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Purdue University HR Interactive HSA Guide

NOTE: Purdue University is providing you with this tool for informational purposes only to help guide you through the HSA eligibility rules. It is designed specifically to provide you with general information regarding Health Care Flexible Spending Accounts and Health Savings Accounts as they relate to the 2014-2015 Purdue health plans. The tool does not provide detailed information about other options that are available to you, including Limited Purpose Spending Accounts and Dependent Care Flexible Spending Accounts. This information does not constitute tax or legal advice. You should not act solely upon the information contained in this tool. If you have specific questions about the implications of these plans for you, you are encouraged to seek professional tax or legal counsel. For the purposes of this tool, any reference to "spouse" includes same-sex IRS-qualified married or non-married tax dependents and refers to any spouse, whether they are employed at Purdue or elsewhere.

Eligibility Rules

To be eligible for an HSA:

  • Employee may not be a dependent on someone else's tax return
  • Employee cannot be receiving Medicare, Social Security or TRICARE
  • Employee must be covered by a high deductible health plan, as defined by the IRS
  • Employee may not be covered under any other type of health insurance plan other than a HDHP (exceptions for insurance for specific injuries, accidents; disability; dental; vision; and long term care)
  • If employee's spouse is covered under employee's Purdue HDHP and another group plan (not at Purdue) that is not an HDHP, Purdue employee can still have an HSA and contribute up to the family maximum, as long as the Purdue employee is not covered on the spouse's plan.
  • If employee and SSDP are married, regardless of the state they were married in, they may be considered IRS-qualified tax dependents (effective with Revenue Ruling 2013-17 from the IRS), effective 8/29/2013
  • If an employee holds a J type Visa, they are not eligible for an HSA because the plan's deductible is more than their federally-mandated limit.

Qualified Medical Expenses

  • Medical expenses incurred by you, your spouse, and all legal dependents you claim on your tax return
  • Medical expenses incurred by any legal dependent you could have claimed on your tax return except if: a) the dependent filed a joint return (such as with his or her spouse) b) the dependent had a gross income of $3,700 or more
  • Insurance premiums for long-term care, health care continuation coverage (ex. COBRA), health care coverage while receiving unemployment compensation under federal or state law, Medicare Part A, B, and D and other health care coverage if you were 65+ (other than premiums for a Medicare supplemental policy such as Medigap)

Allowable Usage

Funds belong to the employee and can be withdrawn at any time for any reason. If it is for a qualified medical expense, whether over or under 65, the funds are not taxable and there is no penalty. If it is for a non-qualified medical expense, the money is taxable and subject to a 20% penalty if the employee is under 65. If the employee is 65 or older and withdraws for a non-qualified medical expense, the money is taxable but there's no penalty.

Interactive HSA Guides

NOTE: Health Care Reform requires that every individual have health coverage, effective 1/1/14. If the employee or spouse is listed as not having a group plan/opt out, we would assume that individual is covered through the Exchange or through the purchase of individual insurance.

The IRS contribution limits listed below reflect the rates for 2014. The contributions made on the employee's behalf (for example by Purdue) are included within this limit.

The 55+ catch-up contribution, in the amount of $1,000 for 2014, applies to each spouse (if eligible). Therefore, the maximum single HSA limit would be $4,300. Together, the spouses could not exceed $8,550. Each spouse must make the additional contribution to his or her own HSA.

Same-sex IRS-qualified married or non-married tax dependents are treated the same as spouses for the purposes of HSA.

End result

IRS Contribution Limit

55+ HSA Catch-Up Contribution Per Eligible Member
(NOTE: this is an additional contribution above the limit noted above)

Purdue Employee plan Spouse plan Employee/Spouse covered on same plan? Will you or your spouse be
covering IRS-qualified children?

          Instructions: Pick an item from the first column to start. This will populate additional options in the following columns. Select the item applicable to you and the final result will appear in a box above the interactive columns.

          NOTE: An employee is eligible to enroll in an HSA as long as the employee does not have Medicare. If one of the employee's dependents is covered under Medicare, it is still permissible for the employee to sign up for the HSA. If the employee, or any dependents, are covered under Medicaid, the employee is still eligible for the HSA. It should be noted, though, that the same expense cannot be claimed under both Medicaid and the HSA.

          If you do not accept Medicare when you first qualify, there are special rules for when you do decide to take it (if, for example, you select it at retirement but after you have turned 65). You must stop all contributions to the HSA 6 months before you decide to accept Medicare. If a situation arises where you take Medicare and you hadn't been anticipating it, the employee will need to account for those 6 months with their HSA or on their taxes.

          If you are receiving social security, you may NOT opt out of Medicare Part A. Therefore, if you are getting social security and you are 65 or older (Medicare-eligible age), you will not be able to have an HSA since you must take Medicare.

          End Result

          IRS Contribution Limit

          55+ HSA Catch-Up Contribution Per Eligible Member
          (NOTE: this is an additional contribution above the limit noted above)

          Age Employee Status *Medicare Eligible? Enrolled in Medicare?

          Instructions: Pick an item from the first column to start. This will populate additional options in the following columns. Select the item applicable to you and the final result will appear in a box above the interactive columns.

          Specific Situations

          Divorce

          For purposes of the HSA only, the child is considered the dependent of both parents. Therefore, either parent's HSA money may be used on the child.

          Same-Sex Domestic Partners (SSDP)

          • Purdue employee: If the employee is eligible for an HSA, he or she may use their funds for their own personal medical expenses. If they are also covering an IRS-qualified tax SSDP or other dependents on their health plan, the employee may contribute up to the family maximum.
          • Children: If the child the employee is covering is an IRS qualified dependent (lived with the employee for the entire year as a member of their household, has been a U.S. citizen or resident alien of the U.S. or resident of Canada or Mexico for part of the calendar year in which the tax year began, has not filed a joint tax return, and if the employee provided over half of their support for the calendar year), the employee may use their HSA funds to pay for thei child's medical expenses.
          • SSDP, non-IRS tax dependent: If an employee has a non-IRS qualified SSDP, the HSA money may NOT be used to cover the SSDP's medical expenses. If this is the case, contact your tax advisor and they can further assist you.
          • If the employee has family health coverage through Purdue but the SSDP isn't a tax dependent and there are no other IRS-qualified dependents, then the employee may still use the family tax limit for the IRS. Purdue will contribute the family amount from the employer side if the employee has dependents on their health plan.

          Adult Child

          • Adult child (tax-dependent - up to age 19 or 24 if full time student): the child’s out-of-pocket medical expenses can be paid with the primary account holder’s HSA. In other words, the parent can use their own HSA to pay for the child’s medical expenses
          • Adult child (not tax-dependent, on parent's HDHP through age 26): the child’s out-of-pocket medical expenses cannot be paid with the primary account holder’s HSA. If this is the case, contact your tax advisor and they can further assist you.

          Medicare Disclaimer

          • If an employee becomes disabled and enrolls in Medicare, he or she can no longer contribute to an HSA or have anyone else contribute on their behalf (such as Purdue) as of the first of the month in which the employee enrolled. The current HSA funds may be used to pay Medicare Part A and/or Part B premiums, as it is considered a qualified medical expense. If the disabled employee does not receive Medicare, he or she can stay on the HDHP just without the Purdue HSA contributions.
          • When the employee reaches age 65, they become eligible for Medicare. If they receive Medicare, they can no longer contribute to an HSA or have anyone else contribute to an HSA on their behalf (such as Purdue). If the employee declines Medicare, the employee may continue with their HSA. See the above Medicare Interactive Guide for further clarification.

          HSA Disclaimer

          • If a spouse is being covered as a dependent on the employee's HSA plan, they are not eligible to have an FSA. One must drop the account. See the below Family Interactive Guide for further clarification and scenarios.
          • The only FSAs that are permitted when an employee has an HSA are limited purpose, after-tax, and dependent care FSA's.

          Terminating Employment with Purdue

          • What happens if I terminate my employment with Purdue?
            PayFlex will set up a new account, transfer your HSA balances into this new account, and issue you a new card. You will be responsible for the monthly account maintenance fees for the HSA.

          COBRA

          If you have an HSA account it remains your account for you to pay qualified health care expenses. You will no longer receive contributions from Purdue and you can no longer make contributions.

          FSAs

          Standard Health Care Flexible Spending Account

          A Standard Health Care Flexible Spending Account is used for medical, dental, and vision expenses that are deemed qualifying reasons by the IRS. There is a $2,500 single contribution limit for 2014, and a $5,000 contribution limit for those filing joint tax returns in 2014. An employee may not be covered under an HSA and a Standard Health Care FSA. Whenever there is a reference to an FSA in this document, it is referring to a Standard Health Care FSA. For more information, visit the Benefits website at http://www.purdue.edu/hr/Benefits/Standard_FSA.html.

          Limited Purpose Flexible Spending Account

          A Limited Purpose Flexible Spending Account is used to cover qualifying dental and vision expenses. To be eligible for a Limited Purpose FSA, you need to be enrolled in a high-deductible health plan with an HSA. There is a $2,500 single contribution limit for 2014, and a $5,000 contribution limit for those filing joint tax returns in 2014. You, or your spouse, are eligible to participate in a Limited Purpose FSA and an HSA if you are covered under a high deductible health plan. For more information, visit the Benefits website at http://www.purdue.edu/hr/Benefits/LimitedPurposeFSA.html.

          Dependent Care Flexible Spending Account

          A Dependent Care Flexible Spending Account is used to reimburse dependent day care expenses necessary while you (and your spouse, if you're married) are attending school on a full-time basis or working. There is a $2,500 single contribution limit for 2014, and a $5,000 contribution limit for those filing joint tax returns in 2014. In addition to remaining eligible for a Limited Purpose FSA, you, or your spouse, are able to enroll in both the Dependent Care FSA and an HSA if you are covered under a high deductible health plan. For more information, visit the Benefits website at http://www.purdue.edu/hr/Benefits/Dependent_Care_FSA.html .

          NOTE: The information provided here is offered for informational purposes only.  If you have specific questions about the implications of these plans for you, you are encouraged to seek professional tax or legal counsel. Please also be aware that any reference to "employee" means a Purdue employee, and "spouse" refers to the husband or wife of the Purdue employee, whether they are employed at Purdue or elsewhere.