Health Savings Account
Beginning in Plan Year 2018, primary participants on the CDHP are eligible to receive an additional $200 HSA/HRA contribution once four wellness requirements are complete. For information on this benefit, click here.
The HealthCare FSA is a tax-free account that allows a person to pay for essential health care expenses that are not covered or are partially covered by your medical, pharmacy, dental and vision plans. For more information regarding the FSA contact HealthSCOPE Benefits at 888-763-8232 then press 2 then press “#” then press 3.
*The FSA is a use it or lose it and the HSA/HRA rolls over from year to year, month to month. The FSA does allow up to $500 to roll over from year to year.
*An HRA is a Health Reimbursement Arrangement with only PEBP contributions. You are not eligible to make your own contributions to this account. If you leave State Services this money will go back to the State. Everyone on the CDHP/PPO plan is eligible for an HRA.
*An HSA is a Health Savings Account that also receives tax-free contributions from PEBP but also allows the participant to make voluntarily contribute to their HSA through pre-tax payroll deductions. If you leave State Service the money will stay with you until it is spent by you. Not everyone is eligible for an HSA.
Verification of expenses is not required for HSAs. However, total withdrawals from your HSA are reported to the IRS on Form 1099-SA. You are responsible for reporting qualified and non-qualified withdrawals when completing your taxes. You are also responsible for saving all receipts as verification of expenses in the case of an IRS audit.
If I am enrolled in single coverage under the CDHP, can HSA funds be used for my spouse or eligible dependents that are not covered under my health plans?
An HSA allows you to withdraw funds for any reason. However, you would need to pay ordinary tax and an additional penalty of 20% on any funds that are withdrawn for an ineligible expense.
You are responsible for determining if an expense is an eligible medical expense and maintaining receipts for tax reporting and potential IRS audit purposes. At age 65, funds can be withdrawn for any reason and only ordinary tax applies.
What happens to my HSA if I am no longer an eligible individual? For example, if I change coverage from the CDHP to an HMO or if I enroll in Medicare?
In general, you must be a United States citizen, green card holder, or a United States resident to participate. An HSA cannot be opened without a verifiable United States residential address and a valid United States Social Security Number.
My spouse is a state employee with an HRA. I am a new employee and plan to enroll in the CDHP with an HSA, am I eligible to contribute to an HSA?
HSA contribution limits are set by the IRS and may change from year to year. The combined contribution limits from all sources (PEBP, employee, family, etc.) are listed in the table below.
|Calendar Year 2017||Calendar Year 2017 Catch-Up (age 55+)||Calendar Year 2016||Calendar Year 2016 Catch-Up (age 55+)|
Under the Testing Period, if you use the Last Month Rule, you must also remain an eligible individual (retain your same coverage under the CDHP or other high-deductible health plan) for the following 12 months. If you fail to remain an eligible individual (i.e., if you change coverage from the CDHP to an HMO or enroll in Medicare, etc.) any “extra” contributions you made as a result of the Last-Month Rule must be included in your gross income. Also, a 20% additional tax applies to this amount. Your excess contributions are determined by the contribution limit divided by 12 months, compared to your time eligible.
The Last-Month Rule states that if you are covered by an HSA-eligible health plan on the first day of the last month of a given year, you are considered an eligible individual for the entire year. In turn, you can then contribute to the HSA for that full year.
Example: If you enrolled in the CDHP on July 1, 2015 and retained coverage under that plan through December 1, 2015, you are covered per the Last-Month Rule. This means you are considered an eligible employee for the entire year in 2015. This allows you to contribute up to the 2015 contribution limit. However, you must also take into consideration the Testing Period.
To be eligible to establish and contribute to an HSA on a pre-tax basis, you must meet the following criteria:
– You are covered by an IRS qualified high deductible health plan – such as PEBP’s CDHP medical plan.
– You are not covered by a non-IRS qualified high-deductible health plan – such as a spouse’s PPO or HMO medical plan.
– You are not enrolled in Medicare.
– You are not enrolled in TRICARE or TRICARE for life.
– You have not received care from a Veterans Administration (VA) medical facility within the past three months.
– You or your spouse cannot be enrolled in a Medical Flexible Spending Account or HRA which may be used to pay your out-of-pocket health care expenses.
– You are not retired.
A Health Savings Account (HSA) is a tax advantaged savings account for qualifying medical expenses. The funds contributed to an account are not subject to federal income tax at the time of deposit. To be an eligible individual and qualify for an HSA per the IRS guidelines:
- You must be an active employee enrolled in the CDHP
- You cannot have secondary coverage unless your secondary coverage is also a high deductible health plan
- You cannot be claimed on another person’s tax return (excludes joint returns)
- Your spouse (if applicable) cannot have a Medical FSA or HRA that can be used to pay for your out-of-pocket medical expenses
- You are not enrolled in Medicare or COBRA
- If you do not qualify for an HSA at initial enrollment or on the first day of the plan year (July 1) you cannot change from the HRA to an HSA mid-year
- You are not enrolled in Tricare or Tricare for Life
- You are not retired