An ACS|BNY Mellon Health Savings Account (HSA) is a special tax-advantaged savings account, similar to a traditional Individual Retirement Account (IRA) but designated for medical expenses. An HSA allows you to pay for current covered health care expenses and save for future qualified medical and retiree health care expenses on a tax-favored basis.

HSAs provide triple-tax advantages: contributions, investment earnings, and qualified distributions are all exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).

Unused HSA dollars roll over from year to year, making HSAs a convenient and easy way to save and invest for future medical expenses. You own your HSA at all times and can take it with you when you change medical plans, change jobs or retire. This means the funds in the account [both yours and your employer's, if they contribute] are non-forfeitable and portable.

Funds in the account not needed for near term expenses may be invested, providing the opportunity for funds to grow. Investment options include money market accounts, mutual funds, etc.

To be eligible to set up an ACS|BNY Mellon HSA and to make annual contributions, you must be covered by a qualified High Deductible Health Plan (HDHP).

Basic Overview:

• To be eligible to contribute to an ACS|BNY Mellon HSA, you must be covered by a qualified High Deductible Health Plan (HDHP) and have no other first dollar coverage.
• You may use your HSA to help pay for medical expenses covered under a High Deductible Health Plan, as well as for other common qualified medical expenses.
• HSA funds unused remain in your account for later, and can be invested in a choice of investment options, providing the opportunity for funds to grow.

HSAs work in conjunction with a HDHP. All the money you (or your employer) deposit into your HSA up to the maximum annual contribution limit is 100% tax-deductible for federal income tax, FICA (Social Security and Medicare) tax, and in most states, state income tax. This makes HSA dollars tax-free.

You can use these tax-free dollars to pay for expenses covered under your HDHP until you have met your deductible. The insurance company pays covered medical expenses above your deductible, except for any coinsurance; you can pay coinsurance costs with tax-free money from your HSA. In addition, you can use tax-free dollars for qualified medical expenses not covered by the HDHP, such as dental, vision and alternative medicines.

The funds in the account also can be used for other, non-medical expenses, but then your dollars are subject to ordinary tax, plus a 20% penalty if you are under age 65. The 20% penalty does not apply if the distribution occurs after you reach age 65, become disabled or die; however ordinary income tax may still apply.

Funds remaining in your account at year-end are yours to rollover and accumulate for your future health care expenses. You may choose not to spend your HSA dollars on small expenses, instead using after-tax dollars to meet these expenses, and leaving your HSA dollars to grow for future needs. Choosing the expenses on which to spend your HSA dollars and which to pay out-of-pocket with after-tax dollars is entirely up to you.

If you meet all the criteria listed below you are eligible to open and contribute to an HSA. The Medicare Act of 2003, which established HSAs, defines "eligible individuals" as those who:

• are covered by a qualified High Deductible Health Plan (HDHP);
• are not covered by another health care plan, such as a health plan sponsored by your spouse's employer, Medicare or TriCare;
• cannot be claimed as a dependent on another individual's tax return.

You may still open and contribute to an HSA if you have certain limited coverage's approved by the IRS, such as dental, vision and long-term care insurance. And you are still eligible to establish an HSA if you are entitled to benefits under an Employee Assistance Plan (EAP), disease management or wellness program or have a discount card for prescriptions.

After you open your ACS|BNY Mellon HSA, making contributions helps you build a balance to assist with current and future health care expenses. Anyone, including your employer or family members may contribute to your HSA. You can make contributions by payroll deductions (if available) or by after-tax contributions.

Payroll deductions: If your employer offers the option, you may specify a regular contribution to be deducted from your paycheck. This contribution will be made before Social Security, federal, and most state income taxes are deducted.

After-tax contributions: You may choose to make all or part of your annual account contributions to your HSA by making "after-tax" contributions to your account. These contributions, which you can make by writing a personal check, may be deducted on your income tax return, using IRS Form 1040 and Form 8889.

Employers may make contributions to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income.

Note: You will use IRS Form 1040 for your HSA contributions, not the short form 1040A or 1040EZ. This deduction is taken "above the line": you do not need to itemize contributions on Schedule A in order to claim the deduction for HSA contributions.

You are eligible to make contributions to your HSA as long as you meet the definition of an "eligible individual" as listed in the question, "Who is eligible to open an HSA?" If you no longer participate in a High Deductible Health Plan or enroll in Medicare, however, you can no longer contribute new funds.

Money may be deposited to your ACS|BNY Mellon HSA through payroll deduction, if your employer participates in such a program, or you may make deposits directly to your account. Deposits may be made periodically or in a lump sum.

Payroll deductions: If your employer offers the option, you may specify a regular contribution to be deducted from your paycheck. This contribution will be made before Social Security, federal, and most state income taxes are deducted.

After-tax contributions: You may choose to make all or part of your annual account contributions to your HSA by making "after-tax" contributions to your account. These contributions, which you can make by writing a personal check, may be deducted on your income tax return, using IRS Form 1040 and Form 8889.

Employers may make contributions to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income.

Contributions from all sources including employer and personal contributions must be added together for purposes of determining whether you are within the IRS maximum contribution limits for the year.

Note: You will use IRS Form 1040 for your HSA contributions, not the short Form 1040A or 1040EZ. This deduction is taken "above the line": you do not need to itemize contributions on Schedule A in order to claim the deduction for HSA contributions.

A tip: you can contribute up to the maximum allowed for the year at any time up until the tax filing deadline of the following year. (For example, you can deduct an additional after-tax contribution on your 2012 income tax return when you file your 2012 tax return in 2013.)

First, consider the following: unless you have a significant, catastrophic-type medical claim, it is unlikely that you will recoup the amount of money you pay in employee contributions for traditional plans (such as a PPO) or even Health Reimbursement Accounts (HRAs).

For example, assume you contribute $550 a month for family coverage, which amounts to $6,600 per year (12 x $550). We'll come back to this figure.

Now, if your family has three doctor visits during the year at $200 each ($600 total), plus four prescriptions at an average of $75 ($300 total), that's a total of covered expenses for the year of $900. Assuming the co-payments for each of the three doctor visits was $20 (3 x $20 = $60) and each of the four prescriptions was $30 (4 x $30 = $120), you will pay $180 out of pocket, taxed.

Now let's look at the whole picture. Your insurance paid for $720 of your $900 in costs. You paid $180 - taxed - along with $6,600 in contributions.

Compare the numbers of your available plans, and you're likely to find that an HDHP and ACS|BNY Mellon HSA make sense for you. The HDHP usually offers lower premiums in exchange for the higher deductible, including the same coverage for significant health expenses as with the more expensive traditional plans. You pay for costs below the deductible with tax-free dollars and employer contributions, if offered, and keep and grow the funds you don't use each year.

How much can you save over time? An enrollee with family coverage who contributes the maximum allowed each year could accumulate a balance over $300,000, assuming he/she invests and receives an annual investment return of 7%. And this assumes the account holder is using their HSA to pay medical expenses of $1,500 per year!

 

You must first open your HSA before funds may be deposited (including any employer contributions) or withdrawn to pay for qualified medical expenses.

To open an ACS|BNY Mellon HSA, enroll in a High Deductible Health Plan (HDHP) and elect the ACS|BNY Mellon HSA option if it is not automatically included by your employer.

You will receive a Welcome Kit in the mail or a link to open your account electronically. For either method, there are a few forms requiring personal information; this information is required by federal banking regulations under the Patriot Act, just as it would be required to open a traditional banking account.

Look for the form titled "Master Signature Card" in your kit or online. Even if you electronically provide your signature to open your account, you should mail in this card. It gives you the ability to designate a beneficiary for your account.

Tax-advantaged:

• Contributions you may make through payroll deposits are made with pre-tax dollars, meaning they are not subject to federal (or state, for most states) income taxes.
• Contributions to your HSA made with after-tax dollars can be deducted from your gross income, meaning you pay less income tax at the end of the year.
• The interest you earn on your HSA balance is not taxed.
• Withdrawals from your HSA for qualified medical expenses are not subject to federal income tax. As long as you use your HSA funds for qualified medical expenses, you will not have to pay federal (or state, for most states) income taxes.
• Employers may make contributions to your account; these contributions are excluded from your gross income.

Flexible: The money is yours; it grows and remains with you, even when you change medical plans, change employers or retire. There are no "use it or lose it" rules. Even if you are no longer eligible to make contributions, funds in your account may still be used to pay for qualified medical expenses tax-free. And after age 65, or in cases of disability, the funds in the account can be used for non-qualified expenses.

Portable: Accounts move with you when you change medical plans, change employers or retire.

Savings mechanism for future health needs: Unused funds can grow through interest and investment earnings and can be "banked" for future medical expenses.

Contributions can come from multiple sources: As long as you are covered by a qualified HDHP, you, your employer, family members, or anyone else may contribute to your HSA up to the maximum annual contribution limit.

With a High Deductible Health Plan, you have the security of comprehensive health care coverage. Like a traditional plan, you are responsible for paying for your qualified medical expenses up to the in-network deductible; however, the deductible will be higher, and you can use HSA funds to pay for these expenses.

After the annual deductible is met, you are responsible only for a portion of your medical expenses through coinsurance or co-payments, just as with a traditional health plan. For 2013, the minimum HDHP deductible by law is $1,250 for individuals and $2,500 for families.

For 2013, the maximum out-of-pocket expenses by law (including deductible and co-payments, but not including premiums) cannot exceed $6,250 for individuals and $12,500 for families.

The deductible and maximum out-of-pocket expenses are indexed annually for inflation.

The health insurer or your employer can verify the status of your coverage. In addition, the words "qualifying (or qualified) High Deductible Health Plan" or a reference to IRC Section 223 will be included in the declaration page of your policy or in another official communication from the insurance company.

To be a qualified plan the deductible cannot be below the annually declared minimum and out-of-pocket maximums cannot exceed the maximum as outlined below:

• The minimum annual deductible cannot be less than $1,200 for individual coverage or $2,400 for family coverage in 2012;
• The minimum annual deductible cannot be less than $1,250 for individual coverage or $2,500 for family coverage in 2013;
• A deductible greater than the minimum is permitted in a qualified plan, but the maximum contribution cannot be more than $3,100 for individual coverage OR $6,250 for family coverage in 2012;
• A deductible greater than the minimum is permitted in a qualified plan, but the maximum contribution cannot be more than $3,250 for individual coverage OR $6,450 for family coverage in 2013;
• The maximum out-of-pocket expenses are capped at $6,150 for individual coverage and $12,100 for family coverage in 2012;
• The maximum out-of-pocket expenses are capped at $6,250 for individual coverage and $12,500 for family coverage in 2013; and
• Deductibles and out-of-pocket maximums are adjusted annually for inflation.

A qualified HDHP with family coverage may have deductibles for both the family as a whole (an umbrella deductible) and for individual family members (embedded deductibles). If either the deductible for the family (umbrella) or the deductible for an individual (embedded) is below the minimum annual deductible for family coverage ($2,500) for 2013, the plan is not a qualified HDHP.

Both HSAs and FSAs allow you to pay for qualified medical expenses with pre-tax dollars. One key difference, however, is that HSA balances can roll over from year to year, while FSA money left unspent at the end of the year or after a designated grace period isforfeited.

You may choose to use a Limited Purpose FSA to pay for eligible heath care expenses (such as vision or dental) and save your HSA dollars for future health care needs. You may use Limited Purpose FSA dollars to reimburse yourself for expenses not covered by your High Deductible Health Plan, such as:

• Vision expenses, including:
  Glasses, frames, contacts, prescription sunglasses, goggles, vision co-payments, optometrists or ophthalmologist fees, and corrective eye surgery
• Dental expenses, including:
  Dental care, deductibles and co-payments, braces, x-rays, fillings, and dentures

The funds in a regular savings account do not have the tax advantages of an HSA.

No, only one person can be named the account owner. If both you and your spouse have qualified HDHP coverage, you must each have your own account.

If both you and your spouse have family coverage under qualified High Deductible Health Plans, the maximum total tax-deductible HSA contribution both of you can make (including employer contributions) is the IRS limit for family coverage. In 2013, that amount is $6,450. This contribution can be divided between you and your spouse however you wish. If you and/or your spouse are eligible to make catch-up contributions, you may each contribute your eligible catch-up contribution to your individual HSA.

Offering an HSA is an excellent way to help you save for future medical expenses and pay for current expenses with tremendous tax advantages. In addition, HSAs offer you investment opportunities unavailable through other reimbursement plans.

Yes, you may have more than one HSA and you may contribute to them all. However, this does not give you any additional tax advantages, as the total contributions to your accounts cannot exceed the annual maximum contribution limit. Contributions from your employer, family members, or any other person must be included in the total.

Yes, you can have both an HSA and an IRA.

Although HSAs operate under many of the same rules that apply to traditional IRAs, an HSA is not an IRA; it is a tax-advantaged savings account for current and future medical expenses. (However, it may be used to pay for non-medical expenses without penalty after the account holder turns 65, so it can be used to save for retirement.)

No. You are not eligible for an HSA if you are covered by any other health plan that is not a qualified HDHP.

Yes, as long as you haven't received any VA medical benefits during the preceding three months and you are currently enrolled in a qualified HDHP, you are allowed to open and contribute to an HSA.

Yes. You are eligible to open and contribute to an HSA as long as you are not enrolled in benefits under Medicare and are covered by a qualified HDHP.

Yes. If you choose to be covered by the qualified HDHP, you may open and contribute to an HSA. It does not matter what options your employer offers. It matters only which option you elect.

Yes. As long as you are covered by a qualified HDHP you may also be covered for any benefit provided by "permitted insurance" as defined by IRS code. Permitted insurance includes insurance for a specified disease or illness, such as cancer, diabetes, asthma or congestive heart failure. Other permitted insurances include policies that provide coverage for accidents, disability, dental care, vision care or long-term care.

Yes, you may make contributions for this year, provided you are covered by a qualified HDHP no later than the first of December.

Under the Tax Relief and Health Care Act 2006, if you enroll before the first day of December of any year, you are considered eligible to make up to the entire year's contribution to your HSA. This remains true as long as you continue to participate in a High Deductible Health Plan for the next 12 consecutive months (13 months in total) beginning with the last month in the year in which you became eligible. During this time, you cannot have other non-qualifying health care coverage.

So, for 2012, you (and your employer) may contribute up to $3,100 if you have single coverage, or up to $6,250 if you have family coverage. For 2013, that annual contribution limit is $3,250 for individual coverage and $6,450 for family coverage. In addition, if you are 55 or older, you may add up to $1,000 in additional monies as part of a "catch up" contribution.

However, if you enroll in the HDHP but end your coverage at any time during the 12-month period, your and your employer's contributions are no longer eligible for tax benefits. You would need to calculate a prorated contribution amount based on your actual months of HDHP coverage and apply to have excess contributions returned. Excess contributions will be included in your income and subject to regular income tax plus a 20 percent additional tax.

For example: Your employer's plan year is January 1 to December 31 (12 months) and the annual deductible is $1,500 for individual coverage. If you maintain HDHP coverage for six months (July through December), and the IRS maximum contribution limit for the year is $3,250, then your maximum contribution would be $1,624.98. [$3,250/12 = $270.83 [maximum monthly contribution] $270.83 x 6 = $1,624.98. If you are 55, catch-up contributions are permitted and must also be pro-rated using the same formula.

You can avoid tax penalty by enrolling in a High Deductible Health Plan through another employer (if you terminate from your employment), COBRA or retiree medical coverage in order to continue your eligibility for the next 12 months.

First-dollar coverage means that you may receive a reimbursement for expenses immediately, without first meeting a deductible.

First-dollar benefits paid for "permitted insurance" expenses (such as vision and dental paid through a Limited Purpose FSA) or preventive care do not disqualify you from making HSA contributions.

First-dollar reimbursements for covered expenses from the following may make you ineligible for an HSA:

• Medicare
• Medicaid
• Flexible Spending Arrangements (FSA)
• Health Reimbursement Arrangements (HRA)
• Coverage under a spouse's plan, including:
  • Low-deductible insurance coverage
  • FSA or HRA through spouse's employer

No, only one person can be named the account owner. If both you and your spouse are covered by qualified HDHPs, you must each have your own account.

The only age-related restriction for HSAs is that once an HSA account owner becomes enrolled in Medicare, contributions to the account must stop. Generally this means at age 65. If, however, you become disabled and entitled to Medicare, contributions to the account must stop for the month in which you become enrolled.

If the person can be claimed as a dependent on someone else's tax return, they are ineligible to open an HSA. Although not an age restriction, generally you cannot open an HSA for your child if you, or someone else, claims them as a dependent.

If you become disabled and enroll in Medicare, contributions to your HSA must stop as of the first of the month in which you become enrolled.

You may use your ACS|BNY Mellon HSA funds to pay Medicare Part A and/or B premiums. Payment of Medicare premiums is a qualified expense and a tax-free distribution. HSA distributions used for non-qualified expenses will be subject to ordinary income tax but exempt from penalty.

Your ACS|BNY Mellon HSA is portable. This means that you can take your ACS|BNY Mellon HSA with you when you leave and continue to use the funds you have accumulated. Funds left in your account continue to grow tax-free. If you are covered by a qualified HDHP, you can even continue to make tax-free contributions to your HSA.

There are no health related screenings or requirements to open an ACS|BNY Mellon HSA.

However, you will be required to complete some paperwork in order to open your account. This is required by the USA PATRIOT Act.

To help fight the funding of terrorism and money-laundering activities, the USA PATRIOT Act established requirements for investors as of October 1, 2003. Banks that open HSAs must obtain, verify and record information that identifies individuals and entities that engage in certain transactions with or through the bank.

No. You are not eligible to open an HSA or contribute to an existing HSA because you are not covered by a qualified HDHP. However, any distributions you make from an existing HSA for qualified expenses continue to be tax-free and excludable from your gross income.

No. A general-purpose health FSA or HRA that pays first-dollar benefits is the same as family coverage, because it is available to reimburse the qualified expenses of the employee and the employee's spouse and dependents. Consequently, if either you or your spouse participates in a general-purpose health FSA or HRA, neither of you will be eligible to contribute to an HSA.

No. There are no salary restrictions - minimum or maximum - that make you ineligible to open and contribute to an HSA.

No. There are no salary restrictions - minimum or maximum - that make you ineligible to open and contribute to an HSA.

No. You may open your HSA with any qualified financial institution, regardless of which insurance company provides your HDHP. However, you should check with your benefits department, as they may only provide contributions via payroll deduction with ACS|BNY Mellon HSA Solution.

No. You may open your HSA with any qualified financial institution, regardless of which insurance company provides your HDHP. However, you should check with your benefits department, as they may only provide payroll contributions via payroll deduction with ACS|BNY Mellon HSA Solution.

The custodian of ACS|BNY Mellon HSA Solution is The Bank of New York Mellon (BNY Mellon). Deposits to the HSA checking account are FDIC-insured up to the FDIC coverage limit.

The Federal Deposit Insurance Corporation, or FDIC, is an independent agency of the United States government. The FDIC protects an account owner's deposits in the unlikely event of the failure of the insured bank or savings institution.

• FDIC deposit insurance covers the balance of each depositor's account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank's closing
• The FDIC does not insure the money you invest through the investment component of your HSA.

Please visit the FDIC Web site at www.fdic.gov for more details.

No. Only cash may be contributed to your ACS|BNY Mellon HSA. You may set up an HSA investment account with investment options, such as mutual funds or securities, which you may purchase with your HSA funds.

No. Your contributions to your HSA are limited to a maximum annual contribution adjusted each year by the IRS. Your contributions to an IRA have no bearing on your HSA and vice versa.

What about the reduction in HSA maximum for IRA rollover amount?

Yes. If you are 55 or older and covered by a qualified HDHP, you can make additional catch-up contributions each year until you are enrolled in Medicare benefits. The maximum annual catch-up contributions is $1,000.

If both spouses have HSAs, then each is permitted full catch-up contributions, provided they are covered by a qualified HDHP for the entire year.

If you will reach age 55 before the close of the calendar year, you may make a full year's catch-up contribution, provided you are covered by a qualified HDHP no later than December 1st.

Yes. If you are 55 or older and covered by a qualified HDHP, you can make catch-up contributions each year until you are enrolled in Medicare benefits. The maximum annual catch-up contributions to an HSA is $1,000.

If both spouses have HSAs, then each is permitted full catch-up contributions, provided they are covered by a qualified HDHP for the entire year.

If you will reach age 55 before the close of the calendar year, you may make a full year's catch-up contribution, provided you are covered by a qualified HDHP no later than December 1st.

For 2013, the combined maximum contributions to your HSA, including any made by your employer to your account, are $3,250 if you have individual coverage and $6,450 if you have family coverage. If you turn age 55 or older in 2013 or after, you may add up to $1,000 more as a "catch up" contribution.

These amounts are valid as long as you enroll in qualified HDHP coverage before the first day of December, meaning you have held at least one full month of HDHP coverage, and so long as you continue to maintain qualified HDHP coverage for the next 12 months (Thirteen months in total).

Yes, you may have more than one HSA and you may contribute to them all. However, this does not give you any additional tax advantages, as the total contributions to your accounts cannot exceed your maximum annual contribution. Contributions from your employer, family members, or any other person must be included in the total.

Contributions to your ACS|BNY Mellon HSA are not subject to federal taxes or state tax (for most states) unless used to pay for non-qualified expenses.

Contributions may be made either directly by you to your HSA or through payroll deduction, if your employer participates. Either way, your contributions are not subject to federal income tax, FICA (Social Security and Medicare) tax and for most states, state income tax. If you make your contributions through payroll deductions, the amount is taken from your payroll before taxes are calculated. If you make deposits directly to your account, you may take an "above the line" deduction when filing your annual tax return.

"Above the line" means you reduce your taxable income regardless of whether you itemize or use the standard deduction on your income tax form. You may deduct the contribution amount, subject to the maximum annual contribution limits from your taxes, at filing time.

Employers may make contributions to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income.

If a family member or anyone else makes a contribution to your HSA, the tax advantages apply to you and not the person making the contribution. You may deduct the contribution amount when filing your annual income taxes, in the same way you would if you had deposited the post-tax contribution on your own.

Employers may make contributions to your account as well; while you do not take a deduction for these contributions, they are excluded from your gross income.

All contributions to the account are combined and subject to maximum annual contribution limits.

Contributions for the taxable year can be made in one or more payments at your convenience. If your employer contributes to your account, they too may make either a lump sum or periodic deposits to your account.

The IRS determines maximum annual contributions by your coverage type (single or family) annually. The annual total of all contributions to your account, from all sources, cannot exceed the IRS maximum annual contribution.

If the HSA account owner has family coverage with individual deductibles for each family member, they are still subject to a 2013 maximum annual contribution limit of $6,450 plus up to $1,000 in additional catch up dollars if they turn 55 or older during the year.

No. You are not eligible to contribute because you are not covered by a qualified HDHP. However, any distributions you make from your ACS|BNY Mellon HSA for qualified expenses continue to be free of federal taxes and state tax (for most states) and excludable from your gross income.

Remember that unused HSA dollars roll over from year to year. You may invest unused HSA dollars in investment options, providing the opportunity for funds to grow.

Catch-up contributions are permitted contributions made by an eligible participant that are in excess of maximum annual contribution limits. Eligible participants are HSA owners who are covered by a qualified HDHP and age 55 or older.

Catch-up contributions to your HSA are available for the calendar year in which you reach age 55. If you will reach age 55 before the close of the calendar year, you may make a full year's catch-up contribution, provided you are covered by a qualified HDHP no later than December 1st.

No. A general-purpose health FSA or HRA that pays first-dollar benefits is the same as family coverage, because it is available to reimburse the qualified expenses of the employee and the employee's spouse and dependents. Consequently, if either you or your spouse participates in a general-purpose health FSA or HRA, neither of you will be eligible to contribute to an HSA.

If you contribute more than your maximum annual contribution to your HSA, you may withdraw the excess without penalty up until April 15 of the following year. After that time, the funds are subject to both ordinary income and an excise tax.

No. You cannot take the excess as an above the line deduction. You have until the filing date of your federal tax return to take a distribution of the excess contribution from your HSA without incurring a 6 percent excise tax. The amount of the excess contribution is includable in your gross income for tax purposes.

Based on your employer's cafeteria plan rules, you may be allowed to increase, decrease, start or stop your ACS|BNY Mellon HSA contributions at any time, provided that the change is prospective only. Remember you are still restricted to your maximum annual contribution.

You can still make your maximum annual contribution. Your eligibility to contribute to an HSA is determined by the effective date of your qualified HDHP coverage. Your contribution for any given year depends on your enrolling in HDHP coverage by December 1st of that year and maintaining qualified HDHP coverage for the next 12 full months (13 months total).

The amount you can contribute is not determined by the date you establish your account unless you maintain qualified HDHP coverage for less than 12 full months, in which case the maximum is prorated by the number of full months of coverage.

Generally, the Establishment Date of your HSA custodial account is the later of the effective date of your qualifying HDHP coverage or the date you provide evidence of intent to open the account (e.g., completion of some type of form or application requiring your signature that acknowledges your desire to open an HSA), notwithstanding the fact that deposits or a signature card have not been received, required regulatory and compliance activities have not been completed and the account is not yet operational. The "Establishment Date" of an HSA is important because you can only receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses incurred after the date the HSA is considered "established". Because you are ultimately responsible for determining which expenses are reimbursable from your HSA, you should consult with your personal tax advisor to determine how IRS guidance on this issue should be applied to your specific situation.

You have until April 15, 2013 for contributions with respect to 2012 HDHP coverage, and until April 15, 2014 for 2013 contributions.

Yes. You always have the option to choose when and when not to use your HSA dollars. You may pay for qualified medical expenses with after-tax dollars, allowing your HSA balance to grow tax-free.

Many HSA participants elect to pay smaller expenses with after-tax dollars, allowing their balances to grow for the future.

Your HSA funds can be used tax-free to pay for out-of-pocket qualified medical expenses, even if the expenses are not covered by your HDHP. This includes expenses incurred by your family.

There are hundreds of qualified medical expenses, including many you might not expect: over-the-counter medications; dental visits; orthodontics; glasses; long-term care insurance premiums; cost of COBRA coverage; medical insurance premiums while receiving federal or state unemployment compensation and post age-65 premiums for coverage other than Medigap or Medicare supplemental plans. In addition, HSA funds may be used to pay your Medicare parts A and B premiums and for employer-sponsored retiree plans.

All of these expenses may be paid for with your HSA funds, free from federal taxes or state tax (for most states).

Refer to IRS Publication 502 for a more complete list of qualified medical expenses.

Your HSA funds can be used to pay for out-of-pocket qualified medical expenses without federal taxes or state tax (for most states), even if the expenses are not covered by your HDHP. This includes expenses incurred by your family.

There are hundreds of qualified medical expenses, including many you might not expect: over-the-counter medications; dental visits; orthodontics; glasses; long-term care insurance premiums; cost of COBRA coverage; medical insurance premiums while receiving federal or state unemployment compensation and post age-65 premiums for coverage other than Medigap or Medicare supplemental plans. In addition, HSA funds may be used to pay your Medicare parts A and B premiums and for employer-sponsored retiree plans.

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20 percent penalty tax. If you are age 65 or older, disabled, or your estate pays bills subsequent to your death, the 20 percent penalty may not apply.

The IRS requires that you confirm that your distributions are for qualified medical expenses. It is your responsibility to keep all documents (such as receipts) that show how you used your HSA, including any for non-qualified transactions, and self-report accordingly on your annual tax return.

Distributions from your HSA that are used exclusively to pay for qualified medical expenses for you, your spouse, or dependents are excludable from your gross income. Your HSA funds can be used for qualified medical expenses and will continue tax-free (free from federal taxes and state tax, for most states) even if you are not currently eligible to make contributions to your HSA.

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20 percent penalty tax. If you are age 65 or older, disabled, or for the year in which you die, the 20 percent penalty may not apply.

Yes. Dental and vision care expenses are qualified expenses, as long as these are deductible for your income tax under the current IRS rules. For example, glasses, contacts and braces are deductible; cosmetic procedures, like cosmetic dentistry, are generally not deductible and would not be considered qualified expenses.

Only qualified expenses incurred after you have established your HSA meet the requirements for tax-free reimbursement.

Yes. You always have the option to use your ACS|BNY Mellon HSA funds however you wish. Distributions used exclusively to pay for qualified expenses continue to be free of federal taxes and state taxes (for most states). You may not, however, make contributions to your HSA because you are not covered by a qualified HDHP at this time. Should you enroll in a qualified HDHP at another time, you may then make contributions to your established HSA.

No. Expenses incurred before you establish your HSA are not eligible for tax-free distribution. You can receive tax-free distributions from your HSA for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20 percent penalty tax.

Your HSA must be established before qualified medical expenses are incurred to receive distributions free from federal taxes and state tax (for most states).

The "Establishment Date" of an HSA is important because an account holder can only receive tax-free distributions from his/her HSA to pay or be reimbursed for qualified medical expenses incurred after the date the HSA is considered "established" (See IRS Notice 2004-02; Q&A 26).

Just like a checking account, you can only access funds that are already in your account.

However, as additional funds are added to your account via your deposits (and/or deposits from your employer), you can reimburse yourself for qualified medical expenses paid for out of pocket, so long as those expenses occur after the date of the establishment of your HSA.

Yes, provided the services are qualified medical expenses, the distribution would be free from federal taxes and state tax, for most states.

You are responsible for the full amount charged until you have met your deductible; then co-payments and co-insurance apply. You may use your HSA funds to be reimbursed for these qualified medical expenses without federal taxes or state tax, for most states.

No, you are never required to withdraw funds from your account. Your HSA can continue to earn interest and grow until you decide to use the funds. If you never use your funds, your spouse may inherit your account and continue its tax-free status, or your beneficiaries will receive the funds as a taxable event as part of your estate.

No, a single expense can only be reimbursed by a single account. You may however, use both accounts to reimburse yourselves for different expenses. For example, you may use your spouse's HSA to reimburse the entire family's dental expenses, yourself included, and use your HSA to cover expenses incurred prior to reaching the deductible.

If there is clear and convincing evidence that this was a mistake, you may repay the mistaken distribution no later than April 15 following the first year that you become aware of the mistake. Under these circumstances the distribution is not included in gross income and the 20 percent penalty does not apply. You will need to keep records that demonstrate the actions you took.

You will also receive tax forms from your financial institution that show the distribution, as they will not be able to identify the funds returned as a result of the error. You should follow the instructions on the forms 1099 and 5498, your form 1040 or contact your tax advisor for assistance.

Yes, as long as the eligible expense was incurred after the effective date of your HSA, you can reimburse yourself with HSA funds in one of the following ways:

• writing yourself a check from your account (if you have an HSA checkbook)
   
• initiating a check through Direct Pay HSA (from an account online)
   
• withdrawing cash from the ATM (if you have ATM access)

Remember to always keep receipts, so you can show proof for any expenses incurred in the event you are audited.

If you become disabled and enroll in Medicare, contributions to your HSA must stop as of the first of the month in which you become enrolled. You may use your ACS|BNY Mellon HSA funds to pay Medicare Part A and/or B premiums. Payment of these Medicare premiums is a qualified expense and a tax-free distribution.

Distributions from your HSA used for non-qualified expenses will be subject to ordinary income tax but exempt from the 20 percent penalty.

Your ACS|BNY Mellon HSA is portable. This means that you can take your ACS|BNY Mellon HSA with you when you leave and continue to use the funds you have accumulated. Funds left in your account continue to grow tax-free. If you are covered by a qualified HDHP you can even continue to make tax-free contributions to your HSA.

Distributions from your HSA that are used exclusively to pay for qualified expenses for you, your spouse, or dependents are excludable from your gross income. Your HSA funds can be used for qualified expenses even if you are not currently eligible to make contributions to your HSA.

There are no "use it or lose it" rules with regard to your HSA. Unused funds roll over from year to year. The money in your HSA is all yours. The less money you spend, the more money you have that may earn interest or be invested in investment options.

HSAs are a convenient and easy way to save and invest for future medical expenses, as unused HSA dollars roll over from year to year. You may invest unused HSA dollars in investment options, providing the opportunity for funds to grow.

HSAs are a convenient and easy way to save and invest for future medical expenses, as unused HSA dollars roll over from year to year. You may invest unused HSA dollars in investment options, providing the opportunity for funds to grow.

You have full control over the assets in your ACS|BNY Mellon HSA. When the total funds in your account reach certain limits, you have the option to invest excess monies. The investment choices will be yours to select from the options offered.

In cases of divorce, an HSA can be transferred between spouses without taxation. This is not considered a taxable distribution. All HSA rules regarding continued tax-free status, contributions and distributions apply.

Your HSA will no longer be considered an HSA if, upon your death, your estate or someone other than your spouse becomes the beneficiary of your account. Only if the account is transferred to your spouse will it remain an HSA.

Your HSA must be established before qualified medical expenses are incurred to receive tax-free distributions.

No. IRS rules consider these to be allowable distributions. These charges are paid tax-free.

No, you are never required to withdraw funds from your account. Your ACS|BNY Mellon HSA can continue to earn interest and grow until you decide to use the funds. If you never use your funds, your spouse may inherit your account and continue its tax-free status, or your beneficiaries will receive the funds as a taxable event as part of your estate.

While you do not need to continue your qualified HDHP coverage through COBRA, but you must maintain qualified HDHP coverage to continue making contributions. You may pay your COBRA premiums with tax-free HSA dollars should you wish.

Your HSA is not subject to COBRA provisions. It is your account to take with you and to maintain as you choose.

Based on your employer's cafeteria plan rules, you may be allowed to increase, decrease, start or stop your ACS|BNY Mellon HSA contributions at any time, provided that the change is prospective only. Remember you are still restricted to your maximum annual contribution.

Yes. Participation in a qualified HDHP is not required to receive distributions. In order to maintain the tax-free status of the distribution, funds must be used for qualified medical expenses.

If you are no longer eligible to contribute because you are enrolled in Medicare benefits, or are no longer covered by a qualified HDHP, distributions used exclusively to pay for qualified medical expenses continue to be free from federal taxes and state tax (for most states) and excludable from your gross income.

Your HSA will no longer be considered an HSA if, upon your death, your estate or someone other than your spouse becomes the beneficiary of your account. Only if the account is transferred to your spouse will it remain an HSA.

Yes. You always have the option to use your HSA funds however you wish. Distributions used exclusively to pay for qualified medical expenses continue to be free from federal taxes and state tax, for most states. You may not, however, make contributions to your HSA because you are not covered by a qualified HDHP at this time. Should you enroll in a qualified HDHP at another time, you may then make contributions to your established HSA.

At age 65 and older, your funds continue to be available without federal taxes or state tax (for most states) for qualified medical expenses; for instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.

If you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the monies for non-qualified expenses, the distribution becomes taxable, but exempt from the 20 percent penalty.

With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.

Building an account balance in preparation for expenses associated with disability or increasing medical usage in retirement is one of the great benefits of an HSA.

If you choose to enroll in Medicare, you are no longer eligible to contribute to your HSA, but can continue to use your funds without federal taxes or state tax (for most states) for qualified medical expenses, including payments for Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax free to purchase Medigap or Medicare supplemental policies.

If you use your funds for qualified medical expenses, the distributions from your account remain tax free. If you use the monies for non-qualified expenses, the distribution becomes taxable, but exempt from the 20 percent penalty.

 

You should choose a beneficiary when you set up your ACS|BNY Mellon HSA by completing a Master Signature Card. And as circumstances in your life change, be sure to review your beneficiary designation. You can change your beneficiary by completing a new signature card.

Your HSA is an inheritable account. What happens to your HSA when you die depends who you named as your beneficiary.

Spouse designated beneficiary. If your spouse is your designated beneficiary, the account will be treated as your spouse's HSA after your death. The account will continue to be tax-free for qualified medical distributions. If your spouse is covered by a qualified HDHP, contributions to the account may also be made tax-free, up to maximum annual contribution limits.

Other than Spouse designated beneficiary. If you designate someone other than your spouse as the beneficiary of your HSA:

• The account stops being an HSA on the date of your death;
• The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die (without penalties); and
• The amount taxable to a beneficiary (other than your estate) is reduced by any qualified medical expenses you incurred prior to your death that are paid from the HSA by the beneficiary within one year after the date of death.

Your estate is the beneficiary. If your estate is the beneficiary of your HSA, the value of your account is included on your final income tax return.

No designated beneficiary on file. If you do not have a beneficiary on file, the funds are payable to the account holder's estate.

When you participate in a payroll deduction program through your employer, deductions can be taken from your payroll before calculating your taxable federal income, FICA (Social Security and Medicare) tax and for most states, taxable state income. By taking deductions pre-tax, you reduce the dollars on which you are taxed and, as a result, reduce your total tax bill.

Above the line means you will reduce your taxable income regardless of whether you itemize or use the standard deduction on your income tax form. If you contribute to your HSA with after-tax dollars, you may deduct the contribution amount, subject to the maximum annual contribution limits from your taxes at filing time.

For 2012, the combined maximum contributions to your HSA, including any made by your employer to your account, are $3,100 if you have individual coverage and $6,250 if you have family coverage. If you turn age 55 or older in 2012 or after, you may add up to $1,000 more as a "catch up" contribution.

For 2013, the combined maximum contributions to your HSA, including any made by your employer to your account, are $3,250 if you have individual coverage and $6,450 if you have family coverage. If you turn age 55 or older in 2013 or after, you may add up to $1,000 more as a "catch up" contribution.

These amounts are valid as long as you enroll in qualified HDHP coverage before the first day of December, meaning you have held at least one full month of HDHP coverage, and so long as you continue to maintain qualified HDHP coverage for the next 12 months.

The IRS determines these maximum contribution limits annually.

There are no tax penalties for closing an HSA. However, if you use ACS|BNY Mellon HSA funds for other than qualified medical expenses, those distributions will be subject to ordinary income tax, and in some cases, a 20 percent penalty.

The 20 percent penalty will be assessed for the year in which you take the distribution for non-qualified expenses. The penalty will be due and payable when you file your annual tax return.

Distributions from your HSA that are used exclusively to pay for qualified medical expenses for you, your spouse, or dependents are excludable from your gross income. Your HSA funds can be used for qualified expenses and will continue to be free from federal taxes and states taxes (for most states) even if you are not currently eligible to make contributions to your HSA.

If you take a non-qualified distribution, you are subject to ordinary income tax and a 20 percent penalty tax. If you are age 65 or older, disabled, or for the year in which you die, the 20 percent penalty may not apply.

If you are no longer eligible to contribute because you are enrolled in Medicare benefits, or are no longer covered by a qualified HDHP, distributions used exclusively to pay for qualified medical expenses continue to be free from federal taxes and state taxes (for most states) and excludable from your gross income.

Form1099-SA notifies the IRS of distributions made from your HSA during the tax year. Form 5498-SA notifies the IRS of contributions made to your HSA during the tax year. ACS|BNY Mellon will send the appropriate form(s) to you with instructions regarding the forms' use and requirements for filing your annual tax return.

Form1099-SA notifies the IRS of distributions made from your HSA during the tax year. Form 5498-SA notifies the IRS of contributions made to your HSA during the tax year. ACS|BNY Mellon will send the appropriate form(s) to you with instructions regarding the forms' use and requirements for filing our annual tax return.

All the dollars in your HSA, including earnings generated on those dollars, are completely free of federal taxes and state taxes (for most states) while in your account. You may have the option of selecting your own investment option(s) for savings above the minimum required for your transactional (checking) account.

The only time tax is ever owed on principal or interest from your HSA is if the money is distributed for non-qualified expenses prior to your reaching age 65, becoming disabled or die. Even if you use the funds for non-qualified expenses after you are 65 or disabled, you will only be subject to tax on the money you withdraw without the 20 percent penalty. You can always withdraw funds to pay for qualified medical expenses at any time without tax or penalty.

Contributions, investment earnings, and distributions for qualified medical expenses all are exempt from federal income tax, FICA (Social Security and Medicare) tax and state income taxes (for most states).

If a family member or anyone else makes a contribution to your HSA, the tax advantages apply to you and not the person making the contribution. You may deduct the contribution amount when filing your annual income taxes, in the same way you would if you had deposited the post-tax contribution on your own. All contributions to the account are combined and subject to maximum annual contribution limits.

This does not include any contributions made to your account by your employer. You do not take any deductions on contributions they make.

Your HSA must be established before qualified medical expenses are incurred to receive tax-free distributions.

How you report your distributions depends on whether or not you use the distribution for qualified medical expenses:

• If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution, but you have to report the distribution on Form 8889. Follow the instructions for the form and file it with your Form 1040.
• If you use a distribution from your HSA for non-qualified expenses, you must pay tax on the distribution. Report the amount on Form 8889 and file it with your Form 1040. You may have to pay an additional 20 percent tax on your taxable distribution. There is no additional tax on distributions made after the date you are disabled, reach age 65, or die.

You must keep records (such as receipts) sufficient to show that:

• The distributions were exclusively to pay or reimburse qualified expenses;
• The qualified expenses had not been previously paid or reimbursed from another source; and
• The medical expenses had not been taken as an itemized deduction in any year.

Do not send these records with your tax return. Keep them with your tax records.

If you contribute more than your maximum annual contribution to your HSA, you may withdraw the excess without penalty up until April 15 of the following year. After that time, the funds are subject to ordinary income and an excise tax.

No. You cannot take the excess as an above the line deduction. You have until the filing date of your federal tax return to take a distribution of the excess contribution from your HSA without incurring a 6 percent excise tax. The amount of the excess contribution is includable in your gross income for tax purposes.

If there is clear and convincing evidence that this was a mistake, you may repay the mistaken distribution no later than April 15 following the first year that you become aware of the mistake. Under these circumstances the distribution is not included in gross income and the 20 percent penalty does not apply. You will need to keep records that demonstrate the actions you took.

You will also receive tax forms from your financial institution that show the distribution, as they will not be able to identify the funds returned as a result of the error. You should follow the instructions on the forms 1099 and 5498, your form 1040 or contact your tax advisor for assistance.

You have until April 15, 2013 for contributions with respect to 2012 HDHP coverage, and until April 15, 2014 for 2013 contributions.

The IRS does not consider a domestic partner a spouse, regardless of state provisions. Thus, unless your domestic partner qualifies as your dependent under the federal tax laws, which is usually not the case, you cannot withdraw funds tax-free to pay for your domestic partner's qualified health care expenses.