U.S. Bank Health Savings SolutionSM

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U.S. Bank Health Savings SolutionSM

• An Institutional Trust Custody Product

HSA Basics Industry Insights

• (Presenter Name)
• (Job Title)
• (Company)
• (Date)

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Health Care Market Forces, Trends and Solutions

• Employers can no longer manage rapidly increasing
  health care costs
• Over 60 cost increase since 2001
• 75 of employers say they are likely to offer
  HDHP in 2006
• Employees can not continue to manage for
  reduction in health care benefits and
  cost-shifting
• The solution must benefit employers financially
• The solution must be seen by employees as a
  positive and not a reduction in benefits

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Background What is an HSA?

• Medicare Modernization Act 2003 (MMA)
• Promoted Use of High Deductible Health Plans
  (HDHP)
• Deductible for individual coverage is 1,050
• Deductible for family coverage is 2,100
• HDHP turns health care users into health care
  consumers
• The HSA was created to put accountholders in
  control of their health care spending decisions
• The HSA is designed to help accountholders save
  money for their health care expenditures in a
  tax-advantaged saving vehicle

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Health Care Market Forces, Trends and Solutions

• HDHP A shift for employers and employees
• Employer saves substantially on premiums
• Can offer several HDHP options
• Employee becomes a consumer of health care
• Empowered to shop on price and quality
• Proactive vs. reactive health care decision
  making

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HSA Advantages

• Employer
• Reduction/Control of health care costs
• Reduction in payroll taxes
• Turns health care users into smart consumers
• Employee
• Pay only for insurance costs, not to cover
  routine care
• Lower monthly premiums
• Difference goes to HSA, which is their money to
  spend or save no use-it-or-lose-it factor
• Save for medical expenses or for retirement

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HSA Industry Trends

• Earliest adopters professionals and
  small/medium employers
• Two types of HSA employees
• Spenders 60
• Savers 40
• Employers are choosing an HSA Custodian
  independent from their health care provider
• Trending away from complex integration with their
  health plan

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HSAs What should an employer look for?

• HSA Enrollment Materials clear, concise, easy
  to understand
• Bundled HSA Fees no separate transaction
  charges
• Easy To Use easy access for deposits and
  withdrawals
• Service Level Commitments turnaround time and
  resources
• Multiple Investment Options trustworthy and
  familiar
• Employer Reports and HSA Tax Administration
• Consumer Decision Support Tools financial and
  medical

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HSAs What is your best strategy?

• Cut/control health care costs by choosing an HDHP
  option
• Choose an HSA Custodian separate from the health
  care provider
• If offering a choice of coverage, employer should
  consider contributions to an HSA in order to
  increase adoption rates for HDHPs
• Pay first year HSA administration costs for
  employee
• Create electronic payroll contributions for
  employees
• Amend your 125 Plan to allow for pre-tax
  contributions

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How the HSA Works Who is Eligible for an HSA?

• To be eligible to contribute funds to the HSA,
  the accountholder must be covered by a high
  deductible health plan (HDHP)
• The accountholder cannot be enrolled in Medicare
  and/or be receiving Medicare benefits
• The accountholder cannot be counted as a
  dependant on someone elses tax return

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How the HSA Works Contributing to an HSA

• Accountholder Contribution Options
• The accountholder can contribute money to the HSA
  through payroll deduction on a pre-tax basis
• The contributions reduce the accountholders
  taxable income by the amount deposited into the
  HSA
• The accountholder can also contribute money on
  an after-tax basis using
• Deposit Coupons
• U.S. Bank eContributeSM (contribution tool
  available via Web site and IVR)
• Employer Options (Delete if employer is not
  contributing)
• Contribute money to employee HSA
• Contributions for employees are tax-deductible to
  the employer
• Employee salary deferrals exempt from Social
  Security taxes
• Savings on employee FICA taxes

(HSA is not an employer sponsored plan like other
qualified plans or other group health plans
the accountholder owns the account)
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How the HSA Works Having Funds in an HSA

• Funds in the HSA belong to the HSA Accountholder
• Funds are held in an individual interest bearing
  custodial account (similar to a checking account)
  FDIC insured
• Funds are always available to be used there are
  no restrictions or vesting schedules for funds
  contributed by the employer
• HSA is portable there are no restrictions on
  maintaining funds in an existing HSA or moving
  funds to a new HSA
• There is no annual use-it-or-lose-it provision on
  an HSA
• Upon death, the funds are transferred to the
  designated beneficiary of the HSA
• If beneficiary is spouse, the account remains an
  HSA. If beneficiary is non-spouse, funds will be
  distributed as cash, and beneficiary will be
  issued a 1099-SA for tax reporting
• Funds in the HSA are allowed to grow from year to
  year without taxation
• HSAs can be used as a tax-advantaged savings
  vehicle (like an IRA or 401(k))
• Funds in the HSA can be invested in mutual funds,
  including lifecycle and lifestyle funds and money
  market funds.
• The accountholder does not pay taxes on the
  interest earned in the HSA
• The accountholder does not pay taxes on the
  growth of the investments in the accountholders
  HSA

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How the HSA Works Using HSA Funds

• Two ways for accountholder to use HSA funds
• Distributions from the HSA are not taxed as long
  as the funds are used for qualified medical
  expenses (QME)
• Funds can also be used for any reason, not just
  QME, without penalty after the age of 65
• It is the accountholders responsibility to
  report HSA distributions to the IRS
• A list of QMEs can be found at www.irs.gov

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Contact Information

• (Presenter Name)
• (Job Title)
• (Company)
• (Phone Number)
• (Email Address)
• (Date)