IU Human Resources Health Savings Account (HSA) INDIANA UNIVERSITY
Reality Check A healthy couple retiring at age 65 can expect to pay $404,253 in premiums, dental, vision, hearing and all other out of pocket health-related expenses during retirement* *Source: HealthView Services – 2017 Retirement Health Care Costs Data Report
Reality Check Using Social Security benefits to cover healthcare costs: • A 66-year-old couple will need 59% of benefits • A 55-year-old couple will need 92% of benefits • A 45-year-old couple will need 122% of benefits Healthcare costs will be one of the most significant expenses in retirement. *Source: HealthView Services – 2017 Retirement Health Care Costs Data Report
Health Savings Account • Savings Account • For Healthcare Expenses • Paired with enrollment in an HDHP • Offers Triple Tax Savings • Help prepare for Retirement
HSA Contributions • University makes a contribution each year Varies by medical plan enrollment Varies by coverage level • You make contributions each year Minimum of $300 per year Annual maximums are set by the IRS Made through payroll deductions Can change election any time
Annual HSA Contribution Maximums Maximums For 2018 (changes each year) Employee Only $3,450 Family (Employee + Child(ren), Employee + Spouse, or Family) $6,850 Age 55+ “Catch-Up” $1,000 • Spouse may contribute to their own HSA up to another $1,000 (if also enrolled in an HDHP) • Maximums include contributions from all sources (IU & employee)
Tax Advantage #1 No Taxes on Contributions • No Federal Income Taxes • No State Income Taxes • No Local Income Taxes 1 • No Social Security Taxes (OASDI) • No Medicare Taxes (FICA)
Tax Advantage #2 No Taxes on Interest or Earnings • Cash Account earns savings interest • Open an Investment Account $1,000 initial account transfer Set up one time or recurring transfers 2 Manage investments online (FREE) Speak with a Nyhart registered investment representative (FREE)
Tax Advantage #3 No Taxes on Withdrawals when Used for IRS Approved Health Expenses • Medical • Prescriptions • Dental • Vision 3 • Hearing Aids • Acupuncture • COBRA premiums • Medicare premiums List of HSA eligible expenses at hr.iu.edu/benefits/2018/hsa.html
More Advantages • Use for the health expenses of any tax dependent (spouse, child(ren), dependent relative, etc.) • Flexibility of access Use debit/Visa card at healthcare providers (physician offices, pharmacy, dental, vision providers) Use Online tools to pay bills directly Use Online tools to transfer money Download the mobile app
More Advantages • Unused funds are always yours to keep Even when you retire Even when you leave IU employment Even when you are no longer eligible to make contributions Even when you pass away, your funds can pass to your beneficiaries • Review & update every year • Can use funds to reimburse yourself for expenses incurred all the way back to the date the account was opened
IRS Rules
HSA Restrictions • Must meet eligibility requirements to be eligible to make tax-free contributions • Until Age 65, must use ONLY for IRS qualified healthcare expenses, otherwise IRS imposes: ‒ 20% penalty ‒ Income taxes • Age 65 or older, can use account for non-healthcare expenses: – NO penalty – Income taxes
Eligibility Rules You must have a valid Social Security Number . You cannot be claimed as a dependent on someone else’s tax return. You must be covered under an HDHP . You must have NO other medical coverage . • Coverage by a federal government program, e.g., Medicare A & B or D, Tricare, or VA medical • Coverage by a spouse’s medical plan unless it is also an HDHP • Coverage by a spouse’s: Flexible spending account (FSA) o Health Reimbursement Arrangement (HRA) o IU’s TSB Healthcare Reimbursement Account (TSB) o
HSA Reporting Requirements What to Retain: Receipts are not Copy of Receipt sent to the IRS. Doctor’s Prescription or Note Keep receipts and records for use if audited by the IRS • Show expense is primarily for medical care • Recommended for treatment of a specific medical condition Tax Reporting: Form 8889 (annually with income taxes) • Report contributions to your HSA • Report distributions from your HSA • Figure any taxes or penalties for ineligible contributions and/or distributions
Retirement Considerations
How Medicare Affects Your HSA • Medicare enrollment (A, B or D) will make you ineligible to contribute tax-free dollars to your HSA. • If actively employed and covered by a group health plan at age 65: • Can postpone enrollment in Medicare until retirement • Not able to postpone if drawing from Social Security income benefits (yours or spouse’s)
When You Enroll in Medicare • Enroll during initial eligibility (7 month period around 65 th birthday) : o If your birthday falls mid-year : HSA Contribution maximum will be prorated based on number of months you were on an HDHP up to your Medicare effective date o If your birthday falls after December 1 st : Can contribute full annual contribution maximum • Enrollment postponed until after retirement: o Medicare backdates the enrollment date in Medicare Part A either 6 months or back to 65th birthday (which ever is closest) o HSA Contribution maximum will be prorated based on number of months you were on an HDHP up to your Medicare effective date
If You are Ineligible to Make Tax-Free Contributions You can enroll in HDHP plan and waive the HSA • No HSA account will be opened; No IU contribution • No taxes or penalties to worry about • Can still enroll in the TSB Healthcare Reimbursement Account If you are ineligible and still enroll in the HSA • You will be required to contribute the $300 minimum to receive the IU Contribution to your account • You are responsible for: Filing an “Excess Contribution” form with Nyhart o Reporting all contributions (University and Employee contributions) as o taxable income on your annual tax return Paying any taxes or penalties assessed by the IRS. o • Recommend consulting a tax advisor
Resources
Nyhart • View account activity • Expense Tracker function • Transfer funds online to/from a personal bank account • Pay your healthcare expenses directly from account • Find common forms • Searchable IRS Qualified iu.nyhart.com Expense List
Castlight Health • Search for a primary care physician • Learn more about prescription drug options • Know where you stand in your deductible • Look up prior medical and Rx claims • Estimate personalized costs for medical services • Compare in-network doctors, facilities, and medical services • Review step-by-step explanations of past medical spending us.castlight.com • Receive helpful tips
IRS Website • Publications 969 – Health Savings Accounts and Other Tax- Favored Health Plans 502 – Medical and Dental Expenses • Tax Forms Form 8889 www.irs.gov Instructions for Form 8889
Questions
IU Human Resources The IU Human Resources Customer Care Team is here to assist you in all matters related to your employment at Indiana University. Starting from when you begin your career, continuing through your service, and providing a seamless transition as you complete your employment journey – we are here for you. TEL : 812-856-1234 FAX : 812-855-3409 askHR@iu.edu
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