What are Health Savings Accounts?

        - An HSA is a NOW account, much like an IRA, that allows individuals to save and pay for qualified
          medical and retiree health expenses on a tax-free basis.
        - HSAs are established for the benefit of an individual and are portable.
        - Unused account balance can be carried over from year-to-year, continuing to grow tax free.

What are the benefits of a Health Savings Account?

         - Save on Federal Income Taxes – the contributions you make are deductible, up to the
           lesser of the annual insurance deductible or the HSA maximum contribution (including age
           55 catch-up contribution). Account balances grow tax-free.

         - Cover deductibles and qualified out-of-pocket expenses – Account balances can be
            used to pay for any qualified medical expenses incurred after the HSA is opened. 
            Withdrawals used to pay for qualified medical expenses are tax-free.

         - Take control – You determine which qualified expenses will be paid from your HSA, how they
            will be paid and when.

         - Benefit from no ‘use it or lose it’ restrictions – Unlike Flexible Spending Accounts (FSA),
            unused balances can be carried over from year-to-year and continue to grow on a tax-free basis.

        - Use HSA dollars to pay COBRA premiums – Preserve your liquidity between jobs or
           during time of unemployment.  Special tax-free withdrawals permitted.

         - Purchase long-term care insurance – Use tax-deferred dollars to plan for long-term needs

        - Supplemental retirement income – Once you enroll in Medicare, you may use HSA
           balances to pay for out-of-pocket Medicare expenses tax-free, or choose to use HSA balances
           for non-medical purposes by claiming the amount of the withdrawal as income for tax purposes,
           penalty free.

How do I qualify?

        You are eligible if all of the requirements are met:

●          Covered under a high deductible health plan (HDHP)
●          Not covered by any other health plan that is not an HDHP
●          Not currently covered by Medicare benefits
●          Not eligible to be claimed as a dependent on another person’s tax return;
●          Have HDHP coverage on the first day of the month during the month that the account is opened.

What is a High Deductible Health Plan (HDHP)?

         - For those with individual coverage: A health plan with a minimum annual deductible of $1,200
            and annual out-of-pocket expenses not to exceed $5,950 for the 2011 plan year.
         - For those with family coverage: A health plan with a minimum annual deductible of$2,400 and
           annual out-of-pocket expenses not to exceed $11,900 for 2011 plan year.

How much can I contribute to an HSA?

Contribution Limits
	Standard		Catch-Up Contributions	Combined Standard and Catch-Up Limits
Tax Year	Individual	Family		Individual	Family
2011	$3,050	$ 6,150	$1000	$ 4,050	$7,150

What if my total contributions exceed this limit?

       If total contributions exceed the allowable contribution limit for the year, you will be subject to an
       excess contribution tax.  It is your responsibility to remove excess contributions and any interest
       earned before filing your federal income taxes.

Who can contribute to an HSA?

        Once the eligibility requirements are met, anyone can contribute to an HSA on an individual’s
        behalf (the individual, the employer, their family, etc.) as long as they do not exceed the total
        annual maximum.

Are rollover contributions permitted?

        Yes, when the rollover is from one qualified HSA or Archer MSA to another qualified HSA. 
        For more information, ask your Foster Bank Branch Manager.

Do I have an HSA qualified health insurance plan?

        The quickest way to find out if your health insurance is HSA qualified is to ask your health         insurance company.  If they say ‘yes’, then you now your health plan qualifies you to open an
        HSA.  If your employer provides your health insurance, ask your employer.  If they do not know,
        they should ask the insurer on your behalf.

What are qualified out-of-pocket medical expenses?

        Any expense that the IRS allows you to deduct as a medical expense on Federal Income Tax
        Form 1040 and as defined under Section 213 of the IRS code are qualified, including:

         - Deductibles
         - Co-Payments
         - Prescription Drugs
         - Long-term care insurance
         - Health insurance premiums during unemployment

Can I contribute to an HSA until April 15th of the year following my tax year
     in an effort to receive a tax deduction?

        Yes, contingent on qualifying for an HSA, the maximum deductible amount is prorated on the first
        full month your high deductible health care plan was in place. Contributions are prorated based
        on the month in which your HDHP is established.

        Example: If your HDHP was established September 1, 2011 with an annual deductible of $2,400
        (assuming coverage continues the remainder of the year), the contribution limit would be
         calculated as follows: $2,400 / 12 months x 4 months (September-December) = $800.

        The same would be true if you established your HDHP on March 1st for the current tax year.
        The contribution limit would be calculated as follows:
         $2,400 / 12 months x 10 months (March-December) = $2000.

Are HSAs tax deductible?

         - Contributions made by the employer are not included in the employee’s taxable income and
           are not deductible on their federal tax return.
         - Contributions made by the employee (or their family members) can be claimed as a deduction
           on their federal tax return.
         - Contributions are not deductible from Illinois income tax return.

What if I use my HSA funds for unqualified medical expenses?

        It is your responsibility to ensure that your HSA funds are spent for qualified medical expenses, as
        defined by the IRS. If you use funds for non-qualified medical expenses, you must report this in
        your annual income tax filing, and pay the related income taxes, plus a 20 percent tax penalty.
        After age 65, any funds used for non-qualified medical expenses must still be reported as income,
        but the 20 percent tax penalty does not apply.

Are the Foster Bank account fees that are charged to my account considered to be
      qualified expenses?

       Yes, the IRS considers account, debit card and check fees to be eligible expenses to be paid from
       an HSA.

Do I need to save my itemized receipts?

        Yes.  They may be needed if the IRS requests documentation to verify that the funds in your HSA
        were used for qualified medical expenses.

Can I be covered if I have a health plan that is not a High Deductible Health Plan
     (HDHP)?

       Only, in the following circumstances:

          - Workmen’s compensation;
          - Insurance for a specified disease or illness
          - An insurance paying a fixed amount for hospitalization, accident insurance, disability insurance,
            dental care, vision care or long-term care.

What happens to the HSA in the event of death?

        Balances remaining in the account become the property of the beneficiary of the account if the
        surviving spouse is the listed beneficiary, the HSA becomes the property of the surviving spouse
        and is subject to income tax only to the extent that distributions are not used for qualified medical
        expenses.

        If the beneficiary is not the surviving spouse, the HSA ceases to be an HSA as of the date of death.

How do I learn more?

         - If you have any questions we recommend that you speak to a tax advisor or your employer to
           understand if you qualify for an HSA.

           Foster Bank offers a NOW Health Savings Account (HSA) with a premium money market rate
           and the advantage of unlimited 24-hour access. Here’s how it works:

Unlimited check writing and debit card usage	Yes
Minimum opening balance	$50
Minimum balance requirement to avoid service fee	FREE
Monthly fee if minimum balance is not met	FREE
Online banking with Bill Payment	FREE
Account set-up fee	$25
Account closing fee	$75

 

FOSTER BANK