Benico, Ltd. - Employee Benefits and Insurance

 General

Creates new Health Savings Accounts (HSAs) to help individuals save for qualified medical and retiree health expenses on a tax-free basis.  HSAs first became available as of January 1, 2004.

Eligibility

• Individuals under the age of 65 are eligible to contribute to an HSA if they have a qualified health plan.
• Preventive care services are not subject to the deductible.  In addition, coverage for accidents, disability, dental care, vision care, and long-term care is not subject to the deductible.

Contributions

• Contributions are allowed up to 100% of the health plan deductible.
• Individuals age 55 – 65 may make additional “catch-up” contributions of up to $1,000 annually in 2009 and thereafter.  A married couple can make two catch-up contributions as long as both spouses are at least 55.  Catch-up contributions will help individuals accumulate assets for retiree health expenses.
• Contributions may be made by individuals, family members and employers.
  • o        Contributions made by individuals and family members are tax-deductible (for the account beneficiary) even if the account beneficiary does not itemize.  Employer contributions are made on a pre-tax basis and are not taxable to the employee.  Employers are allowed to offer HSAs through a cafeteria plan.
• Investment earnings accrue tax-free.

See "HSA Changes for (current year)" for current Minimum Deductibles and Contribution Amounts

Distributions

HSA distributions are tax-free if they are used to pay for qualified medical expenses. Such as:

• Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease,
• Prescription drugs,
• Qualified long-term care services and long-term care insurance,
• Continuation coverage required by Federal law (i.e., COBRA),
• Health insurance for the unemployed,
• Medicare expenses (but not Medigap), and
• Retiree health expenses for individuals age 65 and older (Note: retiree health plans would not have to meet the minimum deductible requirement.)

Distributions made for any other purpose are subject to income tax and a 10% penalty.  The 10% penalty is waived in the case of death or disability.  The 10% penalty is also waived for distributions made by individuals ate 65 or older.

Treatment at Death

Upon death, HSA ownership may transfer to the spouse on a tax-free basis.