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Health Savings Account (HSA)

Overview

The HSA lets you control how you save, invest, and use your healthcare dollars

Because you fund the HSA with pre-tax money, you're using tax-free funds for healthcare expenses you'd normally pay for out-of-pocket. Your HSA contributions don't count toward your taxable income for federal taxes. They're not taxable in most states, as well.

The money always belongs to you, even if you leave the university. Plus, unlike a Flexible Spending Account, unused funds carry over from year to year so you never have to worry about losing your money. With an HSA, your account can grow tax-free in an interest-bearing savings account. You may be able to invest HSA funds in a money market account and wide variety of mutual funds, as well. Of course, your funds are always available if you need them for qualified healthcare expenses.

You can use HSA funds for IRS-approved items. Examples include:

  • Doctor's office visits
  • Dental services
  • Eye exams, eyeglasses, contact lenses and solution, and laser surgery
  • Hearing aids
  • Orthodontia, dental cleanings, and fillings
  • Prescription drugs and some over-the-counter (OTC) medications
  • Physical therapy, speech therapy, and chiropractic expenses

For a sample list of IRS-approved expenses, refer to IRS Publications 969 and 502. Keep in mind the IRS may allow or disallow any expense because of circumstances involved.

You can spend only the money that's actually in your HSA. If your healthcare expense is more than your HSA balance, you need to pay the remaining cost another way, such as cash or personal check. You can request reimbursement after you have accumulated more money.

Every time you use your HSA, save your receipt in case the IRS asks you to prove that your claim was for a qualified expense. If you use HSA funds for a nonqualified expense, you'll pay tax and penalty on the ineligible amount.


Qualifying for a Health Savings Account

In order to qualify for HSA participation:

  • You must be enrolled in the HDHP Plan,
  • You cannot be claimed as a dependent on someone else’s tax return,
  • You cannot be covered by a spouse’s Flexible Spending Account,
  • You cannot be covered by any other medical plan (unless it is an HSA-qualified plan), and
  • You cannot be entitled to or enrolled in Medicare Part A and/or B

You can use the funds in your HSA to pay for the medical expenses of dependents covered by another health plan, even if it is not an HSA-qualified plan, as long as they are eligible dependents as defined by the IRS.

Contributions to your Health Savings Account

You have TWO opportunities for Health Savings Account contributions.

Once your Health Savings Account (HSA) is established, the funds in it can be used to meet your deductible, pay current eligible medical expenses, or be saved for future medical expenses, even after retirement. Contributions to your Health Savings Account come from the following sources:

  • UC – contributions are based on your base pay salary level as of January each year – see below, and
  • You – contributed on a pre-tax basis through automatic payroll deduction.

HSA contributions are owned by you. This means that you will be able to continue to use the funds to pay for eligible expenses even if you are no longer working for UC or covered under a UC medical plan.

UC’s Contributions to a Health Savings Account - Non-AAUP                                             

If you are enrolled in the HDHP/HSA on January 1, 2015, UC will make a contribution to your Health Savings Account as shown below. UC will put money in your Health Savings Account beginning in January on a monthly basis. Monthly contributions will be sent to the bank during the first or second day of the month for the prior month's contribution.

  ANNUAL BASE PAY AS OF JANUARY 1, 2015 (non-AAUP)
Coverage Level
$39,999 or less
$40,000-$79,999
$80,000-$99,999
$100,000 +
UC annual HSA funding is...
UC annual HSA funding is...
UC annual HSA funding is...
UC annual HSA funding is...
Employee Only
$800 $550 $450 $350
Employee + One Dependent
$1600 $1100 $900 $700
Family
$1600 $1100 $900 $700

UC’s Contributions to a Health Savings Account - AAUP 

The HDHP Plan is automatically coupled with a Health Savings Account (HSA) funded by UC. UC will fund the Health Savings Account for the FIRST YEAR of HDHP enrollment only. Thus, if you enroll in the PPO for 2015 but enroll in the HDHP in 2016, the UC HSA funding will occur in 2016. The UC funding is a one-time only opportunity and will occur in the first year of HDHP enrollment – either 2015 or 2016.

For the first year of HDHP enrollment only (either 2015 or 2016), 50% of the amount shown below will be funded in early January. The remaining funding will be made on a monthly basis, beginning in July. The monthly funding will be made available in the first week of the month following pay day; as an example, July's funding will be available in the first week of August 2015.

  ANNUAL BASE PAY AS OF JANUARY 1, 2015 - Applicable to AAUP Only
 
Coverage Level
$59,999 or less
    
$60,000-$79,999
$80,000-$99,999
$100,000+
UC annual HSA funding is...
UC annual HSA funding is...
UC annual HSA funding is...
UC annual HSA funding is...
Employee Only $800 $550 $450 $350
Employee + One Dependent $1600 $1100 $900 $700
Family $1600 $1100 $900 $700

For employees who enter the plan any time after January 1, 2015 UC’s contribution will be prorated based on the plan effective date. Pro-rated contributions will be made on a monthly basis.

Your HSA Contributions

In addition to the contributions from UC, you can also contribute to your HSA. You can make contributions in one of three ways: 

  1. Pre-tax payroll deduction;
  2. After-tax electronic funds transfer; or
  3. Manually mailed after-tax payment.

The most convenient and advantageous way to contribute is through pre-tax payroll deduction. Monthly payroll contributions are deposited during the first week of the month following the month in which they are deducted (e.g., January contributions are deposited during the first week of February).

You can change your Health Savings Account contribution at any time. You can choose any amount to contribute to the HSA as long as your total contributions for the calendar year do not exceed the IRS maximum. You are responsible for monitoring your total IRS contributions. 

You are able to ‘pre fund’ your account – for example, if you anticipate a large expense in January, you can choose to contribute a larger amount in January to cover this expense. Then in February or March, you can reduce this amount by making a new election.    

When combined with UC’s contributions, all 2015 HSA contributions cannot exceed $3,350 for individual (employee only) coverage or $6,650 if you cover dependents, per IRS guidelines.  

If you are age 55 or older, you may contribute an additional $1,000 to your HSA, known as a ‘catch up contribution’ for a maximum amount of $4,350 for employee only coverage and $7,650 for family coverage, per IRS guidelines. Catch up contributions are allowed until you begin participating in Medicare. If your total HSA contributions exceed annual maximums, you will be taxed on the excess.

You can make changes to your method of contribution as well as your contribution amount at any time during the year; payroll deduction changes are processed monthly.

2015 Health Savings Account

HealthEquity will be the univesity’s health savings account vendor for 2015. You can learn more about Health Equity at this website: http://healthequity.com/ed/hsalearn

In compliance with the US Patriot Act, HealthEquity must verify the identity of all individuals seeking to open an HSA.  This process is handled once enrollment information is sent to HealthEquity.  By electing to enroll in UC’s High Deductible Health Plan, you are authorizing HealthEquity to open a health savings account. 

If you elect to enroll in the HDHP/Health Savings Account and are not eligible, you may be subject to income tax and IRS penalties for contributing to an HSA when not eligible.

For additional detail regarding HSA eligibility requirements, see IRS Publication 969.

IRS Restrictions

IRS Restrictions on HSAs if you have a 2014 Health Care Flexible Spending Account Balance

In accordance with IRS regulations, if you enroll in the HDHP/HSA Plan for 2015 and have a balance in a 2014 Health Care Flexible Spending Account (FSA) as of December 31, 2014, you are not eligible to contribute funds to an HSA or receive any funds in your HSA until April 1, 2015.  This includes UC’s contribution.  The April 1, 2015 date applies even if your Healthcare FSA account balance reaches $0 at an earlier point in 2015.

Additionally, if you have a balance in your Health Care FSA as of December 31, any medical expenses incurred prior to April 1, 2015 are not eligible for reimbursement with HSA funds. Expenses must be incurred after April 1, 2014 in order to use HSA funds.

You will need to consider whether or not you will have a Health Care FSA balance on December 31 when making your decisions about enrolling in the HDHP/HSA Plan including making any contributions to the HSA through payroll deduction.

If you have a $0 balance in your 2014 Health Care FSA as of December 31, 2014, you are HSA eligible on January 1, 2015 and you (and UC) can make contributions to the account and eligible medical expenses can be paid with your HSA funds.

The above does not apply to the Dependent Care Flexible Spending Account.