HSAs - Frequently Asked Questions (Business)
General Information About HSAs
- What is a Health Savings Account?
- How does it work?
- What type of insurance plan is HSA-eligible?
- Who can open an HSA?
- Who should I contact to offer the HSA?
- What is an Archer MSA?
- What are qualified medical expenses?
- Can an HSA be used to pay insurance premiums?
- How will the HSA be set up?
- Can my employees open an HSA in one of your banking offices?
- How can my employee transfer their existing HSA or Archer Medical Savings Account (MSA) with another financial institution to your bank? What do they need to do to get started?
Managing an HSA
- How would my employee reimburse themselves for qualified medical expenses if they pay a medical bill out of their regular account?
- How would my employee transfer their HSA to another financial institution?
- How is the account accessed?
- If they already bank with Columbus Bank and Trust Company how can my employee transfer money from their HSA to their regular account to reimburse themselves for out-of-pocket qualified medical expenses?
- How do employees order or reorder checks?
- Who do they call for information about their account?
- How can my employee change their beneficiary?
- Who do they call if they have a problem with their debit card?
- What happens to the HSA in the event of my employee's death?
Tax Savings
- How do the tax savings work?
Contributions
- Can my company match or make additional contributions to our employee's accounts?
- What happens if all of the money contributed is not used?
- How much can be contributed each year to an HSA?
- Who can contribute to an HSA?
- If my employee exceeds their annual maximum contribution amount can they do anything to correct the mistake and avoid a tax penalty?
- What is the deadline for making contributions for the year?
- How much can I contribute to an HSA if I'm not covered by an HDHP all year?
Distributions
- How are distributions taxed or penalized?
How HSAs Work With Other Accounts- Can my employee have an HSA if they already have a Flexible Spending Account (FSA)?
- Can my employee have an HSA and an IRA or other qualified retirement plan?
Fees
- What are the fees and services associated with this account?
- Are the fees associated with this account tax deductible?
Investment Option
- Can my employees have the investment option account through Synovus Securitites, Inc. without opening a regular HSA with the bank?
- When will the annual fee be charged to the investment account?
- Will new checks or a new debit card be required when the investment option is opened?
- Will my employee receive statements?
- Who will handle any mutual fund investment transactions?
- Where can I get more information about Fidelity Investment® mutual funds offered with the HSA investment option?
- How can the investment option be added to theColumbus Bank and Trust Company HSA?
- What is the balance requirement to add the investment option to an HSA?
- Is there a minimum investment to get started?
- What is a Health Savings Account?
A Health Savings Account (HSA) is a deposit account created to help meet rising health care costs by allowing individuals and families with High Deductible Health Plans (HDHP) to deposit pre-tax funds* into an account for qualified medical expenses. After age 65, the account owner can also use the funds for non-medical expenses without incurring tax penalties. This account was authorized by the Medicare Reform Act, approved December 2003.
*Deposits made from after-tax income are tax deductible.
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- How does it work?
The HSA works in conjunction with a special High Deductible Health Plan (HDHP) that provides comprehensive health insurance coverage at the lowest possible net cost.
If the HSA is funded through payroll deduction, the contribution can be made using pre-tax dollars, which may reduce your employee’s income tax liability.
The money in the account can be used to cover the deductibles on the insurance policy and any other qualified medical expenses that may be incurred as defined under IRS Code 213(d). Any unused funds are the account holders to use in the following year. Unlike plans such as the Flexible Spending Account, the money remaining in the account will continue to draw interest as long as there is a balance.
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- What type of insurance plan is HSA-eligible?
The policy must be a High Deductible Health Plan (HDHP) with an annual deductible of at least $1,200 for individuals and $2,400 for families. For 2010, your total annual out-of-pocket expenses (money applied to your deductible and your coinsurance for covered charges) must be no more than $5,950 for individuals or $11,900 for families. These amounts are subject to cost-of-living adjustments. If you are unsure whether your health insurance is HSA-eligible, please contact your insurer or tax advisor.
[ top ] - Who can open an HSA?
Anyone with a High Deductible Health Plan (HDHP) as their primary health insurance plan is eligible to open an HSA. Secondary coverage, such as a spouse's policy, is not permitted when contributing to an HSA.
The only groups not eligible are individuals entitled to Medicare benefits (generally not reached until age 65) or those claimed as a dependent on another person's tax return.
Anyone over the age of 65 who is not enrolled in Medicare can open/contribute to an HSA.
[ top ] - Who should I contact to offer the HSA?
Anyone with a High Deductible Health Plan (HDHP) as their primary health insurance plan is eligible to open an HSA. Secondary coverage, such as a spouse's policy, is not permitted when contributing to an HSA.
The only groups not eligible are individuals entitled to Medicare benefits (generally not reached until age 65) or those claimed as a dependent on another person's tax return.
Anyone over the age of 65 who is not enrolled in Medicare can open/contribute to an HSA.
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- What is an Archer MSA?
The Archer MSA* is a program established in 1996 by the Health Insurance Portability and Accountability Act (HIPAA) which is very similar to the HSA.
The main differences between these two accounts include:
- Contribution limitations are up to 100% of the maximum set by the IRS for the HSA; MSAs limit those contributions to 75% for families and 65% for individuals.
- HSAs allow both employer and employee to contribute in the same year; MSAs require that only one party contribute during a calendar year.
- At age 65, funds in an HSA can be used for any health insurance premiums, except Medicare supplemental policies. The MSA only allows this while an individual is receiving unemployment or while receiving COBRA continuation benefits.
*MSAs are no longer available.
[ top ] - What are qualified medical expenses?
HSAs can be used for many types of medical expenses as defined in IRS Code 213 (d), including some that are often excluded on health insurance plans. Some examples of both are:
Qualified medical expenses include:*
- Health insurance plan deductibles, co-payments and co-insurance
- Prescription and over-the-counter drugs
- Dental services, including braces, bridges and crowns
- Vision care, including glasses, contact lenses and lasik eye surgery
- Psychiatric and certain psychological treatments
- Long-term care services
- Medically-related transportation and lodging
Typically HSAs may not be used to pay health insurance premiums, but there are exceptions:
- Any health plan coverage while receiving federal or state unemployment compensation
- COBRA continuation coverage after leaving employment with a company that offers health insurance coverage
- Qualified long-term care insurance
- Medicare premiums and out-of-pocket expenses, including deductibles, co-pays, and coinsurance
- Part A (hospital and inpatient services)
- Part B (physician and outpatient services)
- Part C (Medicare HMO and PPO plans)
- Part D (prescription drugs)
As the account owner, you will be responsible for substantiating that the distribution is for qualified medical expenses and must maintain records sufficient to show it is tax-free.
Please refer to the "Qualified Medical Expenses" in IRS Publication 502 for the complete list or go to http://www.irs.gov/publications/p502/index.html.
Note: An HDHP must already be established before incurring any expenses or they will not qualify.
*Please consult your corporate Human Resource department, Insurance Company, your tax consultant or IRS Publication 502 with any questions regarding these expenses.
[ top ] - Can an HSA be used to pay insurance premiums?
No, this is considered a non-medical withdrawal subject to all taxes and penalties.
The exception to this rule would apply if the money being withdrawn were being used to pay for:
- Qualified long-term care insurance.
- Health care insurance, including a major medical plan while you are: a) receiving unemployment compensation or b) entitled to health care continuation programs such as COBRA.
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- How will the HSA be set up?
Funds in these accounts will be held in an interest-bearing checking account for your employees by Columbus Bank and Trust Company.
[ top ] - Can my employees open an HSA in one of your banking offices?
Yes, one of our customer service representatives will be happy to open an HSA with Columbus Bank and Trust Company for your employee.
[ top ] - How can my employee transfer their existing HSA or Archer Medical Savings Account (MSA) with another financial institution to Columbus Bank and Trust Company? What do they need to do to get started?
They should fill out the "Request for Transfer to a Health Savings Account" located in the Forms section of our website and bring it to one of our banking offices for us to mail to your existing financial institution.
If they need any help, our customer service center will be happy to help. The number is 1-877-367-4HSA.
[ top ] - How would my employee reimburse themself for qualified medical expenses if they pay a medical bill out of their regular account?
They would simply write a check* from their HSA account to reimburse themselves for the expense. They should keep a record of their expenses to prove that the distribution was made for qualified medical expenses.
*Fees may apply.
[ top ] - How would my employee transfer their HSA to another financial institution?
The account holder should go to the new financial institution and complete a "Request for Transfer to a Health Savings Account" form. That institution will mail the completed form to us and once received, we will close the account and send the funds to the new financial institution.
If you have any questions please call 1-877-367-4HSA.
[ top ] - How is the account accessed?
A Visa® debit card(s) is issued to the account holder as soon as the account is set up. Account holders can also sign up for OnLine Access, our Internet banking solution, to have access to their account or make transfers between other accounts held at our bank; Bill Pay is also available with this service.*
Check access** is also an option on this account; account holders may call 1-877-367-4HSA to order customized checks. **
*Please refer to the OnLine Access information on our web page for fee information. **Fees may apply.
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If I already bank with Columbus Bank and Trust Company how can my employee transfer money from their HSA to their regular account to reimburse themselves for out-of-pocket qualified medical expenses?
They can go into their local banking office to complete a transfer between accounts. They can also make a transfer for current year* expenses or contributions using OnLine Access if their other accounts are set up with that service.
* All prior year expenses or contributions must be completed by a banker to insure proper reporting.
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How do my employees order or reorder checks?
By calling 1-877-367-4HSA; one of our customer service representatives will be happy to help.
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Who do they call for information about their account?
Customer service representatives are available at 1-877-367-4HSA to answer questions about their balance and to see if checks or deposits have posted. Account information is also available through OnLine Access.
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How can my employee change their beneficiary?
By completing a "Change of Beneficiary" document located in the Forms section of our website. Account holders should make a copy for their records and mail the completed document to HSA Operations, P. O. Box 1828, Columbus, Georgia 31902-1828.
If they have any questions or need help completing the form, they should call customer service at 1-877-367-4HSA.
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Who do they call if they have a problem with their debit card?
If their card is lost, stolen or damaged they should call 1-877-367-4HSA.
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What happens to the HSA in the event of my employee's death?
If your spouse is the beneficiary, then ownership of the account transfers to the spouse. We will close the account and open a new one in his/her name, transferring the balance with no penalty.
If the beneficiary is not your spouse, the HSA will be closed and the balance of the account will be included in the beneficiary's gross income for the year that the death occurred. We will need to re-issue the account in the beneficiary's name and close it for tax reporting purposes.
In either case, the beneficiary should either go into one of the banking offices or call customer service at 1-877-367-4HSA to help take care of all the details.
Please note that a death certificate will be required before any distributions or changes can be made to the account.
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How do the tax savings work?
Employee contributions can be made with pre-tax dollars through payroll deduction and withdrawn for qualified medical expenses, tax free.
Your employees will receive a monthly statement listing all deposits and withdrawals; they will also receive year-end tax statements. The contributions made to their HSA are fully deductible*; the interest earnings grow tax deferred. Distributions for qualified medical expenses are tax free.
If they have contributed more than the maximum allowed by the IRS for the year, there will be a penalty. Additional penalties also apply to any withdrawals made for non-qualified expenses prior to age 65.**
*If the HSA is funded through payroll deduction, the contribution will be made using pre-tax dollars and they will not be allowed an additional deduction on their federal income tax. If the contribution is made through any other means, they will be allowed a deduction at the end of the year on their federal income taxes.
**Please consult a tax advisor.
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Can my company match or make additional contributions to our employee's accounts?
Yes, we can set that up for you. Ask your bank representative for details.
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What happens if all of the money contributed is not used?
The HSA works just like an IRA account; any funds left in the account at the end of the calendar year will remain in the account and earn non-taxable interest to supplement medical expenses at any time in the future. The balance will not affect the amount that may be contributed the next calendar year.
When the account owner reaches age 65, he/she can continue to use funds for qualified medical expenses, or withdraw penalty-free any amount for non-qualified medical expenses. The money withdrawn at that time will need to be claimed as taxable income, just like an IRA distribution after age 65.
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How much can be contributed each year to an HSA?
The maximum annual contribution is set by the IRS each year, up to $3,050 for individuals or $6,150 for families in 2010, reduced by any contribution to an Archer MSA. Individuals age 55 or older are allowed to make an additional annual "catch-up" contribution of up to $1,000 in 2010.
As of January 1, 2007, HSA account holders can make a one-time, tax-free distribution from their Roth or Traditional IRA for the purpose of making a regular HSA contribution. This provision also applies to roll-overs from a Health Reimbursement Arrangement (HRA) or a Flexible Spending Account (FSA) through 2011. Certain restrictions apply.*
*Please consult a tax advisor.
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Who can contribute to an HSA?
Contributions can be made by your company, your employee or their family member; this is true whether a person is self-employed or unemployed.*
*Please consult a tax advisor.
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If my employee exceeds their annual maximum contribution amount can they do anything to correct the mistake and avoid a tax penalty?
If the account holder has exceeded the limit for the calendar year, they can fill out a "Health Savings Account Distribution" form located in the Forms section of our website; there is a Correction of Excess Contribution box that should be checked under Distribution Reason. Your employee should make a copy for your records and mail the form to HSA Operations, P. O. Box 1828, Columbus, Georgia 31902-1828.
The withdrawal for the excess contribution must be made by writing a check from the account by the due date, including extensions, of the account holder's tax return along with any income earned on the withdrawn contributions. The earnings will need to be included in "other income" on the tax return for the year they withdraw the contributions and earnings. They can not claim a deduction on their Form 1040 for the amount of the withdrawn contributions.
For any questions about this process, the account holder should call 1-877-367-4HSA and one of our customer service representatives will be happy to help.
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What is the deadline for making contributions for the year?
All regular or catch-up contributions can be made anytime during the tax year up to and including your federal income return due date on April 15th of the following year. Extensions are not included in this time period.
[ top ] - How much can I contribute to an HSA if I'm not covered by an HDHP all year?
Until December 31, 2006, the maximum contribution would have been pro-rated based on the amount of time in the calendar year the account holder was covered by the HDHP. Beginning January 1, 2007, HSA account holders can contribute the maximum allowable annual contribution; regardless of their HDHP enrollment date, as long as they are covered under an HDHP for at least 12 consecutive months.*
*Please consult a tax advisor.
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- How are distributions taxed or penalized?
Any distribution from an HSA for qualified medical expenses for the account owner, their spouse or dependents are not taxable.
All other distributions are taxable and subject to an additional 10% tax on the amount withdrawn. Exceptions to this rule include:
- Distributions made after the account owners death or disability*.
- Distributions made after age 65 for any reason**.
Please note that distributions for qualified medical expenses must be incurred only after an HSA has been established.
*This applies only if you are disabled before age 65. The custodian or trustee may request a copy of a certificate from your physician that you meet the definition of disability under IRC Section 72(m)(7).
**Distribution made after age 60 for anything other than qualified medical expenses must be claimed as income.
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- Can my employee have an HSA if they already have a Flexible Spending Account (FSA)?
As a general rule you cannot have both, but there are circumstances that allow the combination of aspects of an FSA with an HSA*. Your employee will need to consult a tax advisor for the specifics on this situation.
*Please consult your tax advisor.
[ top ] - Can my employee have an HSA and an IRA or other qualified retirement plan?
Yes. An HSA does operate under some of the same rules that apply to traditional IRAs, but it is not an IRA. An HSA is simply a savings account plan for medical expenses; it does not have any effect on their ability to contribute to any type of retirement plan.
[ top ] - What are the fees and services associated with my account?
Our HSA is structured so you don't have to pay a great deal to benefit from the tax savings the account offers.
Services offered with this account at no charge:
- Up to two (2) Visa Debit Cards
- OnLine Access, Access Only Internet Service
- Monthly and Year-End Tax Statements
Please consult your bank representative for fees associated with the HSA Account.Please note that other banking fees listed in our Miscellaneous Fee Schedule that are provided at account opening may also apply.
[ top ] - Are the fees associated with this account tax deductible?
Account fees are not tax deductible. They will not be counted as a taxable distribution.
[ top ] - Can my employee have the investment option account through Synovus Securities, Inc. without opening a regular HSA with the bank?
No, a regular HSA must be opened with Columbus Bank and Trust Company first. A brokerage account will be established, in addition to the regular HSA, for mutual fund investments; it will not be set up to handle any debits or checks that are written for your qualified medical expenses.
[ top ] - When will the annual fee be charged to the investment account?
$25 will be debited from the account in October of each year. Account holders will receive a reminder from Synovus Securities, Inc. prior to the date the fee is charged.
[ top ] - Will I need to order new checks or get a new debit card when the investment option is opened?
No, the account number will not change; the same debit card and checks will still access the HSA. The account holder will be assigned a brokerage account number but it will only be needed for investment transactions.
[ top ] - Will my employee receive two statements?
No, they will receive a combined statement that contains the activity in the deposit account held by the bank and the brokerage account with Synovus Securities, Inc.
[ top ] - Who will handle any mutual fund investment transactions?
Synovus Securities, Inc. will handle all transactions pertaining to the investment option account. The toll-free number is (877) 367-4HSA option 7.
[ top ] - Where can I get more information about Fidelity Investment® mutual funds offered with the HSA investment option?
A prospectus for each fund and fund fact sheets will be provided in the enrollment package. You can also access that information by visiting the Fidelity Investments® web page at www.fidelityinvestments.com.
[ top ] - How can the investment option be added to the Columbus Bank and Trust Company HSA?
HSA account holders can call our toll-free customer service line at (877) 367-4HSA and choose option 6 to request an enrollment package. You cannot open this account or obtain an enrollment package in our branches at this time.
[ top ] - What is the balance requirement to add the investment option to an HSA?
The minimum balance required is $3,500 or more.
[ top ] - Is there a minimum investment to get started?
Yes, the minimum initial investment for each fund is $2,500 which would come from the existing balance in the HSA. All subsequent investments must be $100 or more. The initial investment is required at account opening.
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