Health Saving Account
NEW State HSA Contribution
Up to $720 Annual Contribution!
New for FY 2016-17: State-paid Health Savings Account (HSA) Contributions
Beginning with the FY 2016-17 benefit plan year the State of Colorado will contribute $60 per month to each eligible employee’s Health Savings Account (HSA) at Optum Bank, the State’s designated HSA trustee.
What is a Health Savings Account (HSA)?
An HSA is a tax-advantaged savings account that belongs to you. It is always paired with a HSA-qualified High Deductible Health Plan (HDHP). Think of an HSA as a savings plan for healthcare you’ll need today, tomorrow and into the future. It works like a regular bank savings account, but you don’t pay federal income tax on the money deposited. When you use your HSA money to pay for qualified healthcare expenses (medical, dental and vision) you won’t pay income taxes on the money you withdraw from your account, either. You can build your HSA savings for expenses in future years or even into a nest egg for retirement. Unlike a healthcare flexible spending account (FSA), all of your HSA savings rollover from year to year. There’s no “use it or lose it” rule. The money is there when you need it. And it’s yours to keep.
Determining if an Health Savings Account (HSA) is Right for You
An HSA allows you to be more involved with decisions on how your healthcare dollars are spent and encourages you to budget effectively and save money. In order to think in terms of a healthcare budget, you want to look at your financial situation and the type of healthcare you require. Consider whether you are eligible to establish and contribute to an HSA, have benefits paid from an HSA, or claim the tax deduction for your HSA contributions. Whether a High Deductible Health Plan combined with an HSA is right for you depends on a number of factors including the health needs of you and your family.
Are you eligible to open an Optum Bank HSA?
Health Savings Account (HSA) Eligibility Requirements—Beginning with the FY 2016-17 benefit plan year you can open a Health Savings Account (HSA) at Optum Bank, the State’s designated HSA trustee, if you:
- Are an active State of Colorado benefits eligible employee on the first day of a given month.
- Are enrolled in a State of Colorado sponsored HSA-qualified High Deductible Health Plan (HDHP) on the first day of a given month.
- Are not covered by any other non-HDHP health plan, such as a spouse’s plan, unless it is permissible coverage like dental, vision, long-term care, disability, accident, and insurance covering certain types of liabilities, specific illnesses or diseases, or hospitalization.
- Are not enrolled in any part of Medicare.
- Do not receive health benefits under TRICARE or TRICARE for Life.
- Have not received Veterans Administration (VA) benefits within the past three months. (Some exclusions may apply).
- Cannot be claimed as a tax dependent on another person’s tax return.
- Are not covered by a general purpose healthcare flexible spending account (FSA) or health reimbursement account (HRA). Alternative plan designs, such as a limited purpose FSA or limited purpose HRA, are permitted.
For any month that you do not meet all eight (8) of the above eligibility requirements you are ineligible to open an Optum Bank HSA.
Other IRS restrictions and exceptions may also apply. We recommend that you consult a tax, legal or financial advisor to discuss your personal circumstances and for personal advice on eligibility, tax treatment and restrictions.
If you later switch to a health plan that is not an HSA-qualified HDHP that makes you ineligible to continue depositing money into your HSA, you may continue to use the money in your account for qualified healthcare expenses, but you can no longer make deposits to your HSA.
Are you eligible to receive the State-paid $60 per month HSA Contributions?
Beginning with the FY 2016-17 benefit plan year you are eligible to receive the State-paid $60 monthly HSA contribution for each month you meet all of the following eligibility requirements:
- You are an active State of Colorado benefits eligible employee on the first day of each month in which a contribution can be made to your HSA.
- You are enrolled in a State of Colorado sponsored HSA-qualified High Deductible Health Plan (HDHP) on the first day of each month in which a contribution can made to your HSA.
- You meet the eligibility requirements to be able to open an Optum Bank HSA (see above requirements “Are you eligible to open an Optum Bank HSA?”) on the first day of each month in which a contribution can be made to your HSA. Please note that you must open an Optum Bank HSA as soon as possible in order for the State to be able to deposit the State-paid $60 per month HSA contributions into your account. Once money has been deposited into your Optum Bank HSA you will have access to your HSA funds.
For any month that you do not meet all three (3) of the above eligibility requirements you are ineligible to receive the State-paid $60 per month HSA contribution.
Enroll Online for your Optum Bank HSA
If you meet the eligibility requirements you can sign-up and open your Optum Bank HSA through your employer by visiting your FY 2016-17 State of Colorado open enrollment website at benefitsolver.com.
As part of the USA Patriot Act of 2001 when a Health Savings Account is opened, the account holder goes through a verification process. All financial institutions are required to verify the name, date of birth, social security number and address of each account holder. The USA Patriot Act of 2001 verification process applies to all financial accounts (Public Law 107-56).
Why Have an HSA?
A Health Savings Account (HSA) helps you plan, save and pay for healthcare.
- You own your HSA. The money belongs to you, even deposits made by others to your HSA.
- Anyone can contribute to your HSA. You, your employer, family members or anyone else can deposit money into your HSA. There are no restrictions on who can put money into your HSA.
- You keep your HSA. All the money in your HSA (including contributions deposited by your employer or anyone else) remains yours even if you change jobs, change health plans or retire.
- Your HSA has tax benefits. Money goes into and comes out of an HSA tax-free (as long as HSA funds are used to pay for qualified healthcare expenses).
Here are four key tax benefits to a Health Savings Account (HSA).
- Generally, the State-paid employer contributions to an eligible employee’s HSA are excludable from an employee’s income and are not subject to federal income tax, Social Security or Medicare taxes. The State-paid employer HSA contribution amounts will be reported as non-taxable income in Box 12 of an employee’s W-2 (which also means that an employee cannot deduct their State-paid employer HSA contributions on IRS Form 1040).
- An employee can make personal post-tax contributions directly to his or her HSA (up to IRS statutory limits) and get an “above-the-line” tax deduction (federal taxes) even if the employee does not itemize deductions on IRS Form 1040. This means the employee’s personal post-tax HSA contributions reduce his or her adjusted gross income before itemized or standard deductions are considered.
- Earnings growth in your HSA from interest and investments are tax-exempt.
- Any money you take out from your HSA to pay for qualified healthcare expenses for you, your spouse or your qualifying tax dependent child(ren) (qualifying children) is tax-free.
It’s not just for doctor visits. You can use your HSA to pay for qualified healthcare expenses such as medical, dental, vision, eyeglasses, hearing aids and qualified prescriptions. You can even use your HSA savings to pay for other kinds of health insurance, such as COBRA, long-term care insurance and any health plan coverage you have while receiving unemployment compensation. When you turn 65, you can use HSA funds to pay for any tax deductible health insurance (except for Medicare supplemental insurance).
You can invest it*. Once your balance reaches the designated investment threshold, which is typically around $2,000, you can begin investing in mutual funds at Optum Bank. If you earn money on your investments, you don’t pay income tax on that money, either.
*However, investments like mutual funds are not FDIC insured, are not guaranteed by Optum Bank, and may lose value.
You can save for the future. By saving in an HSA, you can be ready for expenses due to illness or accident. And, after you turn 65 or you enroll in Medicare benefits or you become disabled, you may withdraw money from your HSA for expenses that are nonqualified healthcare expenses without paying the 20 percent (20%) IRS penalty tax, although you may have to pay normal income taxes on the withdrawal.
HSA Contribution Limits—Calendar Year 2016
HSA contribution limits are determined every year by the Internal Revenue Service (IRS) under section 223 of the Internal Revenue Code (IRC). For 2016, the statutory annual HSA contribution limit is $3,350 if you have individual HDHP coverage (unchanged from 2015) and $6,750 if you have family HDHP coverage ($100 higher than for 2015). The IRS also allows you to make an extra catch-up contribution of $1,000 if you are age 55 or older. You can make contributions to your HSA all the way up to the tax-filing deadline (usually April 15) and still get tax credit for the previous calendar year.
|2016 Annual HSA Contribution Limits||Individual Coverage||Family Coverage|
|• Maximum Annual Contribution Limit||$3,350||$6,750|
|• Catch-up Contribution Limit (age 55+)||$1,000||$1,000|
Note: These IRS statutory contribution limits apply to the combined total of all of your HSA deposits including contributions from you, your employer, family members or anyone else.
Note: Catch-up contributions can be made during the calendar year in which the HSA participant turns 55.
An HSA is different than a Healthcare Flexible Spending Account (FSA)
You may have had a Healthcare FSA in the past. With a Healthcare FSA, all the money you chose to contribute was available to help pay for eligible expenses on the first day of your benefit plan year. An HSA works differently. Money grows in your HSA as you and your employer may deposit money into it. You can only use your Optum Bank HSA to pay for qualified healthcare expenses if you have enough money in the account to cover the cost. While you are growing your HSA savings, you may be required to pay for a qualified healthcare expense out of your pocket if your HSA balance is not great enough to pay for the expense. You can reimburse yourself from your HSA later, after you have enough money in your account.
Paying with your HSA is Easy
- Use your Optum Bank debit card to pay at the pharmacy, doctor’s office or elsewhere. You can also order extra debit cards for covered family members.
- Pay your bills for qualified healthcare expenses online at optumbank.com.
- Pay out-of-pocket and reimburse yourself. You can do that online at optumbank.com or by withdrawing money with your Optum Bank debit card from any ATM with the MasterCard logo.
- Order Optum Bank checks.
There are several ways to contribute money to your account:
- State-Paid (Employer) contributions: Beginning with the FY 2016-17 benefit plan year the State of Colorado will contribute $60 per month to your HSA if you are eligible to open an Optum Bank HSA, you open an Optum Bank HSA, and you are eligible to receive the State’s monthly HSA contributions.
- Electronic deposits: Log on to optumbank.com and make a deposit by transferring money from another bank account.
- Check: Mail a check along with a contribution form to Optum Bank. The contribution form is available online on the Optum Bank website.
- Transfer or roll over funds: If you already have an HSA, you can roll over or transfer funds from that account into your Optum Bank account. Some restrictions will apply. More information and a rollover/transfer form is available online on the Optum Bank website.
Be on the Lookout
After you open your Optum Bank HSA you will receive in the mail your welcome kit with your account number, account disclosures, and your Optum Bank HSA Debit MasterCard.
Optum Bank Customer Service
- You can call Optum Bank toll-free at (866) 234-8913. Customer service representatives are available from 8 a.m. to 8 p.m. Eastern time, Monday through Friday. Assistance for most foreign language speakers is also available. Optum Bank customer service representatives do not have access or data about your HSA-qualified High Deductible Health Plan or claims. Please contact your health plan for that information.
- Log into your account through optumbank.com. Manage your account online. Make deposits. Pay bills directly to physicians, dentists, or other healthcare providers. Reimburse yourself for qualified healthcare expenses paid out-of-pocket. Check monthly statements. Download account forms. Update your email address or change your mailing address. Find helpful HSA information.
Optum Bank—HSA Administration Fee
Once an eligible employee has opened their Optum Bank Health Savings Account (HSA) and money has been deposited into your HSA, Optum Bank will begin to charge you an HSA administration fee of $1.75 per month which will be deducted from your HSA funds. In addition to the monthly HSA administration fee, Optum Bank may charge you fees for other banking services you use.
How to File Taxes for an HSA
If you contributed money to your Health Savings Account (HSA) you’ll want to fill out IRS Tax Form 8889 so you can deduct the correct amounts from your taxable income. Don’t forget to file this form to claim the tax deductions.
Important Information about Children
While the Affordable Care Act (ACA) allows parents to add their adult children (up to age 26) to their health plans, the Internal Revenue Code (IRC) definition of a qualifying tax dependent child (qualifying child) who may be covered under an employee’s HSA is different. This means, for instance, if you have adult children covered under your health plan you may not use your HSA funds to pay or reimburse yourself for their qualified healthcare expenses if they are not your qualifying tax dependent children.
For more information refer to the Working Families Tax Relief Act of 2004 (WFTRA) which established the IRS definition of a qualifying tax dependent child (qualifying child) effective January 1, 2005.
- Health Savings Accounts (HSAs) are individual accounts and are subject to eligibility and restrictions, including restrictions on distributions for qualified healthcare expenses set forth in section 213(d) of the Internal Revenue Code (IRC).
- State taxes may apply. While Health Savings Accounts (HSAs) were created by the federal government, states can choose to follow federal tax treatment guidelines or establish their own. Please consult your tax advisor or state department of revenue for more information.
- If you are not age 65 or not enrolled in Medicare benefits or not disabled and you use your HSA funds for nonqualified purposes, any HSA funds used for nonqualified purposes are taxable as normal income and also subject to an additional 20 percent (20%) IRS tax penalty.
- After you turn age 65 or become enrolled in Medicare benefits, you may withdraw money from your HSA for nonqualified purposes without being subject to the 20 percent (20%) IRS tax penalty. The HSA fund withdrawal is treated as retirement income and is subject to normal income tax. The same holds true if you become disabled before age 65; you are not liable for the 20 percent (20%) IRS tax penalty and the HSA fund withdrawals are taxable as normal income.
- Optum Bank fees may reduce HSA fund balances.
- Federal and state laws and regulations are subject to change.
- Be careful to save medical, dental, vision and all other qualified healthcare expense receipts. You are responsible for being able to prove, if questioned by the IRS, that you used your HSA funds only for qualified healthcare expenses.
- Track your qualified healthcare expenses with the Expense Tracker Worksheet on optumbank.com or your own money management software.
- Retain all tax documents you receive from Optum Bank for filing your tax returns and maintaining your records.
This information is not intended as legal or tax advice. We recommend that you consult a tax, legal or financial advisor to discuss your personal circumstances and for personal advice on eligibility, tax treatment and restrictions.
UHC HDHP with HSA Enrollment
Kaiser HDHP with HSA Enrollment
Optum Bank Routing #: 1243 8487 7
2016 Open Enrollment Presentation
HSA User Guide
A Short Guide to HSAs
HSA Qualified Expenses
HSA Planning Guide
50+ HSA Planning Guide