRA. It could be a nightmare.

• Claims substantiation is required. That’s good for PayPro!

“Special HRA”• Just as in the discussion on FSA and HSA,

there are rules about coverage under other reimbursement plans. So if you’re looking at HRA’s keep in mind that you may need a limited purpose or post deductible HRA to keep participants eligible for HSA contributions.

• FSAs and HRAs are fine together. The documents will need to detail the ordering of reimbursements (i.e. will the HRA pay first or only after the FSA is exhausted?).

Important!

• You absolutely must discuss the HRA with the carrier. Enough said, right?

HRA Rules• Employer contributions only.

• Reimburse only Qualified Medical expenses (Code Section 213(d).

• Reimbursements require substantiation like the FSA.

• May reimburse for health insurance premiums for current employees, retirees and COBRA qualified beneficiaries.

• The HRA cannot be used to pay the employees’ share of the employer-provided group health coverage if the employee could pay those premiums pre tax thru the cafeteria plan. HRAs can only be funded by employer.

Who can/cannot participate?

• The HRA can provide tax free benefits to employees, former employees, retirees, their spouses covered tax dependents or children that are under 27 by the end of the taxable year.

• Only bona fide employees can participate. Those individuals not eligible to participate include:

• More than 2% shareholders in an S Corp, (as well as their spouses/family members);

• Partners in a Partnership (as well as their spouses/family members);

• Sole Proprietors, etc.

Healthcare Reform, Mandates & HRAs

• HRAs are “group health plans” and are subject to many of the Code versions of the health care reform law’s and the health coverage mandates.

• For example the reform extended the income exclusion exclusion for medical expense reimbursements (Code Section 105(b) again) for the children under 27 years of age.... The reform also changed the tax rule that now requires a prescription for medicines and drugs, even if it’s an OTC that can be purchased without a prescription.

• Many HRAs are also either ERISA or PHSA group health plans and may also be subject to the coverage mandates (coverage mandates are often called PHSA mandates even when the Code or ERISA version applies).

• PHSA Exceptions to HRAs:

• PHSA mandates do not apply to retiree-only HRAs or “excepted benefits” under the HIPAA portability rules, Thus an HRA that provides dental or vision-only coverage should generally be exempt from those mandates.

• Some of the PHSA mandates don’t apply to grandfathered plans.

Reform Highlights:

• Bans lifetime limits on plans established after September 24, 2010.

• Allows “restricted annual limits” on essential health benefits for plans beginning from September 23, 2010 though December 31, 2013.

• And on January 1, 2014 the reform requires that plans have no annual limits on essential health benefits.

Essential Health Benefits...• Essential health benefits include

emergency services, maternity and newborn care, mental health and disorder services, prescription dugs, ambulatory patient services, hospitalization, rehab services and devices, lab services, preventive and wellness services & chronic disease management and pediatric services (which includes oral and vision care).

Impact on HRAs• Most HRA plans are set up to reimburse

in at least one of these “essential health benefit” categories - and will be subject to the reform law’s restrictions.

• Some HRAs may not be subject to the annual or lifetime limit restrictions because they don’t reimburse any benefits that are “essential health benefits.”

Designing an HRA to Avoid the Annual Limits Restriction is Possible

• An HRA that reimburses for limited-scope dental or vision expenses only may not be subject to these annual limit rules (and the retiree-only HRA)

• Specific exemptions can apply to HRAs with balances as great as 500% of the annual value of the coverage...blah blah blah

• Integrated HRA+HDHC Plans would not violate the limit rules so long as the other coverage on it’s own would comply. No specific guidance on how to integrate the HRA - but possibly having the HRA and major medical being documented as one plan, identical participation (all under HRA are also under the major medical). But still a bit vague.

HRAs in 2014 - Options• Integrate the HRA into group health

plans that meet the annual limit and lifetime limit rules.

• Modify the HRA so it only reimburses for excepted benefits (dental and vision).

• Terminate the HRA.

• Wait and see what really happens before changing?

In Conclusion

• FSAs, HSAs and HRAs have unique advantages and disadvantages.

• They are alike because they each have 3-letter acronyms and are tax advantaged. But the rules governing each type of plan vary - and may change.

• They are evolving - just as healthcare is.

• Look at your current plans and consider the possibilities.

Combo Plans & Educating Employees

• The following slides have been used to assist employers and employees about enrollment options and plans.

• We do not have to go through them!

PayPro Administrators

How is my High Deductible Health Plan going to work with an HSA and an FSA?

!November 2015

!

Benefit Terms

HDHP HSA

LPFSAFSA

HDHP/High Deductible Health Plan

• A High Deductible Health Plan is a popular way to save money on health insurance. You have coverage, but you need to satisfy a deductible before the insurance will pay a portion. Similar to a high deductible on car insurance - you’ll be responsible for meeting the deductible under the health plan before your policy covers certain expenses.!

• There are many kinds of HDHPs, but in order to be called a “HDHP” it must meet certain qualifications.!

• HDHP must have a minimum and maximum deductible amount. Those limits are in place because if you have a qualified HDHP, you can choose to contribute to an HSA.

HSA/Health Savings Account

• An HSA is an account opened at a financial institution. It’s oftentimes simply called, or explained as a “medical IRA.”!

• You can contribute to an HSA if you have a qualified HDHP.!

• Contributions to your HSA can be made on a “pre” or “after” tax basis. !

• If you elect to open and contribute to your HSA during Open Enrollment, your contributions will be taken on a pre tax basis and deposited to your account automatically.!

• Or you can opt to take a deduction on your tax return for HSA contributions. This is similar to an IRA contribution.

Health Savings Account cont.• You may use the monies in your HSA to pay for qualified medical expenses.

You’ll be able to write a check or use your HSA debit card to pay at the time of service. Or you can pay for it out of your non-HSA funds and reimburse yourself from the HSA.!

• You can use the monies in your HSA for health, dental and vision expenses. You should always keep in mind that should you have a medical expense - you are responsible for the deductible amount. Therefore, use the HSA dollars wisely so you can afford the deductible before you have fully funded your account.!

• If you ever use HSA dollars for something other than qualified medical care, you will be subject to taxation and a 20% penalty! (as of 2012)!

• Your HSA belongs to you. Contributions roll over year to year. If your employment discontinues, your account will still belong to you.!

• You are responsible for maintaining records & proof of HSA expenses - keep all itemized receipts in a secure place. If you are audited, you need them.

FSA/Flex Spending Account

• FSAs allow you to set aside monies each pay period, on a tax free basis, that can be used to pay for un reimbursable expenses for you and your qualified dependents.!

• You can use FSA dollars for co payments, prescription drugs, dental, vision, and many other healthcare expenses.!

• You cannot use FSA dollars to pay for your deductible under the HDHP if you are contributing to an HSA. (see you’re already getting the tax break on the HSA, so you can’t double dip!)

FSA/Flex Spending Account

• If you elect to contribute to an HSA - you cannot participate in the traditional FSA. However, you can take advantage of the Limited Purpose Flex Spending Account - or LPFSA. !

• If you have signed up for a HDHP but will not be opening an HSA, you can contribute/participate in the traditional FSA for all of your out of pocket healthcare expenses.!

• Each year, during open enrollment, you estimate the amount you/your family will spend out of pocket on healthcare expenses. The election amount is divided and withheld each pay period of the plan year.

LPFSA/Limited Purpose FSA• If you have an HSA, but know that you’re going to have certain dental and vision expenses, you

may wish to sign up for the LPFSA. Or if you know that you will have medical expenses that exceed the IRS-imposed minimum deductible (IIMD)for the year, you may wish to contribute to the LPFSA for the amount in excess of the IRS minimum deductible, which is $1200 in 2011 for employee only, or $2400 for family. Note that the IRS minimum deductible is not the same thing as your HDHP deductible. The IRS minimum deductible is an amount posted from the IRS that you must exceed first, before you could access funds from an LPFSA! Most plans only allow for dental and vision expenses - as the IIMD-style is difficult to administer and communicate.!

• Many people choose to use LPFSA dollars for those dental and vision expenses because they wish to save the monies in their HSA for future use, and/or to make sure they are covered should they exceed the IIMD .!

• During enrollment, make sure to select “LPFSA” because only claims for dental and vision, and expenses that are incurred AFTER you’ve met the IIMD for the year, can be paid out of the LPFSA. Other expenses that could fall under your traditional HDHP deductible amounts are not eligible for reimbursement.!

• The Enrollment and claims process for LPFSAs are the same as those of the traditional FSA.!!!!!

• . !

!!!

FSA & LPFSA Rules

• An advantage of an FSA is that the monies you elect at the start of the plan year, is available to you at any time during the plan year. You can make elections once per year, at open enrollment. !

• You cannot stop or change contributions at any time unless you have a qualifying status change.!

• All expenses must be incurred during the plan year.!

• Some FSA plans have a ‘use it or lose it’ rule. When estimating your elections, we recommend you take a conservative approach.

Practical Tips

HDHP HSA

LPFSAFSA

HDHP with HSA and LPFSA

You can use the monies in your LPFSA for vision and dental expenses. You may also be able to use the LPFSA for expenses that you have AFTER you have exceeded your HDHP deductible for that year.!!For dental and vision expenses, use the claim for provided for the LPFSA Claims. ! !For expenses you wish to claim that were incurred after you meet IRS minimum deductible, use the same claim form but also be sure to include a copy of your EOB (explanation of benefits). The EOB should clearly show what your deductible is and that you have met or exceeded the IRS minimum deductible amount!!Claims for services that would fall under the standard health insurance deductible amount are NOT eligible for reimbursement under the FSA or LPFSA if you have an HSA.

HDHP- NO HSA and FSA

If you have signed up for a HDHP, but have decided to NOT open a Health Savings Account, you can contribute to the standard Health FSA.!!Under the standard Health FSA, you can be reimbursed for out of pocket healthcare expenses that are not reimbursable elsewhere. !!For example, you can include those out of pocket costs you’ll have before you meet your deductible.!!You can also include prescription drugs, chiropractic care, co insurance, dental, vision, office visits, etc. You can include the expenses of you and your family (not if they are contributing to an HSA).

Recap• High Deductible Health Plans are becoming more common! !

• If you have a HDHP, you can open and contribute to an HSA.!

• If you are contributing to the HSA, you can participate in the Limited Purpose FSA (dental & vision) and even elect to have monies set aside after you’ve met the IRS minimum deductible for the year. !

• If you are not contributing to an HSA can enroll in the traditional Health Care FSA.!

• If you enroll in a health benefit that is not HSA compatible, you can contribute to the traditional Health Care FSA!

• If you have a spouse or child under age 27 that has a HDHP, a HSA, FSA or LPFSA please see Human Resources for additional information.