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E-News ~ 2nd Qtr 2004 |
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From the office of Tim Olson, CEBS, CMFC Our lead story this issue focuses on health savings accounts (HSAs). Employers are starting to add high deductible health plans (HDHP) as another option to their current plan in anticipation of establishing an HSA account in the future. As you are probably aware, an HDHP must be offered to set up an HSA. We just found out that prescription drug benefit co-pays will be allowed in an HDHP through January 1, 2006. This is great news since co-pays have not previously been allowed. Currently, most Nebraska health care providers do not offer HDHP plans, but we believe that day is forthcoming for everyone. Read the following information to be more knowledgeable regarding HSAs, and do not hesitate to call THE OLSON GROUP with any questions you may have. Health Savings Accounts (HSA) Defined Basic Facts An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, is covered under a high-deductible health plan. An "eligible individual" means, with respect to any month, any individual who: (1) is covered under a high-deductible health plan (HDHP) on the first day of such month; (2) is not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing certain limited types of coverage); (3) is not entitled to benefits under Medicare; and (4) may not be claimed as a dependent on another person's tax return. An HDHP is a health plan that satisfies certain requirements with respect to deductibles and out-of-pocket expenses. Specifically, for self-only coverage, an HDHP has an annual deductible of at least $1,000 and annual out-of-pocket expenses required to be paid (deductibles, co-payments and other amounts, but not premiums) not exceeding $5,000. For family coverage, an HDHP has an annual deductible of at least $2,000 and annual out-of-pocket expenses required to be paid not exceeding $10,000. In the case of family coverage, a plan is an HDHP only if, under the terms of the plan and without regard to which family member or members incur expenses, no amounts are payable from the HDHP until the family has incurred annual covered medical expenses in excess of the minimum annual deductible. A network plan is a plan that generally provides more favorable benefits for services provided by its network of providers than for services provided outside of the network. In the case of a plan using a network of providers, the plan does not fail to be an HDHP if it would otherwise meet the requirements of an HDHP. The annual contribution limit is determined by reference to the deductible for services within the network. A self-insured medical reimbursement plan sponsored by an employer can be an HDHP if it meets the requirements. Eligibility An individual is eligible if he/she is covered under a high-deductible health plan. An individual is ineligible for an HSA if the individual, while covered under an HDHP, is also covered under a health plan (whether as an individual, spouse, or dependent) that is not an HDHP. The individual can have coverage for any benefit provided by "permitted insurance." Permitted insurance is insurance under which substantially all of the coverage provided relates to liabilities incurred under workers' compensation laws, tort liabilities, liabilities relating to ownership or use of property (e.g., automobile insurance), insurance for specified disease or illness, and insurance that pays a fixed amount per day (or other period) of hospitalization. An individual does not fail to be eligible for an HSA merely because, in addition to an HDHP, the individual has coverage for accidents, disability, dental care, vision care, or long-term care. Establishing An HSA Beginning January 1, 2004, any eligible individual can establish an HSA with a qualified HSA trustee or custodian. No permission or authorization from the Internal Revenue Service is necessary to establish an HSA. An eligible individual who is an employee may establish an HSA with or without involvement of the employer. The HSA can be established through a qualified trustee or custodian who is different from the HDHP provider. Where a trustee or custodian does not sponsor the HDHP, the trustee or custodian may require proof or certification that the account beneficiary is an eligible individual, including that the individual is covered by a health plan that meets all of the requirements of an HDHP. Contributions Any eligible individual may contribute to an HSA. For an HSA established by an employee, the employee, the employee's employer or both may contribute to the HSA for the employee in a given year. Family members may also make contributions to an HSA on behalf of another family member as long as that other family member is an eligible individual. The maximum annual contribution to an HSA is the sum of the limits determined separately for each month, based on status, eligibility and health plan coverage as of the first day of the month. For calendar year 2004, the maximum monthly contribution for eligible individuals with self-only coverage under an HDHP is 1/12 of the lesser of 100% of the annual deductible under the HDHP (minimum of $1,000) but not more than $2,600. For eligible individuals with family coverage under an HDHP, the maximum contribution is 1/12 of the lesser of 100% of the annual deductible under the HDHP (minimum of $2,000) but not more than $5,150. In addition to the maximum monthly contribution amount, catch-up contributions, may be made by or on behalf of individuals age 55 or older and younger than 65. After an individual has attained age 65 (the Medicare eligibility age), contributions, including catch-up contributions, cannot be made to an individual's HSA. In the case of individuals who are married to each other, if either spouse has family coverage, both are treated as having family coverage. If each spouse has family coverage under a separate health plan, both spouses are treated as covered under the plan with the lowest deductible. The contribution limit for the spouses is the lowest deductible amount, divided equally between the spouses unless they agree on a different division. Contributions to an HSA must be made in cash. Payments for the HDHP and contributions to the HSA can be made through a cafeteria plan. Contributions made by an eligible individual or by a family member to an HSA are deductible by the eligible individual in determining adjusted gross income. The contributions are deductible whether or not the eligible individual itemizes deductions but cannot also be deducted as medical expenses. In the case of an employee who is an eligible individual, employer contributions to the employee's HSA are treated as employer-provided coverage for medical expenses under an accident or health plan and are excludable from the employee's gross income. The employer contributions are not subject to withholding from wages for income tax or subject to the FICA, FUTA, or Railroad Retirement Tax Act. Contributions to an employee's HSA through a cafeteria plan are treated as employer contributions. The employee cannot deduct employer contributions on his or her federal income tax return as HSA contributions or as medical expense deductions. An HSA is generally exempt from tax, unless it has ceased to be an HSA. Contributions for the taxable year can be made in one or more payments, at the convenience of the individual or the employer, at any time prior to the time prescribed by law (without extensions) for filing the eligible individual's federal income tax return for that year, but not before the beginning of that year. If contributions exceed the maximum amount, that amount in excess is not deductible. Distributions An individual is permitted to receive distributions from an HSA at any time. Distributions from an HSA used exclusively to pay for qualified medical expenses of the account beneficiary, his or her spouse, or dependents are excludable from gross income. Any amount of the distribution not used exclusively to pay for qualified medical expenses is includable in gross income of the account beneficiary and is subject to an additional 10% tax on the amount includable, except in the case of distributions made after the account beneficiary's death, disability, or attaining age 65. The term "qualified medical expenses" are expenses paid by the account beneficiary, his or her spouse or dependents for medical care as defined in section 213(d) (including nonprescription drugs as described in Rev. Rul. 2003-102, 2003-38 I.R.B. 559), but only to the extent the expenses are not covered by insurance or otherwise. The qualified medical expenses must be incurred only after the HSA has been established. HSA trustees or custodians and employers are not required to determine whether HSA distributions are used for qualified medical expenses. Individuals who establish HSAs make that determination and should maintain records of their medical expenses sufficient to show that the distributions have been made exclusively for qualified medical expenses and are therefore excludable from gross income. Reporting Employer contributions to an HSA must be reported on the employee's Form W-2. In addition, information reporting for HSAs will be similar to information reporting for Archer MSAs. The IRS will release forms and instructions, similar to those required for Archer MSAs, on how to report HSA contributions, deductions, and distributions.
Securities offered through
Sunset Financial Services, Inc. 3520 Broadway Kansas City, MO 64111 (816) 753-7000 (OSJ) Member NASD/SIPC Sunset Financial is not affiliated with The Olson Group. |
What Is A Mutual Fund?
Mutual funds generally invest in stocks, bonds, short-term money market securities, and a mix of these securities. Some funds can invest all over the world or only in certain regions; others focus on specific industries or sectors of the economy; or only in large companies or small companies. In all, more the 8,000 mutual funds are available in the United States. If you are investing for retirement, education, travel, a new home or just for a rainy day, mutual funds can help you achieve your objectives. When An Employee Terminates, Should They "Port" Term Life Coverage or Convert? In general, employees may keep their term life coverage (employer and/or employee paid) upon termination of employment by utilizing either the portability or conversion provisions. If the employee is healthy, portability is the way to go because they are buying group term insurance compared to permanent insurance under the conversion option. As most of you are probably aware, term insurance is much less expensive. Following are the basic rules for each provision. Be sure to check your own group term life contract for specific language regarding these provisions.
AUL Participant Status Sheet The newest version of the Participant Status Sheet (P-15523) is available online through the eProducer and eSponsor websites. This form is used to report any changes in status of participants. The status sheet should be used by any Plan Sponsor wishing to update statuses, initiate Mandatory Cash Outs or instruct AUL to initiate withholding at 100% for participant account balances less than $20. Remember to use the Power Image Fax for all AUL Enrollment Forms, Beneficiary Forms, and all other change forms.
Fax No. (317) 285-1728
Keep a copy in the personnel file. It is not necessary to send a copy to The Olson Group.
The Essence of Today
I expect to pass through this world but once. Any good I can do, or any kindness that I can show, let me do now, for I shall not pass this way again.
Remember to Acknowledge
"I can't think of a single person who doesn't love and appreciate being acknowledged. You can acknowledge others in many ways. When someone calls you, acknowledge the call. When they send you something, remember to say thank you, or take the time to write a note. When someone does a good job, say so. When they apologize, acknowledge that too. It's especially important to acknowledge acts of kindness - doing so reinforces the act and encourages more of the same." Richard Carlson, PH.D. Author of "Don't Sweat The Small Stuff"
Teamwork
"Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishment toward organizational objectives. It is the fuel that allows common people to attain uncommon results."
Prepare For The Future
"Today is the first day of the rest of your life. So, it's no use fussing about the past because you can't do anything about it. But you have today, and today is when everything that's going to happen from now on begins." Harvey Firestone, Jr.
Joke of The Day
Customer Service Contacts
AFLAC 1-800-462-3522 www.aflac.com Allstate (AHL) 1-800-521-3535 www.ahlcorp.com American Funds 1-800-421-0180 www.americanfunds.com Ameritas 1-800-487-5553 www.ameritasgroup.com AUL 1-800-249-6269 www.eretirement.aul.com Enrollment Fax: 1-317-285-1728 Blue Cross Blue Shield 1-888-232-0942 www.bcbsne.com PRINCIPAL 1-800-547-7754 www.principal.com UNUM 1-800-255-6148 www.unumprovident.com Regional Care, Inc. www.regionalcare.com |
The Olson Group
20214 Veterans Drive, Suite 200PO Box 543
Elkhorn, NE 68022
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PHONE: (402) 289-1046 |
TOLL FREE: 1-866-289-1046 |
FAX: (402) 289-1012 |
EMAIL: tolson@theolsongroup.net |
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