What is the maximum annual contribution that can be contributed to an HSA?
2019 Limits: $3,500/Single or $7,000/Family and $1,000 Catch-up (age 55+)
2020 Limits: $3,550/Single or $7,100/Family and $1,000 Catch-up (age 55+)
Is there a cap on how much the HSA can grow to in a lifetime?
There is no maximum accumulation limit for an HSA.
What is the maximum an individual can contribute to the HSA when the account is established mid-year?
If the individual remains HSA-eligible throughout the rest of that year and all of the following year, they can contribute the full annual maximum contribution for each year. However, if HSA eligibility is lost before December of the following year, the limit for both years is prorated by the number of months the individual was HSA-eligible.
How is the contribution limit determined if an individual becomes covered by Medicare, or otherwise loses HSA eligibility during the year?
The limit would be prorated based on the number of months the individual was HSA-eligible. If the individual is age 55 or older, the $1,000 catch-up contribution would also be prorated.
What if an individual contributes more than their allowed limit during the year?
As soon as excess contributions are discovered, they should be withdrawn from the HSA. If this is done before income taxes are filed, the excess contributions will be subject to income tax. However, if the error is discovered in subsequent years the contributions are subject to income taxes and an additional 6% excise penalty. Any earnings on excess contributions are also subject to tax.
Contact a tax professional for additional information or for assistance correcting excess HSA contributions.
Can an HSA be funded outside of payroll?
Yes, HSA owners can contact Alerus directly to arrange this. (Note that an HSA owner has until the sooner of April 15th or the date they file their personal income taxes to make contributions for the previous year. Contributions made outside of payroll will not include the 7.65% savings in FICA tax.)
What are the basic features of a Flexible Spending Account (FSA) and how does it save employees money?
An FSA is a benefit that allows employees to pay for qualified out-of-pocket healthcare and dependent care expenses with pre-tax dollars. Employees elect the amount they plan to spend during a plan year for each type of FSA (health and/or dependent care) and that election is withheld from their pay before Federal, State or Social Security taxes are determined, thereby reducing their taxable income. Employees will save between 25 to 50%, depending on their tax bracket.
As employees incur qualified expenses, they may be reimbursed by the FSA or, if available, use their debit card to pay for the expenses. Any unused funds are forfeited after the end of a plan year.
How does an employee get reimbursed by the FSA?
Employees must submit a claim to be reimbursed by the FSA. Claims may be submitted online or by using a Reimbursement Request Form, which is available in the Resources section of this website. Claims must be accompanied by itemized documentation for the expenses being claimed. Some FSAs also include a debit card which can be used to pay merchants directly from the FSA for qualified expenses.
Why does Alerus Retirement and Benefits sometimes ask participants to turn in documentation for FSA debit card purchases?
IRS regulations require every debit card transaction to be substantiated to ensure it was for an eligible expense. In some cases, this substantiation happens electronically and there is nothing you need to do. If substantiation cannot happen electronically, Alerus must ask participants to send documentation after their transaction is paid with the card.
What happens if I don’t send in the required debit card receipt?
Initially we will send a request for documentation either by email or by mail. If we do not have the receipt within 30 days we will send a second request. After another 30 days (60 days total) we will deactivate the debit card and send an email or letter requesting the amount be paid back to their employer or that the required documentation is sent to us.
Whose expenses are eligible for reimbursement under the FSA?
The FSA can reimburse healthcare expenses incurred by the accountholder as well as their spouse (using Federal definition), qualifying child(ren) and qualifying relative(s). Under Health Reform children are allowed to remain a dependent under the Health FSA through age 26, although they no longer qualify as a tax dependent. See your Summary Plan Description for additional information.
Spouses and qualifying dependents do not need to be covered by the employee’s health insurance plan to be eligible for reimbursement.
Can an FSA election be changed during the plan year?
An FSA election cannot be changed during a plan year unless the plan allows for life status events and the employee, their spouse or their qualified dependent experiences a life status event such as marriage, death, birth, adoption, divorce or change in employment for either employee or spouse. If a qualifying event occurs, the corresponding election change must be consistent with the event and the election must be changed within 30 days of the event. See your Summary Plan Description for a detailed list of qualifying events.
What are the basic features of a Health Reimbursement Arrangement (HRA) and how does it save employees money?
The HRA is an employer-funded benefit that reimburses various healthcare expenses incurred by an employee, their spouse (using Federal definition) and their qualifying dependents. HRA designs vary by employer, but all HRAs are funded strictly with employer dollars and employees do not pay income tax on the amount of the benefit.
See your Summary Plan Description for a detailed explanation of your HRA benefit.
How does an employee get reimbursed by the HRA?
Employees must submit a claim to be reimbursed by the HRA. Claims may be submitted online or by using a Reimbursement Request Form, which is available in the Resources section of this website. Claims must be accompanied by the Explanation of Benefits from the insurance carrier, or other itemized documentation for the expenses being claimed.
Some HRAs also include a debit card which can be used to pay merchants directly from the HRA for qualified expenses.
How does an employee know what expenses are eligible for reimbursement by the HRA?
Employees will receive a welcome notice by mail or email explaining the HRA benefit in detail, including what expenses are eligible for reimbursement by their employer’s HRA.
Employees can also access this information in their Summary Plan Description.
What if an employee is covered by an FSA or HSA in addition to the HRA?
HRAs are sometimes available in conjunction with other tax-favored accounts, such as an FSA or HSA. If this is the case, employees should consult their welcome announcement or Summary Plan Description for an explanation of how the two benefits are coordinated.