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Vice President for Human Resources

FAQs for Purdue Choice Fund medical plan and Health Savings Account (HSA)

These questions and answers are designed to give you the basic concepts of the Purdue Choice Fund and the Health Savings Account. It is not intended to provide all the information you need in order to make a decision on whether or not an HSA is right for you. You may want to consult with a tax advisor.

Choice Fund Plan

HSA Basics and Contributions

Using the HSA and Limited Purpose FSA

Eligibility for HSA

Choice Fund Plan

What defines a “Family” for the Choice Fund?

For a plan to be qualified for a Health Savings Account, the IRS defines that a Family is an employee plus one or more dependents. There will still be different premiums for the coverage levels of employee, employee + spouse, employee + child(ren), and employee + family.

If I have a “Family” deductible on the Choice Fund plan, what is my individual deductible?

The Family deductible on the Choice Fund plan does not have an individual deductible embedded. The entire family deductible must be met before co-insurance applies to the treatment for any one person. It is possible for one individual person to meet the entire family deductible.

Why are the deductibles in the Choice Fund plan so high?

The IRS determines the minimum deductible for HSA-qualified medical plans, and they are adjusted annually. The Purdue Choice Fund plan will have a $1,400 deductible for employee only coverage and a $2,800 deductible for family coverage (employee + one or more dependents).

How are prescription drugs covered under the Choice Fund plan?

If the prescription is not considered preventive you will pay full cost of that medication until the deductible is met. After you meet the deductible, you will pay coinsurance of either 25/35/55% depending on the tier of Generic/Preferred Brand/Non-Preferred Brand (15/25/45% for mail order) until your coinsurance out-of-pocket maximum is reached.

If the prescription is considered preventive you will not need to satisfy the deductible before the plan pays coinsurance. Generic preventive medications are covered at 100% by the plan, you pay no coinsurance. Brand-name preventive medications are covered at the normal co-insurance level for that brand, so you will pay either 35% or 55% coinsurance for medication. (This amount does not apply to the Choice Fund plan's deductible, but does apply to the out-of-pocket maximum.)

Who determines which medications are considered preventive?

Express Scripts reviewed the legislation that authorizes HSA-based medical plans, as well as the published IRS guidance and US Treasury directives in order to develop the list of drugs classified as preventative prescription medications. View the list of medications that are considered preventive for the Choice Fund plan.

For more information on the IRS guidance, please see the IRS Web site. The preventive medication list cannot be appealed to include additional categories of medication.

What does Cigna consider to be “Preventive” medical care?

Your doctor will determine the preventive tests and treatment that is appropriate for you based on your age, gender and family history. Cigna has a list of services that are commonly provided as preventive care; however this list is not comprehensive. Be sure to discuss the preventive care benefits in the Choice Fund plan with your doctor to ensure that you getting the best preventive medical care possible. Preventive care does not include any service or benefit intended to treat an existing illness, injury, or condition.

HSA Basics and Contributions

What is the Health Savings Account?

The HSA is an actual Bank Account that you will own. PayFlex will open this account in your name and Purdue will pay the monthly account maintenance fee while you are covered under the Choice Fund plan.

The Health Savings Account (HSA) works in conjunction with the Purdue Choice Fund medical plan. The account allows you to put money aside and reimburse yourself for medical expenses on a tax-free basis ( for specific details see the later question on “What Can I use my Health Savings Account for?”).

Purdue will make non-taxed contributions to the HSA, and you can also make pre-tax contributions through payroll deduction. The funds in that account are yours, even the contributions that Purdue makes. Unspent funds accumulate tax-free and roll over from year-to-year (there's no “use it or lose it” rule as with flexible spending accounts).

How will Purdue make contributions to my HSA, and how can I make contributions?

Purdue will make a contribution to your HSA each pay period. You may also make pre-tax contributions to your HSA through payroll deduction; the amount you elect during open enrollment is divided equally each pay period. You may change your contribution at any time throughout the year.

How much can I contribute to my HSA?

The IRS has a statutory limit on the annual amount that can be contributed to an HSA. For 2013, an individual can have HSA contributions up to $3,250, and a Family can have HSA contributions up to $6,450. For 2012, the individual limit is $3,100 and the family limit is $6,250. These limits include the amount of money that Purdue will contribute to your HSA if you choose the Choice Fund plan.

If you are age 55 or older, you can also make an additional “catch-up” contribution of $1,000 on an annual basis. If you are turning age 55 at any time during the plan year, you may still make the full catch-up contribution.

How much can I roll over from year-to-year in my HSA?

While there is maximum limit to the amount that you can contribute to your HSA on an annual basis, there is no maximum amount that you can roll over in your account, so you can continue to build up contributions and interest over time if that is your goal.

If both spouses have coverage through the Choice Fund plan, (or another employer's HSA qualified medical plan) how much can each spouse contribute to their HSA?

If both individuals have single coverage, they can each contribute the single contribution maximum, which is $3,250, or a total of $6,450, in 2013 and $3,100, or a total of $6,200, in 2012. If one or both of the spouses have children covered as dependents, then the combined contributions to the HSAs by husband and wife cannot exceed the family contribution maximum ($6,450 for 2013 and $6,250 for 2012) and should be divided between them by agreement.

What is the interest rate for the HSA, and what are my investment options?

The interest rate for the HSA is similar to other savings accounts. If you reach a $1,000 balance in your HSA, you can transfer the funds to an investment account at PayFlex with several different options to invest your money. Details about the HSA investment funds will be available through your member account at PayFlex HealthHub if you elect the Purdue Choice Fund medical plan.

If you choose to participate in the Chase investment options, you will be responsible for the monthly account management fee ($1.67) that is associated, and that amount will be deducted directly from your HSA.

Can I lose money with the investment account options associated with the HSA?

The investment accounts are based on a variety of risk-based investments such as money market or stock funds, so there is the possibility that those investments could lose value.

Will I need to do anything to open my Health Savings Account at PayFlex?

After you choose the Purdue Choice Fund during open enrollment, PayFlex will initiate the bank account opening process. Generally, you will not need to take any steps, however in some cases, PayFlex may need to contact you to verify information such as your street address if you use a PO Box.

How do I roll my MSA or HSA from another bank into my HSA with PayFlex?

You can access a rollover form from HealthHub or by calling Customer Service at the number on the back of your debit card to transfer funds from a Health Savings Account ( HSA) or Medical Savings Account (MSA) held at another institution. After completing the form, you must send it to your current MSA/HSA custodian; the form will serve as your instructions to transfer the HSA/MSA funds into your new account.

Is the HSA account insured?

The HSA cash account offered through PayFlex is an FDIC insured account. The investment account is not federally insured.

Can I transfer funds from my FSA (or HRA) to an HSA?

No.

Using the HSA and Limited Purpose FSA

What can I use my Health Savings Account for?

You can use the funds in your HSA to pay for any medical or pharmacy expenses (such as your deductible and coinsurance), as well as dental expenses, vision expenses and qualified over-the-counter products. To view a list of eligible expenses, log on to HealthHub and under My HealthHub Resources IRS Resources. 

What happens if I use the money in the HSA for a purchase that is not a qualified expense?

If the money is used to purchase something that is not a qualified medical expense, the expenditure will be taxed as part of your income and subject to a 10% tax penalty. Exceptions to the penalty are individuals who are disabled or over age 65, they are only subject to income tax on HSA funds used for non-qualified expenses.

Do I have to fill out any claim forms?

No. You are responsible for that ensuring that your purchases using your HSA funds are qualified, and therefore should familiarize yourself with what qualified medical expenses are (see above) and also keep your receipts in case you need to defend your expenditures or decisions during an IRS audit. PayFlex will keep track of the medical and prescription expenses that apply to your Purdue Choice Fund plan, and you can access those records at any time on your member account at HealthHub.

What kind of forms will I need for my taxes if I have an HSA?

If you enroll in the Choice Fund plan with HSA, you will need to fill out IRS form 8889 when you do your taxes on annual basis. Be sure to discuss this with your tax preparer. Additional information about IRS forms and publications about HSA's can be found on the Dept. of Treasury Web site.

You will receive a 1099 form which shows the total distributions from your HSA account to assist with year-end tax preparation.

How can I access the money in my HSA?

PayFlex will issue you a debit card for your HSA (up to 2 cards if you have family coverage) which you will be able to use when paying bills by mail or swipe in your providers office, pharmacy, etc. You will also be able to transfer funds to a linked bank account using your employee account on HealthHub.

With an FSA, I can access all of the funds I elect to contribute for that year immediately on January 1; does an HSA work the same way?

No, with an HSA you can only access the funds that are actually in your account at that time. That includes the Purdue contributions that are made to your account; you will only be able to use those funds after they have been deposited in your HSA. If you incur out-of-pocket expenses and do not have funds available in your HSA to cover those costs, you can reimburse yourself for when the funds are deposited in your HSA after each pay cycle. You may access the funds using the one of the methods described in the questions above.

Can I still have a Flexible Spending Account if I choose the Choice Fund plan?

If you choose the Choice Fund plan you can have a “Limited Purpose” Flexible Spending Account. You may use the Limited Purpose FSA for Dental and Vision expenses only. You can still have a Dependent Day Care FSA with no changes.

If I can use my HSA to pay for dental and vision expenses, why would I need to have a Limited Purpose FSA?

Many people may not need to participate in a Limited Purpose FSA if they utilize the funds in their HSA to pay for dental and vision expenses. Keep in mind that the dental and vision expenses do not apply to the deductible and coinsurance for the Choice Fund plan, and there is a limit to the amount of money that you can contribute to the HSA on an annual basis. Therefore, if you have significant dental or vision expenses and use the funds in the HSA to pay for those items, you may exhaust your HSA funds and not have them available for use to pay for medical costs that make up your deductible and coinsurance. If you choose the Choice Fund plan and you're planning on having significant dental work or vision costs, such as braces or Lasik eye surgery, you may want to consider putting some funds into a Limited Purpose FSA to pay for those services.

My spouse and/or children have another form of medical insurance, and those plans are not HSA-qualified plans. Can I choose the Choice Fund Plan with the HSA and pay for the medical expenses of my dependents not covered by my medical plan?

Yes, the qualified medical expenses for dependents can be reimbursed from your HSA, even if that dependent has other non-HSA qualified medical coverage. Those expenses for dependents not covered under your medical plan do not apply to the deductible and coinsurance for the Choice Fund plan.

Can I have an HSA if my spouse has a general purpose FSA for Health Care through his/her medical plan?

No, you are not eligible to participate in an HSA if your spouse has a general purpose FSA. Either you may not choose the Choice Fund Plan, or your spouse must not elect to participate in the FSA program through his/her medical plan. You may still participate in the limited purpose FSA for dental/vision expenses.

Where can I learn more about how Health Savings Accounts operate?

The IRS regulates the requirements for health plans to eligible for an HSA, and the rules associated with owning an HSA. There is also an extensive FAQ about Health Savings Accounts on the Department of Treasury Web site (People can also Google “HSA FAQ” and it is the first link.)

Eligibility for HSA

Can I be covered by my spouse's medical insurance at another employer and choose the Purdue Choice Fund with HSA?

The answer in most cases is No. To be eligible for a Health Savings Account, an individual must be covered by a HSA-qualified Health Plan and must not be covered by other health insurance that is not defined by the IRS as a “High Deductible Health Plan.” If the other medical plan is an HSA-Qualified plan, you may have dual coverage under both plans. If you are covered by another medical plan that is not qualified for an HSA, you may enroll in a High Deductible Health Plan that is identical to the Purdue Choice Fund plan, but does not include a Health Savings Account and the associated Purdue Contributions.

I'm on Medicare (or TRICARE), can I have an HSA?

You are not eligible for an HSA after you have enrolled in Medicare or TRICARE, or if you have received health benefits from the Veterans Administration within the last three months. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contributions to an HSA after you enroll in Medicare. You may enroll in a High Deductible Health Plan that is identical to the Purdue Choice Fund plan, but does not include a Health Savings Account and the associated Purdue Contributions.

My spouse or children have another form of medical insurance, and those plans are not HSA-qualified plans. Can I choose the Choice Fund Plan with the HSA and cover my dependents as secondary coverage to their current insurance?

Yes, dependents can be covered under the Choice Fund plan as secondary coverage even if that dependent has other non-HSA qualified coverage, and it does not impact the employee's eligibility for the HSA plan. The Choice Fund plan with HSA will always pay last after the other medical plans have calculated the amounts they will pay.

I'm on COBRA, can I have an HSA?

If you are an employee who has an HSA-Qualified medical plan, and you terminate employment, you will still retain possession of your HSA account, and can use those funds tax-free on qualified healthcare expenses. However you will no longer receive contributions from Purdue for the HSA account. If you choose COBRA, you may enroll in a High Deductible Health Plan that is identical to the Purdue Choice Fund plan, but does not include a Health Savings Account and the associated Purdue Contributions.

Can I switch medical plans to or from the Choice Fund plan during the year?

No, you may not switch your medical plan choices during the plan year, even if you have a change in family status.

What happens if I no longer am enrolled in a qualified HSA medical plan?

According to IRS guidelines, you are eligible to have an HSA bank account and continue to access the HSA funds to pay for qualified healthcare expenses for you and your eligible dependents. However, if you are no longer covered by a qualified HSA medical plan (Purdue Choice Fund Plan), you are not eligible to make or receive additional contributions to your HSA account.

What happens if I terminate my employment with Purdue?

If you terminate from your employer's health plan, several changes to your HSA will take place. PayFlex will set up a new account, transfer your HSA balances into this new account, and issue you a new card. This new card (and information included with it) will provide you with a new toll-free customer service number. You will be responsible for the monthly account maintenance fees ($1.85) for the HSA.

What happens to my HSA when I reach age 65?

At age 65, you are no longer eligible to contribute to your HSA, if you are no longer working at Purdue. Even so, you can continue to withdraw the funds and use them to pay for expenses such as Medicare premiums and out-of-pocket expenses (including Part A and Part B deductibles, copays and coinsurance, and long term care insurance premiums). You also can use these funds to pay medical expenses for your spouse and your dependent children.

If you are still working at Purdue, you may continue to contribute to your HSA at age 65 and older, if you complete and submit a form verifying that you have waived Medicare coverage.

What happens to my HSA if I die?

If you are married, your spouse may become the owner of the account and can use it as his/her HSA. Another option is that the account may no longer be treated as an HSA, and will be passed along to your beneficiary or become part of your estate. For specific details on this subject consult a tax advisor or estate attorney.