What is a Health Savings Account (HSA)?

A Simsbury Bank HSA is a premium interest tax-advantaged account that allows individuals to save up and pay for qualified medical expenses for the HSA owner, spouse and/or dependents.

Why should I consider a Simsbury Bank HSA?

Simsbury Bank is a highly respected local financial institution known for its commitment to customer service and a complete array of product offerings. You may already be a Simsbury Bank customer and prefer the convenience of doing all of your banking at Simsbury Bank. If you are not already a Simsbury Bank customer you may prefer the option of using a bank near your home or office for your HSA. And for many that bank is Simsbury Bank.

Who is eligible for an HSA?

Any individual, including self-employed, enrolled in a qualified health plan is eligible. HSAs are available to those covered under certain types of health plans that meet IRS requirements; these plans are known as high deductible health plans, or HDHPs. Health insurance plans that qualify for use with HSAs have the following characteristics:

These amounts are adjusted by the IRS for cost-of-living increases.
Your employer or health insurance agent can tell you if there is a qualified plan that is available to you. If you have other health insurance, are on Medicare, or are a dependent on someone else’s tax return you are not eligible.

* Some insurers do not include preventive health care in the deductible.
** The limit for maximum out-of-pocket expenses includes deductibles, co-payments, and certain other items, but not premiums.

How does an HSA benefit me?

There are many benefits to an HSA, including significant tax advantages and income for retirement. Because employees usually share the cost of health insurance with their employers, and because HDHP premiums are usually significantly less expensive than other plans and offer tax advantages, there are important reasons to consider an HDHP and an HSA. By enrolling in a plan that can be used with an HSA, you are giving yourself a powerful tool to control your own medical expenses and also providing a supplement to your other retirement plans. The benefits of an HSA to you are:

• Contributions to the HSA are tax
  deductible.
• Employer contributions to your HSA are not counted as income to you.
• Earnings are tax-deferred.
• Distributions are tax free if used for qualified medical expenses.*
• Balances can be carried over from one tax year to the next.
• Assets in HSAs are portable; HSA
  accounts are your own property.
• Balances can be used as a retirement savings account. (For more information please see your benefits provider.)
• Beneficiaries may be named for HSAs. (A spouse can use the HSA as his or her own. Non-spouse beneficiaries must treat the inherited HSA as ordinary taxable income).

Where do I use an HSA?

You may use the funds in your HSA to pay for medical expenses up to your plan’s deductible, plus other qualified expenses*, for you, your spouse and your dependents (even if they are not on your health insurance plan). Examples of expenses are:

• Doctor visits, diagnostic tests, procedures, prescriptions, transportation to get to medical care, some dental and vision care
• Qualified long term care insurance
  premiums
• Health plan premiums when unemployed
• Health plan premiums while on COBRA
• Some health insurance after age 65
• Any reason after age 65 (subject to tax)

Expenses paid with HSA funds cannot also be claimed as deductions on income tax forms. If you use HSA assets for nonqualified expenses, those amounts are subject to taxation and a 20% penalty unless the HSA owner is age 65 or older, deceased, or disabled.

* HSA funds may not be used for over-the-counter medication unless prescribed by a physician.

How do I use an HSA?

When you open a high interest Simsbury Bank HSA Checking Account, you can receive a debit card*, checks or both. You may deposit contributions into this account. Some employers choose to provide additional contributions to your HSA. When paying for qualified medical expenses simply:

• use a debit card
  
• write a check
• withdraw funds at an ATM
• make online bill payments.

An extra debit card is available free of charge for your spouse. Retain all provider receipts for your tax records.

We also offer an HSA CD so that as your HSA balance grows, or you roll over funds from another HSA plan, you can benefit from premium longer-term interest rates. To enroll in an HSA CD, you generally also need to havea Simsbury Bank HSA Checking Account. However, if you are no longer eligible to actively make HSA contributions, but wish to roll over existing funds, you are not required to have an HSA Checking Account and may open a “stand-alone” HSA CD.

Some health insurance plans provide HSA account options within the plan. You are not required to open an HSA with them. You can get all of the tax and other benefits of an HSA with Simsbury Bank.

How is the HSA funded?

There are several ways to fund your HSA.

• Employers may allow direct deposit payroll deductions, which you may change periodically, into the account.
• Employers may make additional “direct deposit” contributions for their employees.
• You can make lump-sum deposits to your account. This is done at a Simsbury Bank branch using an HSA Contribution Form.
• Money may be rolled over from certain medical savings accounts called Archer accounts.
• Funds may be moved from flexible savings accounts (FSAs) or health reimbursement arrangements (HRAs) to your HSA.
• You can move Individual Retirement Account (IRA) assets to an HSA with some limitations.

* Purchases and other transactions made with this debit card are not covered under the FDIC’s Electronic Funds Transfer regulation (“Reg. E”). Reg. E provides consumers certain rights to contest electronic transactions that a consumer believes to be unauthorized including ATM and debit card transactions. Because Reg. E does not apply to HSAs and their associated debit cards, any transactions that a consumer reports as unauthorized will be investigated by Simsbury Bank on behalf of the consumer, but Simsbury Bank does not provide provisional credit during this process. Any credit Simsbury Bank receives as a result
of the investigation will be credited to the customer.

HSA accounts are not permitted to be overdrawn. If an HSA account becomes overdrawn for any reason other than Bank error, the account no longer qualifies as an HSA. Any contributions and distributions made since the beginning of the year, and for the remainder of the year in which the overdrawn situation occurs, lose their HSA tax exempt status and will be treated as regular transactions. This provision includes any contribution an employer has made on an employee’s behalf.

How much can I contribute to my HSA?

Contribution limits depend upon whom you cover with your health insurance plan and your age. The amounts will change with cost of living adjustments.

If you have attained age 55 in any year you may also contribute additional “catch-up” amounts.

Regular and “catch-up” contributions may come from any source, including payroll deductions, rollovers from other HSA accounts and transfers from other accounts, though certain forms may be required for contributions other than payroll deduction. Your employer may contribute toward this account. Any employer contributions are counted toward the maximums allowed.

What are the premium interest rates?

Simsbury Bank offers premium interest rates along with its advice and service.

What does an HSA cost?

There are no fees if your HSA Checking Account balance is $2,500 or more. If your HSA Checking balance is below $2,500, your first two years are free; thereafter there is a maintenance fee of $3.00 per month. There is a one-time $10 enrollment fee that is waived if your employer refers you to Simsbury Bank. Standard banking fees apply, such as check re-ordering and stop payment service.

We also offer an HSA CD so that as your HSA balances grow, or you roll over funds from
another HSA plan, you can benefit from premium longer-term interest rates. If you open an HSA CD there is a minimum balance of $500 and no annual or monthly fee. For customers who qualify for a “stand-alone” HSA CD, there is an annual maintenance fee of $20.

How do I access information on my account?

Simsbury Bank provides monthly paper statements, Internet banking access and 24-hour telephone banking access. If you have other Simsbury Bank accounts, your new HSA account can be added to SBT Online, our Internet banking service. You can use your current ID and password to view balances and transactions and you can even make online bill payments to service providers.

Does Simsbury Bank monitor my HSA account so that I don’t exceed the contribution limits?

Account owners are responsible for monitoring amounts deposited to their accounts.
How does the Bank handle mistaken
distributions?

If you pay for a service whose cost is later adjusted downward, the mo A special form must be signed so that the re-deposit is not coded as a new deposit.

What kind of reporting do I need to do?

Simsbury Bank provides complete reporting of contributions and distributions to the IRS and to HSA owners. HSAs require the following government reporting:

• HSA owners report contributions and distributions on their income tax returns.
• Employers report contributions to employee accounts on a business tax return, as well
  as on employees’ Form W-2.
• Simsbury Bank provides complete reporting of contributions and distributions to the IRS and to HSA owners. In January of each year, HSA account owners receive a Form 1099-SA that totals the gross distributions for the previous tax year and in May a Form 5498 that totals the previous year’s contributions. These amounts are also reported to the IRS.

How do I enroll?

Simsbury Bank offers fully qualified HSAs and can arrange site visits with your employer for your convenience or, you can come to any Simsbury Bank branch and open an account on your own.*

Where do I get more information about HSAs?

Please call or visit any branch to learn more. Complete HSA information, including account limits and restrictions, can be obtained at www.treas.gov.

* Simsbury Bank does not guarantee the Establishment Date of the HSA being the same as the date the participant enrolls in an HDHP. The Establishment Date will be the date the HSA is opened with Simsbury Bank. The IRS prohibits HSA funds to be used to pay for services obtained prior to the Establishment Date.