Choosing the Right HSA

Employer’s
Guide to
Choosing the
Right HSA

Choosing the Right HSA

Overview

How HSAs work

Benefits of HSAs for your company and your employees

How to evaluate HSA providers

How to implement your program

© 2010 Alliant Credit Union. All rights reserved. 2


The emergence of HSAs
Healthcare Savings Accounts (HSAs) were introduced in 2003 as a way to control
rising health care costs

Way to save premium costs and maintain a competitive health care benefit package

Companies can save 20% to 40% in their premiums. The average savings is around 30%1

Attract and retain valued employees

Today 45% of U.S. companies offer an HSA-eligible High Deductible Health Plan (HDHP)2

Sources: 1. Joe Williams, business development manager for Bay Benefits Insurance Services, 2009. 2. C. William Sharon, AON Consulting/ISCEBS survey, October 2008.



Four HSA statistics of interest

 Over 8 million Americans GROWTH OF
have an HSA3 HSA HDHP
ENROLLMENT7
 8% of all U.S. employees in (from March 2005
an employee-sponsored health to January 2009)
insurance plan are in an
HDHP/HSA-eligible plan4

 In companies that offer HDHP/
HSA as an option, about 15%
of employees participate5

 By 2012, between 11 and 13 million
Americans are expected to have
an HSA6

Sources: 3.2009 annual census by America’s Health Insurance Plans, published May 13, 2009. 4. Kaiser Family Foundation and Health Research Education Trust, “Employer Health Benefits 2008 Summary of Findings”. 5. Pediatrics, the official
journal of the American Academy of Pediatrics, March 1, 2007. 6. Diamond, “Diamond Management & Technology Consultants Issues Updated HSA Estimates,” January 7, 2009. 7. 2009 AHIP HSA/HDHP Census.



The fundamentals of an HSA

Health Savings Accounts: tax-deferred, interest-accumulating accounts
that can only be offered in conjunction with an HDHP

Employees must be covered by a qualified HDHP before enrolling in an HSA

Contributions may be made to employees’ accounts by company & employee

2010 contribution limit for individual plans is $3,050; $6,150 for family plans

Employees age 55 or older can also make a $1,000 “catch-up” contribution



How an HSA Works

 Help employees save money to use for their qualified medical expenses
 Paid for with pretax or tax-deductible dollars and is fully owned
by the employee

 Employees and employers can contribute to an HSA
 HSA accountholders can withdraw funds at any time,
without penalty, if used for qualified medical expenses
 Access to funds typically by debit card, check or
online banking system
 HSA funds earn interest provided by the HSA custodian
 The account is portable and unused funds
accumulate and rollover year to year



The Advantages of an HSA vs. an HRA or FSA
HSA (Health Saving Account) HRA (Health Reimbursement Account) FSA (Flexible Spending Account)
Eligibility Employees must be covered by an HDHP. Employees in companies that offer this benefit. Employees in companies that offer this benefit.
(Employees no longer covered by an HDHP keep the (Former employees can be included) (Former employees cannot be included)
HSA, but can no longer make contributions)

Qualifying health Employee must be covered by an HDHP Although usually offered in conjunction with an HDHP, No health insurance requirements
insurance needed there are no health insurance requirements for an
employee to participate in an HRA

Contributions Funding can be made by the employer, the Funding can be made only by the employer Funding is usually made by employees through a
employee or any person on behalf of an eligible reduction in their salary. Contributions can be made
employee by employer, employee or both

Annual contribution In 2011, the contribution limit to individual plans is No contribution limits, although employers typically No required contribution limit, although employers
limits $3,050. Limit for family plans is $6,150. Employees contribute less than the annual deductible of their usually impose one
aged 55 or older can also make a “catch-up” health plan offering
contribution of $1,000

Qualifying expenses Most unreimbursed medical expenses Note: an Most unreimbursed medical expenses, although Most unreimbursed medical expenses, although
employee may qualify for both an HSA and an FSA. employers may impose limitations, such as no employers may impose limitations. Cannot be used
However, they cannot “double-dip” – be reimbursed by payments for long-term care or health insurance for long-term care or health insurance premiums
both accounts for the same expense premiums

Allowable non-medical Permitted, but subject to income tax and 20% penalty. Not permitted Not permitted
withdrawals After accountholder reaches age 65, or upon death or
disability, funds used for non-medical expenses are
subject only to income tax

Carryover of unused Full amount of funds can be carried over Permitted, although some employers limit the Balances left at year’s end (or up to 2 ½ months
funds and rollovers indefinitely amount that can be carried over. Employees are after year’s end, if employer permits) are forfeited to
allowed a limited, one-time rollover to an HSA employer. Employees are allowed a limited, one-time
rollover to an HSA

Portability Portable Funds may be portable – it’s at the discretion of No, funds usually forfeited at termination, although
the employer. Also, subject to COBRA provisions COBRA extensions sometimes apply



HDHPs and HSAs provide key benefits for employers


HOW HSAs BENEFIT EMPLOYERS
Reduced premiums

 Tax savings

 An enhanced benefit package

 An incentive for your employees
to make responsible health
care spending decisions
 An incentive for your
employees to focus on
maintaining their health

 Less administrative hassles



HSAs provide your employees tax advantages:

Pre-tax contributions made via payroll deductions will reduce federal tax liability

Contributions and dividends are not taxable if used for qualified medical expenses

Contributions made with after-tax dollars are deductible

Unused funds remain in the HSA year after year, earning tax-deferred interest



There are many reasons for your employees to open an HSA

Control the way funds
Save for future are spent Account
medical expenses is portable
and invested

Can move the
HSA from one
financial institution
to another



HDHPs/HSAs can be a great investment for your employees

Your company can
HSAs are a great Funds left in HSA will
make contributions to
retirement savings tool earn interest tax-free
employees’ HSAs

Once deductible is met, many The HDHP deductible is
HDHP plans pay 100% of typically less than the HSA
qualified medical expenses contribution limits



Employees can use HSA funds for
qualified medical expenses including
Dental treatment, such as fillings, COBRA insurance
braces and extractions
Medicare premiums (if no longer
Eye exams, eyeglasses and contact lenses covered by an HDHP) but not Medigap

Out-of-pocket expenses, such as deductibles, Retiree health expenses
coinsurance and co-payments
Hearing Aids
Prescriptions
Acupuncture
Qualified long-term care services
and insurance

Qualified medical expenses are subject to change by the IRS. Please visit
www.irs.gov for a current list of qualified medical expenses.



Your employees can withdraw HSA funds without penalty

 At any time to cover
qualified medical expenses
 Funds used for non-medical
expenses when accountholders
reach age 65, or upon death or
disability, are subject only to
income taxes and will not be
assessed a penalty



How to increase HDHP enrollment by offering the right HSA

Educate
Employees

Fund Offer
Employees’ Wellness
Accounts Programs



Fund your employees HSAs

72% 61%
61% of consumers are more likely to
72% of the firms that offer an
participate in an HDHP if their employer
HDHP/HSA fund the account8
contributes to their HSA9

$898/ $1,522
single coverage family coverage
71%
The average employer contribution 71% of employees who received employer
is $898 for single coverage; contributions opened an HSA versus 48%
$1,522 for family coverage10 of those who received no contribution11

How much should your company contribute to your employees’ HSAs?
50% to 70% of the deductible, benefit experts recommend12
Sources: 8. Kaiser Family Foundation and Health Research Education Trust, “Employer Health Benefits 2008 Summary of Findings”. 9. Guardian Life Insurance, “Benefits & Behavior: Spotlight on Consumer-Driven Health Care,”
2008.10. U.S. Bureau of Labor Statistics, 2008, cited in “Benefits Marketplace 2009,” on Benefitnews.com. 11. Blue Cross & Blue Shield Association study, cited in “Members of CDHPs more engaged,” Business Insurance, October
27, 2008 12. Joe Williams, business development manager for Bay Benefits Insurance Services, 2009.



Communicate early and often

Be prepared to address a learning
Be prepared curve when introducing an HSA

Have materials to explain how the plan
Have materials works and the benefits

Communicate via intranet, newsletters,
Communicate payroll stuffers, staff meetings, etc.



Choosing the Right HSA Custodian

Although some HDHP insurance companies have
a “preferred relationship” with an HSA custodian,
there’s no requirement to choose that custodian

Although large banks are
winning HSA market share
If you change insurance
Wider range of investment due to deals with large plan
providers, its affiliate HSA
options and higher interest consultants and employers,
provider will often raise
rates offered through smaller providers and third-
your fees or lower
independent HSA providers party administrators may
your interest13
provide the best products and
services for the end user

Source: 13. ehow.com, tips on choosing an HSA provider by Diane Monde Dill, cited in HR Management, July 28, 2009.



In choosing an HSA custodian
 Look at the relationship from your employees’ point-of-view
 Choose an HSA custodian with a high interest rate
 Choose an HSA custodian with a low-fee or no-fee structure
 Choose a custodian that provides your employees with
easy access to their HSA funds
 Choose a custodian with good investment options
 Choose a custodian that provides
excellent customer service for its HSA
 Choose a custodian that works
well with its clients



Employer’s roles and responsibilities

Include your accounting and programming departments for tax purposes
and record keeping

Plan to offer HSA contributions? Involve your payroll department or vendor

Make sure the HSA custodian is compatible with your processes and operations

Define which activities are the responsibility of the HSA custodian

You will not be involved with any claim reviews, adjudications
or reimbursement checks



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Alliant membership is an exclusive benefit available to employees, retirees and members of qualifying Select Employee Groups, organizations/associations and their
family members; and individuals who live or work in qualifying communities and their family members. Applicants must also meet other eligibility requirements for
Alliant membership. Please visit www.alliantcreditunion.org for details regarding Alliant membership eligibility.



HSA Investment Option

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obligation
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Retirement Income
Experienced advisors with Get the assistance you
Planning, 401k and
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*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/ SIPC, a registered broker/
dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109. Deposit investment and insurance products are not federally insured, involve
investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services
program, to make securities available to members. CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty states of the United States of America.
FR121002-4F80



For more information or to download our white paper, Is an HDHP/
HSA the right prescription for your company?, visit http://
www.alliantatwork.com/.



This material is prepared for educational purposes only and was developed
by Alliant Credit Union. All reasonable efforts were taken to ensure the
accuracy of the information provided and to properly attribute sources.

However, consult your plan administrator, tax and legal advisors for advice.
Alliant disclaims any liability for your reliance on the information presented.

© 2010 Alliant Credit Union. All rights reserved.
SEG333-r11/10
23

Choosing the Right HSA

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