FirstCare Health Savings Account
A Health Savings Account (HSA) is a new way to create a fund to pay health care expenses that can provide substantial savings on your federal income taxes. It is flexible, affordable, easy to use, and leaves you more in control of your money.
Participating in a HSA
To participate in a HSA, you must be enrolled in a High-Deductible Health plan (HDHP). An HDHP is a comprehensive health plan with an annual deductible of at least $1,050 for an individual, and $2,100 for two or more family members. Maximum annual out-of-pocket for in-network expenses cannot exceed $5,250 for an individual, or $10,500 for two or more family members.
To participate in a HSA, you cannot be covered by a plan that does not meet the deductible or out-of-pocket maximum criteria of an HDHP, or which provides coverage for a benefit that is covered by the HDHP. Additionally, there are two more requirements that you must meet in order to participate in a HSA:
You cannot be enrolled for Medicare
You cannot be a dependant on another person's tax return
Contributing to Your HSA
When you participate in a HSA, you set aside money to pay for eligible out-of-pocket expenses. Money can be contributed to your HSA by you and/or your employer, up to the amount of the deductible to a maximum of $2,700 single/$5,450 family for 2006. Contribution maximums are based on monthly limits.
For example, if you enroll in an HDHP on September 1 and your deductible is $1,200, you can contribute only $400 (4/12 of $1,200). If you are age 55 or older, you can make an additional contribution amount of $700 in 2006. The additional amount increases by $100 each year until it reaches $1,000 in 2009. Like the annual contribution limit, this additional contribution limit is calculated monthly. The HSA cannot receive contributions after the individual has enrolled in Medicare. All contributions made, by you or your employer, are tax deferred (withdrawn before taxes) up to the limits described above. You will never lose the money you put into a HSA. Your employer contributions are never forfeited-they are yours permanently. And unlike Flexible Spending Accounts, HSAs do not have a "use it or lose it" requirement; it will rollover from year to year, and may also earn tax-free interest.
Investing Your Money
Federal law requires that contributions be deposited with a qualified trustee or custodian. While you are free to choose your own qualified trustee or custodian, FirstCare has partnered with Wells Fargo who is a qualified trustee and can assist in setting up your HSA.
As a qualified trustee, Wells Fargo holds your HSA contributions exclusively for your benefit, ready for you to use whenever you have qualified medical expenses to pay. In the meantime, you have the opportunity to make your HSA grow by investing it in your choice of six Wells Fargo investment funds. The funds range from a conservative money market fund to a more aggressive stock fund. A brief overview of each of the available funds is provided in your enrollment materials. Please review the materials, and choose funds that best match your needs.
Using Your HSA
Money in your HSA can be used to pay for a variety of health care-related expenses, ranging from routine physicals to prescription drugs. To pay for expenses, you simply present your HSA Visa® debit card to your provider, and money will be deducted directly from your HSA. You may also submit a claim via mail or fax, and receive reimbursement within about four business days.
With Wells Fargo, keeping track of your account balance is easy. You can review your account information 24/7 by logging onto https://www.wellsfargo.com/retirementplan/ or by calling the automated toll-free phone service at 866-890-8319. HSA customer service representatives are available between the hours of 7am and 8pm (CST).
As noted above, money in your HSA account can be contributed with pre-tax income and investment income inside the HSA is tax-free, provided that it is used to pay for qualified medical expenses. If you use the money for any other reason, you will be required to pay income tax and a 10% tax penalty on that amount. (The penalty is waived if you are disabled or age 65 or older.) It is your responsibility to keep the necessary financial records indicating that the funds were used only for qualified medical expenses.
Taking the Next Step
To open your HSA Wells Fargo account, simply complete an enrollment form and return it to Wells Fargo. You will receive two HSA Visa debit cards within 30 days. You may call 866-890-8319 to request additional cards. A $10 fee will be assessed for each additional card.
Frequently Asked Questions
Q: Are HSAs and HDHPs the same?
A: No. Health insurance companies provide HDHPs. HSAs are offered through financial institutions. Individuals who enroll in an HSA-eligible HDHP may be eligible to open an HSA. You should consult with a financial advisor to determine if you meet HSA-eligibility criteria and whether or not an HSA and HDHP are a good fit for your needs.
Q: What types of insurance and other coverage can I have and still be eligible to take advantage of a HSA?
A: Permitted insurance includes worker's compensation, property insurance, insurance for a specific disease (such as cancer coverage), and insurance that pays a fixed amount per day of hospitalization. Life insurance and coverage for dental, vision, long-term care, accidents, and disability are also permitted.
Q: Can I use the money in my HSA to pay medical insurance premiums?
A: Generally, you cannot use your HSA to pay premiums for health insurance coverage. Exceptions include COBRA premiums, long-term care premiums or premiums payments that allow you to retain health coverage while you are receiving unemployment compensation.
Q: What is a qualified expense?
A: Qualified medical expenses are expenses for services that are typically covered by a health care plan, such as office visits, emergency room services, and hospitalization. Qualified medical expenses also include prescription drugs and many over-the-counter drugs, vision expenses (including eyeglasses and contact lenses), medical plan deductibles and co-pays, and non-cosmetic dental expenses. The covered items are defined by IRS code 213(d) and are listed in IRS publication 502.
Q: What if I use my HSA to pay for something other than a qualified medical expense?
A: You will need to include that amount in your gross income when you file your state and federal income taxes. It will be treated as regular income and if you are less than age 65, it will be subject to a 10% penalty.
Q: Can I change investment funds, or will I need to keep my money in the same fund until it is withdrawn?
A: You may change your Wells Fargo investment options at any time. To change your investment fund election at any time, simply go to the HSA section at www.wellsfargo.com/retirementplan/ or call 866-890-8319. Changes requested before 3pm (CST) typically are made on the same business day. Changes requested after 3pm typically are made on the following business day. Changes are made only on days when the financial markets are open. There is no guarantee that a change will be made at a specific time.