HEALTH PLAN

CHECKUP

Health Saving Accounts

(HSA’s)

Frequently Asked

Questions

· WHAT ARE THEY? HSA’s are 401(K)-type investment accounts, when used to pay medical related expenses, they are TAX-FREE.

· WHO IS ELIGIBLE? Anyone who is covered by an employee health insurance plan that has at least an annual self-insured/deductible of at least $1,000 for an individual and $2,000 for a family, can participate.

· HOW MUCH CAN THE INSURED SET ASIDE TAX FREE? For 2006, individuals can place into an HSA investment account an amount equal to their self-insured/deductible, or an amount up to $2,600, whichever is less. For families, the maximum contribution is the lesser of the deductible or up to $5,150. There is no “cumulative” yearly cap on contributions. The HSA investment account can be carried forward and used anytime in the future.

· CAN AN EMPLOYER CONTRIBUTE TO AN INSURED’S HEALTH SAVINGS ACCOUNT AS A BUSINESS EXPENSE AND BECOME TAX FREE INCOME TO THE EMPLOYEE OR THE BUSINESS OWNER? Yes, but it is not required. The annual contribution limits still apply. However, because HSA’S are exempt from ERISA the employer can contribute for one employee, even the owners own account, and is not required to make a contribution to every employees account.

· WHAT HAPPENS TO ANY UNSPENT MONEY AT THE END OF THE YEAR? Funds can be rolled over year-to-year and from job-to-job over the years, accruing interest along the way tax-free.

· CAN I USE MY HSA TO PAY EXPENSES NOT RELATED TO HEALTH CARE? Yes, but if the insured does so before age 65, the insured must pay income tax and a penalty. Over 65 no penalty but must pay income tax.

· WHAT HAPPENS TO THE MONEY IN THE HSA IF THE INSURED DIES? The fund amount will go to your named beneficiary. If the beneficiary is the spouse, the money is tax-free.

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