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Health Savings Account (HSA) – is a special tax-sheltered savings account that is similar to a traditional Individual Retirement Account (IRA), but designated for medical expenses. An HSA allows you to pay for current health expenses and save for future qualified medical and retiree health care expenses on a tax-free basis. Contributions, earnings, and distributions all are exempt from federal income and Social Security (FICA) taxes when used to pay for qualified medical expenses.

Banyan Administrators continue to provide us with beneficial information about several different aspects of the Health Care Reform and how it affects us as well as other interesting health care facts. Over the next months and years, employers will be faced with numerous changes, many of which require regulatory clarification. Banyan will continue to keep us up to date and on target with decisions that affect our plans.

The following information is from Banyan Administrators, LLC:

Despite Potential PPACA Problems on the Horizon…HSA Enrollment Continues to Rise

Since health savings accounts (HSAs) were first authorized in January of 2004 as a tax-advantaged portal for medical savings, America’s Health Insurance Plans (AHIP), which is a trade association representing the health insurance industry, has conducted an annual survey of the HSA market. According the 2011 AHIP survey, HSA plan enrollment in the United States has almost doubled over the last three years, going from 6.1 million participants in 2008 to 11.4 million participants in 2011. From 2010 to 2011, the number of Americans covered by HSAs linked to high-deductible plans (HDHPs) increased by 14%.

Other key findings from the AHIP survey are:

• Large-group coverage was the fastest growing market for HSA plans between 2010 and 2011, with a growth of 26%.

• Individual market coverage was the second fastest growing market for HSA plans, with a growth of 15%.

• Over 6.3 million individuals were enrolled in HSA plans in the large-group market.

• Around 2.8 million individuals were enrolled in HSA plans in the small-group market.

• Approximately 2.4 million individuals were enrolled in HSA plans in the individual market.

The Impact Of The Patient Protection and Affordable Care Act On HSAs

As it relates to HSA plans, AHIP has noted that some of the provisions in the Patient Protection and Affordable Care Act (PPACA) could create some potential unintended consequences that might disrupt, if not limit, the availability of HSA plan coverage. Three of the main problems noted by AHIP include:

1. Medical loss ratio regulation.

This requires an insurer to spend 80% or more of a consumer’s premiums on direct, non-administrative patient care and improvements to such care’s quality. AHIP asserts that medical loss ratio regulations will be especially problematic for HSA-eligible HDHPs. Participating in a qualified HDHP is a requirement to participate in an HSA. HDHPs provide individuals with a low-premium, high-deductible alternative to traditional health plans. These plans might have lower benefit costs, but they certainly aren’t always cheaper to administer from a per-enrollee standpoint. As a result, they may naturally have lower medical loss ratios. (continue reading…)

The following information is from The ACS|BNY Mellon HSA Solution:

On May 1, 2011, The ACS|BNY Mellon HSA Solution “The HSA Solution” will offer a way for account holders to create and send one-time or recurring payments from their HSA ─ on demand ─ in five easy steps. 

Below we have put together a few of the Frequently Asked Questions (FAQs) regarding our Direct Pay HSA service:

How will account holders access the new Direct Pay HSA functionality?  

Account holders will be able to click on a “Direct Pay HSA” tab along the top navigation bar from their ACS|BNY Mellon HSA Solution Account Summary page; then click on “Access Direct Pay HSA”.

What are the necessary steps to create a payment request?

There are five basic steps to creating a payment online using Direct Pay HSA:

• Step #1: Click on the “Direct Pay HSA” tab from the Account Summary page
• Step #2: Click on “Access Direct Pay HSA”
• Step #3: Select “New Transaction” on the Direct Pay HSA home page
• Step #4: Click on “Send a Payment” and complete the payment information
• Step #5: Review and “Submit” the payment request for processing

What information will account holders need to know in order to create a payment using Direct Pay HSA?

• Payment amount
• Issue date
• Payee’s name
• Payee’s address including street address, city, state and ZIP code

Is there a charge to the account holder for creating a payment online using Direct Pay HSA?

Account holders do not incur transaction or postage fees with any payments they create using Direct Pay HSA.

What if I have additional questions?

The following training materials will be located on the “Direct Pay HSA” tab:

• Direct Pay HSA Frequently Asked Questions (FAQs)
• Direct Pay HSA flyer
• Direct Pay HSA online educational video

We thank you for your business and the opportunity to serve you!

The ACS|BNY Mellon HSA Solution

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The following information is from The ACS|BNY Mellon HSA Solution. We hope you find it beneficial.

Combined tax forms 1099-SA and 5498-SA were mailed to The ACS|BNY Mellon HSA Solution account holders on January 29, 2011. The information on these forms will be submitted to the IRS. Account holders receive these combined tax forms for their records only. Account holders use the information on these forms to complete IRS Form 8889.  The 1099-SA and 5498-SA forms do not need to be attached to the account holder’s tax return.

Tax form 5498-SA: This form reports contributions made to an account holder’s Health Savings Account (HSA) by the account holder or by an eligible individual on the account holder’s behalf, as well as contributions made by their employer, if applicable. The IRS requires The ACS|BNY Mellon HSA Solution to issue form 5498-SA to every account holder who had any contribution activity in their HSA during the previous tax year (2010). Account holders can access this form by logging into their HSA account; click on the “Account Holders Services” tab then “View Tax Forms”.

Note: If an account holder makes a prior year (2010) contribution by April 18, 2011 they will receive an amended 5498-SA in May.

Tax form 1099-SA: This form reports distributions made from an account holder’s HSA. The IRS requires The ACS|BNY Mellon HSA Solution to issue Form 1099-SA if account holders took a distribution from their HSA during the previous tax year (2010). Account holders can also access this form by logging into their HSA account; click on “Account Holders Services” then “View Tax Forms”.

IRS form 8889: Account holders must obtain, complete and file IRS Form 8889 as part of the federal tax filing by April 18, 2011. It is downloadable from www.irs.gov or account holders can log into their HSA account and click on the “Account Holder Services” tab; then click “Useful Links”; then “Form 8889″. If both spouses have an HSA, then two forms are required (one for each account).

Additional HSA tax resources are available!

• Two online tax educational programs are now available. You may either click on the “watch video” links below or access the tax programs on our Web site at hsamember.com; click on the “Tools” section in the middle of the home page or by clicking on the “Resources” tab in the upper right corner of the home page.
   
  It’s Tax Time:
  Need tax filing information for HSAs?

Tax Guidelines for HSAs  Watch video
Information on HSA tax forms  Watch video

• Employers can log on to the hsamember.com Web site using their employer ID and view additional tax information in a presentation specifically designed for employers. To access this presentation, click on the “Reports” tab; then click on the PDF labeled “Tax Information for Employers”.

Do you have additional HSA tax questions?

For additional HSA tax questions, call the Employer Support Team at 866-712-4551, Monday through Friday, 8:00 a.m. to 8:00 p.m., Eastern time.
  

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Following is important information from ACS |BNY Mellon HSA Solution:

Protect our environment, go paperless. At ACS|BNY Mellon HSA Solution, we would like to do our part to protect the environment by reducing the amount of printed material we generate.

 If you are not already viewing your periodic HSA statement online; please “turn paper off” by following the four steps outlined below:

 Logon to your HSA Web site

• Select “Update Account Profile” on the left side of the screen
• Click on “Edit” under “Your Statement Delivery Option”
• Click on “Agree” to acknowledge and accept the terms

Beginning in September, any account holder receiving a paper HSA statement will be charged $0.75 each time one is generated.

A customer service enhancement for our account holders. Effective July 19, 2010, you will be able to log on to your HSA Web site or call the HSA Solution Contact Center and update your personal data (i.e., residential address, mailing address, e-mail address, and phone number). We will no longer accept personal data changes from another source.  We have changed the process to allow for direct owner­ship of personal information by the account owner.

HSA limits stay the same for 2011. For calendar year 2011, the maximum HSA contribution that can be made is $3,050 for employee-only coverage ($4,050 if you are age 55 or older and eligible to make catch-up contributions) and $6,150 for family coverage ($7,150 if you are age 55 or older and eligible to make catch-up contributions). The minimum deductible will stay at $1,200 for single coverage and $2,400 for family coverage. The maximum out-of-pocket employee expense, including deductibles, will stay at $5,950 for single coverage and $11,900 for family coverage. (IRS, 5/24/10)

Health care reform and HSAs. Outlined below are the health care reform changes with the most immediate impact on Health Savings Accounts:

• Amounts paid for over-the-counter drugs will no longer be qualified medical expenses eligible for reimbursement from an HAS unless the over-the-counter drug was prescribed by a doctor.  The prescription requirement only applies to over-the-counter drugs.     It does not apply to expenses for other over-the-counter items such as insulin and diabetic supplies, bandages, band-aids or contact lens supplies.  These items continue to be reimbursable from an HSA without a doctor’s prescription.  (Effective 1/1/2011)
• The penalty for reimbursements of nonqualified medical expenses from your HSA will increase from 10 to 20 percent. (Effective 1/1/2011)

NOTE: Do you have a dependent that is between the ages of 23 and 26? Parents who cover adult children via their employer’s high-deductible health plan option may be unable to use HSA funds to reimburse themselves on a tax-free basis for medical expenses incurred by those adult children.

The IRS announced on May 24^th that the 2011 limits for health savings accounts (HSAs) and for high-deductible health plans (HDHPs) will remain unchanged from 2010. Each year the IRS provides new inflation-adjusted limits for qualifying HSA contributions, deductibles, and out-of-pocket maximums. The IRS has determined that the change in inflation was not enough to alter the 2011 HSA contributions limits.

The maximum HSA contribution that can be made next year is $3,050 for single or self-only coverage and $6,150 for family coverage. In addition, the minimum deductible will stay at $1,200 for single coverage and $2,400 for family coverage. The maximum out-of-pocket employee expense, including deductibles, will stay at $5,950 for single coverage and $11,900 for family coverage. The catch-up contribution for those age 55 and older will also remain the same at $1,000.

According to a survey performed by America’s Health Insurance Plans, a Washington-based trade group, as of January 1, about 10 million people were enrolled in high-deductible health insurance plans to which HSAs must be linked which is a 25 percent increase over the last year. This shows just how popular these accounts are becoming.

For further information click here to read the revised (June 7, 2010) Internal Revenue Bulletin: 2010-23.

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The following information is from IRS.gov and is very beneficial to those who have an HSA account.

Death of HSA Holder

You should choose a beneficiary when you set up your HSA. What happens to that HSA when you die depends on whom you designate as the beneficiary.

Spouse is the designated beneficiary.   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse’s HSA after your death.

Spouse is not the designated beneficiary.   If your spouse is not the designated beneficiary of your HSA:

· The account stops being an HSA, and

· The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die.

If your estate is the beneficiary, the value is included on your final income tax return.

TIP: The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death.

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The following information is from IRS.gov and is very beneficial to those who have an HSA account.

You may enjoy several benefits from having an HSA. Here are some of the benefits:

• You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.
• Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
• The contributions remain in your account from year to year until you use them.
• The interest or other earnings on the assets in the account are tax free.
• Distributions may be tax free if you pay qualified medical expenses. See qualified medical expenses below.
• An HSA is “portable” so it stays with you if you change employers or leave the work force.

Qualified medical expenses.  Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. However, even though non-prescription medicines (other than insulin) do not qualify for the medical and dental expenses deduction, they do qualify as expenses for HSA purposes. (continue reading…)