Nyhart - HSA Administration

Flexible Spending Links

Health Savings Accounts
A Defined Contribution Approach to Health Benefits

Health Savings Accounts ("HSA's") became permissible in January 2004. They have received a lot of attention because, unlike FSA's, contributions can be carried over from year to year. Both the employee and employer can contribute to the HSA on a tax favored basis. However, a number of conditions apply to HSA's (among other things, they must be linked to a high deductible health plan), which means plan design and administration of HSA's can be complex.

Unlike Flexible Spending Accounts (click for comparison), HSAs allow contributions to carry forward from year to year. Unlike Health Reimbursement Accounts, both the employer and employee can contribute.

Advantages of Health Savings Accounts

Affordability – You should be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible.

Flexibility – You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs, such as:

Health insurance or medical expenses if unemployed
Medical expenses after retirement (before Medicare)
Out-of-pocket expenses when covered by Medicare
Long-term care expenses and insurance

Ownership – Funds remain in the account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs.

Portability – Accounts are completely portable, meaning you can keep your HSA even if you:

Change jobs
Change your medical coverage
Become unemployed
Move to another state
Change your marital status

Security – Your high deductible insurance and HSA protect you against high or unexpected medical bills.

Control - You make all of the decisions pertaining to:

How much money to put into the account
Whether to save the account for future expenses or pay current medical expenses
Which medical expenses to pay from the account
Which company will hold the account
Whether to invest any of the money in the account
Which investments to make

Savings – You can save the money in your account for future medical expenses and grow your account through investment earnings.

Tax Savings – An HSA provides you triple tax savings:

Tax deductions when you contribute to your account
Tax-free earnings through investment
Tax-free withdrawals for qualified medical expenses

Consultation

Develop plan design and benefit provisions
Prepare draft of Plan Documents and SPD for counsel review
Design of employee communication materials
Ongoing consultation regarding plan design and language

Administration

Process participant enrollment and election information
Preparation of initial report of salary deferrals by benefit type
Process reimbursement requests
Provide participants with explanation of claims
Remit monthly premiums to insurance carriers
Quarterly spending and annual account statements
Maintain accounting of benefits paid to each participant
Toll-free number to our customer service personnel
Quarterly employer reports
Form 5500 preparation
Centralized billing services
Compliance testing and consulting

A Member of Alliance Benefit Group