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Title: plan deductible or IRS annual limits. Contributions ..


1
Consumer Driven Health Plans (CDHP) Sales
Training
Health Savings Accounts (HSAs) Whats Changed
for 2007
2
Session agenda and objective
  • Brief review of the characteristics of Health
    Savings Accounts (HSAs)
  • Description of the changes in the Federal rules
    for HSAs in 2007
  • Description of sales/marketing collateral and key
    sales messages
  • Questions and answers

Prerequisite You have existing knowledge of
the characteristics and rules of HSAs
3
Note!
We are not providing investment or tax or legal
recommendations, advice, or endorsements in this
presentation.
4
Review The Characteristics of Health Savings
Accounts
5
Review HSA characteristics
Which of the following statements are true about
HSAs?
6
Changed HSA Regulations 2007
7
HSA rules overview of changes
  • Old rules
  • Contribution limits defined by plan deductible
    or IRS annual limits
  • Contributions prorated from plan effective date
  • Rollover of unused HRA/FSA funds into HSA not
    allowed
  • Contributions into HSA during FSA grace
    periodnot allowed
  • Transfer of funds from IRA to HSA not allowed
  • Contributions must be comparable for
    compensated employees
  • Cost of living adjustments (indexed amounts)
    released inlate November
  • New rules 2007
  • Contribution limits are subject only to IRS
    annual limits
  • Full contribution maximums are allowed when
    enrolled
  • One-time rollover of HRA/FSA funds into HSA is
    allowed
  • Contributions into HSA during FSA grace
    periodare allowed
  • One-time transfer of funds from IRA to HSA is
    allowed
  • Contributions may be larger for
    non-highlycompensated employees
  • New rule 2008
  • Cost of living adjustments (indexed amounts)
    will be released by June 1

Certain conditions must be met to avoid tax
penalties.
8
New Rule for 2007 Contribution Limits Are
Subject Onlyto IRS Annual Limits
9
New rule for 2007 Contribution limits only
subject to IRS annual limits
  • Old rule
  • Could contribute the lesser of
  • Actual deductible amount
  • or
  • Maximum allowed

Example old rule For an employee with single
coverage, the deductible had to be at least
1,050 and that is the most that could be
contributed to an HSA for such a policy.
However, if that employee had a single coverage
plan with a deductible of 3,000, up to 2,700
could be contributed to the HSA. (Individuals 55
years or older could contribute an additional
700.)
Example old rule (click)
Example new rule For an employee with single
coverage, the deductible must now be 1,100 and a
family plan must have a 2,200 deductible.
However, contributions up to 2,850 can be made
to an HSA for a single plan and 5,650 for a
family plan. (Individuals over 55 may also
contribute an additional 800.)
10
New rule for 2007 Contribution limits only
subject to IRS annual limits
  • Extra notes about the rule
  • The minimum deductible determines if the health
    plan is HSA qualified.An HSA would not be
    qualified if the health plan deductible is less
    than 1,100 for single coverage or 2,200 for
    family coverage.
  • The maximum out of pocket expenses allowed have
    also increased to 5,500 (250 more than 2006)
    for single coverage and to 11,000 (500 more)
    for family coverage.
  • The member must maintain a full 12-month plan
    eligibility to avoid a tax penalty.

New rule Can contribute up to maximum allowed
(contribution cap) Key amounts have been
Increased (deductibles andcontribution caps)
Family
Single
HSA minimum required deductible
2,200
1,100
HSA contribution cap(plus 800 if over 55)
5,650
2,850
11
New rule for 2007 Contribution limits only
subject to IRS annual limits
  • Check your understanding of the new rule
  • Bob, age 46, has self-only coverage with a 1,500
    annual deductible.
  • The legal HSA contribution limit in 2007 for
    single coverage is 2,850 (plus 800 if over
    55).
  • Bob joined the plan January 1, 2007 and stayed in
    the plan for a full 12 months after that.
  • Question 1 of 2
  • Under the new law, what is the maximum that can
    be contributed
  • to Bobs HSA during 2007?
  • Think about your answer, and then click or press
    a key to see the correct answers.
  • 1,100
  • 1,500
  • 2,850
  • 5,560

Under the old rule, with a 1,500 deductible, the
maximum contribution would have been 1,500.
Under the new rule, an additional 1,350 can be
contributed to Bobs HSA. This allows more to be
saved for qualified medical expenses.
12
New rule for 2007 Contribution limits only
subject to IRS annual limits
  • Check your understanding of the new rule
  • Maria, age 57, has family coverage with a 2,500
    annual deductible.
  • The legal HSA contribution limit in 2007 for
    family coverage is 5,650 (plus 800 if over
    55).
  • Maria joined the plan January 1, 2007 and stayed
    in the plan for a full 12 months after that.
  • Question 2 of 2
  • Under the new law, what is the maximum that can
    be contributed
  • to Marias HSA during 2007?
  • Think about your answer, and then click or press
    a key to see the answers.
  • 2,200
  • 2,500
  • 5,650
  • 6,450

Under the old rule, with a 2,500 deductible, the
maximum contribution would have been 2,500 (the
amount equal to the deductible). With the
changed rule, as much as 6,450 can be
contributed to her HSA the maximum contribution
of 5,650 plus the 800 extra for being older
than 55. (5,650 800 6,450)
13
New Rule for 2007 Full Contribution Maximums
Are Allowed When Enrolled
14
New rule for 2007 Full contribution maximums
allowed when enrolled
Old rule If an individual enrolled in a plan
after the effective date, contribution limits to
the HSA were calculated prorated on a
month-to-month basis (1/12 of the annual
contribution limit).
Months, 2006
1
2
3
4
5
6
7
8
9
10
11
12
Enroll after health plan effective date of 1/1/06
1/12 contribution per month enrolled.
Example old rule Nick enrolled in an
HSA-compatible health plan on June 1, 2006. The
plan deductible was 1,200. The legal
contribution limit that year was 1,200 (the same
as the deductible) but the maximum that could be
contributed to his HSA under the 2006 rule for
prorated limits was 700 (the maximum
contribution allowed 1,200 divided by 12
months 100 per month times 7 months June-Dec
).
Example old rule (click)
Months, 2007
New rule If an individual enrolls in a plan after
the effective date, but on or before December 1
of the plan year, then the maximum may be
contributed to the HSA.
Example new rule Karin, age 33, enrolls in an
HSA-compatible health plan on June 1, 2007. The
plan deductible is 1,200. The legal
contribution limit in 2007 is 2,850 and that
full amount (2,850) may be contributed to her
HSA for 2007 even though she will be an eligible
member for only seven months. Note There are
some caveats associated with this, described next.
Example new rule (click)
15
New rule for 2007 Full contribution maximums
allowed when enrolled
  • Extra notes about the rule
  • Someone who joins the plan after the effective
    date must remain eligible until December 31 of
    the year following enrollment to avoid a tax
    penalty.
  • Click to see an example.

Example new rule Karin, who enrolled June 1,
2007, made a full years contribution to her HSA
in the amount of 2,850. She must maintain
membership in the plan (or COBRA or another plan)
through December 31, 2008 to avoid tax
consequences.
Months, 2007
New rule If an individual enrolls in a plan after
the effective date, but on or before December 1
of the plan year, then the maximum may be
contributed to the HSA.
Months, 2008
Must remain eligible until December 31 of the
year following enrollment
16
New rule for 2007 Full contribution maximums
allowed when enrolled
  • Extra notes about the rule
  • Someone who joins the plan after the effective
    date must remain eligible until December 31 of
    the year following enrollment to avoid a tax
    penalty.
  • If the person terminates employment during the 12
    month period, he/she must elect COBRA or coverage
    under another qualified health plan to avoid
    adverse income tax consequences.Click to see an
    example.

Example new rule, continued Karin terminates
employment February 1, 2008 and does not elect
COBRA or another qualified plan. The portion
of the contributions she made for January through
May of 2007 (the five months before she joined
the plan) consequently must be included in her
income and will be subject to a 10 tax. In
Karins case, the amount added to her 2008 income
will be 1,187.50 (5/12 of 2,850) plus a 10 tax
(118.75).
Months, 2007
New rule If an individual enrolls in a plan after
the effective date, but on or before December 1
of the plan year, then the maximum may be
contributed to the HSA.
Months, 2008
Must remain eligible until December 31 of the
year following enrollment
17
New rule for 2007 Full contribution maximums
allowed when enrolled
  • Check your understanding of the new rule
  • The plan effective date is January 1, 2007.
  • Lou, a late-year hire, enrolls in single coverage
    on December 1, 2007.
  • His health plan deductible is 1,500.
  • The legal HSA contribution limit for a single
    coverage plan in 2007 is 2,850.
  • Question 1 of 2
  • Under the new law, how much can Lou contribute
    during 2007
  • even though he enrolls with just one month left
    in the year?
  • Think about your answer, and then click or press
    a key to see the answers.
  • 125
  • 237.50
  • 1,500
  • 2,850

Under the old rule, only 1/12 of the annual limit
could have been contributed to Lous HSA. This
would have totaled 125 (1/2 of the limit of
1,500 the deductible ). Under the new rule,
the legal maximum of 2,850 can be contributed to
Lous HSA for 2007.
18
New rule for 2007 Full contribution maximums
allowed when enrolled
  • Check your understanding of the new rule
  • Doreen, 61, first enrolls in self-only coverage
    on May 1, 2007. Under the new rule she is HSA
    eligible for all of 2007 (January through
    December 2007).
  • Contributions to her HSA for 2007 total 3,650
    (2,850 plus 800 catch up).
  • She ceases to be HSA eligible March 1, 2008 for
    reasons other than death or becoming disabled.
  • Her situation results in tax consequences.
  • Question 2 of 2
  • How many months will be included in the tax
    penalty?
  • Think about your answer, and then click or press
    a key to see the answers.
  • 4
  • 7
  • 12

Per the new rule, her tax penalty will be the
four months of January, February, March, and
April of 2007. 1,216.67 (4/12 x 3,650) will be
included in her 2008 gross income and a 10
additional tax (121.67) will also apply.
19
New Rules for 2007 One-time Rollover of HRA/FSA
Funds into HSA Is Allowed Contributions into HSA
During FSA Grace Period Are Allowed
20
New rule for 2007 One-time rollover of HRA/FSA
funds into HSA allowed
Old rule Funds from Health Flexible Spending
Accounts (FSAs) and Health Reimbursement
Accounts (HRAs) could not be rolled over or
otherwise transferred into HSAs.
FSA
HRA
HSA
  • New rule
  • Employer can offer a one-time rollover of funds,
    tax free, before January 1, 2012 for
    participants who had an FSA/HRA account balance
    on September 21, 2006.
  • The amount rolled over into the HSAdoes not
    decrease the contribution cap.

FSA
HRA
HSA
Rollover 100 Contribution
Example new rule Liannes employer allows a roll
over of 1,000 from her HRA into her HSA in 2007.
The HSA cap for 2007 for her family coverage plan
is 5,650, the full amount of which may still be
contributed to her HSA in addition to the
1,000 rollover.
Example new rule (click)
21
New rule for 2007 One-time rollover of HRA/FSA
funds into HSA allowed
  • Extra notes about the new rule
  • The amount that may be rolled over can be either
  • The FSA/HRA balance as of September 21, 2006
  • or
  • The FSA/HRA balance as of the date of the
    rollover
  • whichever amount is less.
  • Click to see an example.

22
New rule for 2007 One-time rollover of HRA/FSA
funds into HSA allowed
  • Extra notes about the new rule
  • The amount that may be rolled over can be either
  • The FSA/HRA balance as of September 21, 2006
  • or
  • The FSA/HRA balance as of the date of the
    rollover
  • whichever amount is less.
  • The member must maintain a full 12-month plan
    eligibility following the month of the rollover
    to avoid a tax penalty.Click to see an example.

23
New rule for 2007 One-time rollover of HRA/FSA
funds into HSA allowed
  • More extra notes about the new rule
  • This qualified HSA distribution feature is
    optional for employers they may choose to add it
    to health FSA or HRA plans but are not obligated
    to do so.
  • An employer who offers rollovers to any employee
    must offer to all employees covered under the
    employers HDHP otherwise a hefty excise tax
    applies.

24
New rule for 2007 One-time rollover of HRA/FSA
funds into HSA allowed
  • Check your understanding of the new rule
  • On September 1, 2006 Josh had 2,000 in his
    health FSA.
  • Later that month, on September 21, Josh had
    2,500 in his health FSA.
  • On the day of the rollover, the balance has grown
    to 2,800.
  • Josh, age 46, has self-only HDHP coverage with a
    1,500 deductible.
  • The statutory HSA contribution limit in 2007 for
    single coverage is 2,850.
  • Question 1 of 2
  • Under the new rules for 2007, how much can Josh
    rollover into
  • his HSA in 2007?
  • Think about your answer, and then click or press
    a key to see the answers.
  • 2,000
  • 2,500
  • 2,800
  • 2,850

In this case, the amount that can be rolled over
is the balance in the health FSA on September 21,
2006 (2,500) because it is less than the balance
on the rollover date. Under the old rule, Josh
would not have been able to rollover any amount
from his health FSA (or an HRA).
25
New rule for 2007 One-time rollover of HRA/FSA
funds into HSA allowed
  • Check your understanding of the new rule
  • In early 2007, Josh rolled 2,500 from his health
    FSA into his HSA.
  • Josh, age 46, has self-only HDHP coverage with a
    1,500 deductible.
  • The statutory HSA contribution limit in 2007 for
    single coverage is 2,850.
  • Question 2 of 2
  • Counting the rollover amount, what is the maximum
    that could
  • be contributed to Joshs HSA in 2007?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Just the 2,500 from the rollover
  • The 2,500 from the rollover plus 1,500 (same
    amount as the deductible)
  • The 2,500 from the rollover plus 2,850
    (contribution limit)

The rollover does not decrease the HSA
contribution limit.
26
New rule for 2007 Contributions to HSA during FSA
grace period allowed
  • Old rule
  • If an individual was a participant in a health
    FSA on the last day of the plan year and that
    FSA had a grace period (usually 2.5 months), the
    individual was not allowed to establish or
    contribute to an HSA until the end of the grace
    period.
  • This was true even if the FSA account balance was
    zero.

Months prior to 2007
Example old rule (click)
Example old rule Tony participated in a health
FSA in 2005 with a 2.5 month grace period. He
had a zero balance on December 31, 2005. Under
the old rules, he was not able to enroll in an
HSA until April 1 of 2006 (after the FSA grace
period) and he would have been able to contribute
only 9/12 of the HSA contribution limit.
New rule An FSA participant may establish or
contribute to an HSA during the FSA grace period
(with certain conditions, described next).
27
New rule for 2007 Contributions to HSA during FSA
grace period allowed
  • Extra notes about the rule
  • One of the following must apply
  • Either
  • The balance in the FSA is 0 at the end of the
    plan year.
  • or
  • The employer allows a one-time transfer of the
    entire FSA balance at the end of the plan year.

OR
Example new rule (click)
Example new rule Joanies health FSA includes a
2.5 month grace period (January 1-March 15)
following each calendar plan year. On December
31, 2006, her FSA balance is 0 and she is HSA
eligible for 2007. Under the new rules, the FSA
grace period is disregarded and so she may enroll
in an HSA (any time) and the full annual maximum
for her plan may be contributed to her HSA.
New rule An FSA participant may establish or
contribute to an HSA during the FSA grace period
(with certain conditions, described next).
28
New rule for 2007 Contributions to HSA during FSA
grace period allowed
  • Check your understanding of the new rule
  • In 2006, Maiko participated in a health FSA that
    has a 2.5 month grace period.
  • She had a balance of 0 in her FSA on December
    31, 2006.
  • Question 1 of 2
  • If she is HSA eligible, is she allowed to
    participate in an HSA as
  • early as January 1, 2007?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Yes
  • No

The new rules disregard the FSA grace period.
Of course Maiko must have a health plan that
meets HSA deductible requirements.
29
New rule for 2007 Contributions to HSA during FSA
grace period allowed
  • Check your understanding of the new rule
  • In 2006, Oscar participated in a health FSA that
    has a 2.5 month grace period.
  • He had a balance of 100 in his FSA on December
    31, 2006.
  • Question 2 of 2
  • If he is HSA eligible, is he allowed to
    participate in an HSA as
  • early as January 1, 2007?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Yes, the rule requires it.
  • Yes, but only if his employer allows FSA
    transfer to an HSA.
  • No, even if his employer allows FSA balance
    transfers.

A one-time transfer/rollover of the balance in an
FSA is allowed under the new rule, but the
feature is an option for employers. Not all will
elect to offer it to their employees due to the
likely administrative burden.
30
New Rule for 2007 One-time Transfer of Funds
from IRA to HSA Is Allowed
31
New rule for 2007 One-time transfer of funds from
IRA to HSA allowed
Old rule Funds from an Individual Retirement
Account (IRA) could not be rolled over or
otherwise transferred into an HSA.
IRA
HSA
  • New rule
  • HSA participants may make a one-time tax-free
    rollover from an IRA to the HSA.
  • The amount rolled over into the HSAdoes decrease
    the contribution capand therefore may not exceed
    the cap.
  • Note that this differs from the FSA/HRA
    rollover,
  • which does not decrease the contribution cap.

IRA
HSA
Transfer becomes part of contribution
Example new rule (click)
Example new rule Brian rolls over 1,000 from
his IRA into his HSA in 2007. The HSA cap for
2007 for his family coverage plan is 5,650. The
1,000 counts toward that cap, which means that
an additional 4,650 may still be contributed to
his HSA .
32
New rule for 2007 One-time transfer of funds from
IRA to HSA allowed
  • Extra notes about the rule
  • The one-time transfer must be made during the
    members lifetime and is irrevocable.
  • Transfers from SEPS or Simple IRAs are not
    allowed.(It is not yet clear if transfers from
    Roth IRAs are allowed guidance from IRS is
    anticipated).
  • Transfer must be a direct trustee-to-trustee
    transfer.
  • The member must maintain a full 12-month plan
    eligibility to avoid a tax penalty.

33
New rule for 2007 One-time transfer of funds from
IRA to HSA allowed
  • Extra notes about the rule
  • There is a limited exception to the
    once-in-a-lifetime transfer rule
  • An individual has a single-coverage HSA-qualified
    health plan.
  • That person makes a transfer from an IRA into his
    or her HSA.
  • Later that same plan year, that person switches
    to a family plan (same HSA).
  • That person may make an additional transfer from
    his/her IRA.
  • Both transfers count toward the HSA contribution
    for that year (and may not exceed the
    contribution cap).
  • Click to see an example of this exception (it
    will appear on the next screen).

34
New rule for 2007 One-time transfer of funds from
IRA to HSA allowed
Example exception to new rule It is March, 2007.
Ray (age 40) has an HSA-qualified self-only
health plan. He has an HSA with a total balance
of 500 (left over from 2006 he has not made any
contributions yet in 2007). (Refer to the first
row of the matrix below.) He transfers 1,000
from his IRA into his HSA. His HSA now has a
balance of 1,500 (1,000 of which is a 2007
contribution). (Second row of matrix.) In the
months of April and May, he contributes 100 per
month into his HSA. (Third and fourth rows.) Now
it is June of 2007. His HSA balance is 1,700
(of which 1,200 has been contributed in 2007).
Ray switches to a family health plan. (Fifth
row.) The rule exception allows another transfer
from his IRA into his HSA. He transfers 500.
This brings the balance to 2,200 (of which
1,700 has been contributed in 2007). The
contribution cap for an HSA with a family health
plan is 5,650. Up to 3,950 more can be
contributed to his HSA in 2007, but he may not
ever transfer more funds from his IRA into his
HSA. (Sixth row of the matrix below.)
35
New rule for 2007 One-time transfer of funds from
IRA to HSA allowed
  • Check your understanding of the new rule
  • On January 1, 2007 Sue, 46, enrolled in an
    HSA-qualified single-coverage health plan that
    has a 1,500 deductible.
  • The legal HSA contribution cap for that type of
    plan in 2007 is 2,850.
  • Later in 2007 Sue rolls over 2,000 from her IRA
    to her HSA.
  • Question 1 of 2
  • How much more than the rolled over amount can be
  • contributed to her HSA in the 2007 plan year
    before
  • reaching the contribution cap?
  • Think about your answer, and then click or press
    a key to see the answers.
  • 1,500
  • 850
  • 2,000
  • 2,850

The HSA contribution cap for single-coverage plan
is 2,850 for 2007. Sue already transferred
2,000 from her IRA. That means that no more
than 850 additional can be contributed to her
HSA during 2007. (2,850 - 2,000 850)
36
New rule for 2007 One-time transfer of funds from
IRA to HSA allowed
  • Check your understanding of the new rule
  • Sues HSA balance is 2,000, all of which she
    transferred from her IRA while she was enrolled
    in an HSA-qualified single-coverage health plan
    in 2007.
  • Toward the end of 2007, she switches to a
    family-coverage plan.
  • Question 2 of 2
  • Can Sue transfer any more from her IRA to her
    HSA?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Yes, there is an exception to the rule when
    someone switches to a family plan in the same
    year.
  • Yes, there is an exception to the rule when you
    have funds remaining in your IRA and your
    employer allows it.
  • No, it is a once in a lifetime rule.
  • No, she has exceeded the contribution cap for
    2007 with her IRA transfer.

Since Sue changed plans in the same year, the
exception applies and she may make one more
transfer from her IRA into her HSA as long as she
does not exceed the family contribution cap and
as long as she remains HSA eligible for 12 months
after the second transfer.
37
New rule for 2007 Contributions May be Larger
for Non-Highly Compensated Employees
38
New rule for 2007 Contributions may be larger for
non-highly compensated employees
  • Old rule
  • Employer outside a cafeteria plan required to
    make comparable contributions (same dollar
    amounts or same percentages of deductible)
    regardless of employee compensation levels.
  • 35 tax penalty if they failed to comply.

Example old rule (click)
Example old rule Ten HSA-eligible employees in
2006. All current full-time. All with self-only
coverage. Three are HCEs and seven are non-HCEs.
To avoid the tax penalty, their employer
contributes the same amount of 100 to each of
the ten HSAs.
New rule Employer outside a cafeteria plan may
make higher contributions for non-highly
compensated employees (non-HCEs).
Example new rule Ten HSA-eligible employees in
2007. All current full-time. All with self-only
coverage. Three are HCEs and seven are non-HCEs.
Under the new rule, their employer may contribute
100 to each of the three HCEs HSAs and 200 to
each of the seven non-HCEs HSAs.
Example new rule (click)
39
New rule for 2007 Contributions may be larger for
non-highly compensated employees
Extra notes about the rule Even though the
amount for non-HCEs and HCEs can now be
different, all employer contributions must be
comparable for every employee with the same
employment status and the same health plan
coverage. These new rules for designing
comparable contributions for non-HCEs and HCEs
can result in a chart like the following.
Note The dollar amounts on the chart are
strictly for illustrative purposes.
What this means, for example, is that if one HCE
who is a current full-time employee and who has
self-only coverage gets 100, then every other
HCE employee with these same criteria also gets
100.
40
New rule for 2007 Contributions may be larger for
non-highly compensated employees
Check your understanding of the new rule
ABC Company, which does not have a cafeteria plan
arrangement
  • Question 1 of 2
  • Is the above scenario allowed under the 2007
    rule?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Yes
  • No

This is allowed under the new rule. It is
interesting to note that industry experts have
identified a loophole, apparently an unintended
one when the rule is read literally it allows
employers to contribute less to the HSAs of
non-HCEs without violating the comparability
rule. Clarification and guidance is expected
from the IRS.
41
New rule for 2007 Contributions may be larger for
non-highly compensated employees
Check your understanding of the new rule
ABC Company, which does not have a cafeteria plan
arrangement
  • Question 2 of 2
  • Is the above scenario allowed under the 2007
    rule?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Yes
  • No

The rule requires that all HCEs of the same
employment status (full time, in this case) and
same plan coverage (self-plus-one family coverage
in this case) receive the same HSA contribution
from their employer. If ABC contributes 1,000 to
Janes HSA, then to avoid penalty, it needs to
contribute 1,000 to Fionas and every other FTE
HCE who has self-plus-one family coverage.
42
New Rule for 2008 Cost of Living Adjustments
(COLAs) (Indexed Amounts) Will Be Released by
June 1
43
New rule for 2008 COLAs released by June 1
Current rule Cost of living adjustments (COLAs),
on which HSA contribution caps and minimum
deductibles are based, are not released until
some time between October and November prior to
the year they take effect. COLAs are based on
the Consumer Price Index (CPI) for the 12-month
period ending August 31of the preceding calendar
year.
New rule Effective for tax years beginning on
or after January 1, 2008. COLAs must be published
no later than June 1 of the prior year. COLAs
will be based on the CPI for the12-month period
ending March 31 of thepreceding calendar year.
Rollover 100 Contribution
44
New rule for 2008 COLAs released by June 1
Check your understanding of the new rule The cost
of living adjustments (indexed amounts) for 2008
HSAs will be published by June 1, of 2007
(rather than November 2007 which is when they
would have been published under the current rule).
  • Question 1 of 1
  • What benefits will result from this earlier
    notification of HSA limits?
  • Think about your answer, and then click or press
    a key to see the answers.
  • Provide more time to plan and communicate changes
    to members.
  • Allow plan design structure to be 100 compliant
    prior to open enrollment.
  • More time for HSA participants to budget for
    contributions.
  • All of the above, and other benefits as well.

Indeed. If only sales training development had
been able to receive earlier publication of these
new rules, you could have learned about them
before now!
45
HSA rules summary
  • New rules effective January 1, 2007
  • Contribution limits are subject only to IRS
    annual limits
  • Full contribution maximums are allowed when
    enrolled
  • One-time rollover of HRA/FSA funds into HSA
    allowed
  • Contributions into HSA during FSA grace
    periodallowed
  • One-time transfer of funds from IRA to HSA
    allowed
  • Contributions may be larger for
    non-highlycompensated employees
  • New rule effective January 1, 2008
  • Cost of living adjustments (indexed amounts)
    released by June 1

Certain conditions must be met to avoid tax
penalties.
46
New HSA rules Sales and marketing collateral
Numerous sales and marketing materials will
communicate the new HSA regulations Click for
examples.
  • Comparison Chart
  • Newsletter Articles
  • FAQs
  • Member Memoand Email
  • Monthly Bill Statement
  • Op-Ed

47
New HSA rules Key sales messages
  • The Hope Act makes HSAs even more attractive
  • No more coming up short! Consumers can fund
    their HSA with pre-tax dollars up to the
    statutory limit (regardless of when they enroll).
  • More flexibility for employers who can now make
    higher contributions to lower wage earners
  • Save more for now and for the future. Consumers
    can now make the maximum allowable contribution
    pre-tax to an HSA account (regardless of the
    deductible).
  • Eliminates administrative headaches no more
    determining and pro-rating partial-year
    eligibility.
  • Aligns and integrates HSA with other savings
    plans.
  • Removes barrier to converting from HRA to HSA.
  • Better ability to plan (earlier annual index
    adjustments).

48
CDHP Sales Training
Health Savings Accounts (HSAs) Whats Changed
for 2007
Questions?
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