5.1.A. ERMUSR 10-11-2011 - Laserfiche WebLink

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DAVID MARTIN AGENCY, INC. Limited direct rollovers from medical FSAs and health reimbursement accounts (HRAs) are also permitted if the employer agrees. The rollover will not count against the annual HSA contribution limit. There is a limit of one such distribution per health FSA or HRA, which may be made only during a limited time period (January 1, 2007 -December 31, 2011). The rollover amount may not exceed the lesser of the individual's health FSA or HRA balance on September 21, 2006 or as of the distribution date. The individual receiving such a rollover must be HSA eligible in the month the rollover is made and must remain HSA eligible for the following 12 months or the rollover will be included in gross income and subject to a 10% penalty (exceptions apply if the individual dies or becomes disabled). A modified comparability rule also applies: To avoid the 35% excise tax under Code Section 49806, an employer that makes this new rollover opportunity available to any employee must make it available to all employees who are covered under the employer's ClHDHP. Other HSA funding information: • Without regard to monthly pro-ration, employees may make the total annual allowed amount to their HSA if they join the HSA health plan at any time during the year as long as they are covered in December of that year. However, if they make the total annual contribution, they must remain eligible for HSA contributions for the entire calendar yearthat occurs after they join the plan. (For example, if theyjoin in June 2011, they must remain HSA eligible through December 2012.) Otherwise, they will incur income taxes and a 10% penalty on any excess contributions far months they were not covered under the plan in 2011. • If an employee does not wish to maintain HSA coverage during the required testing period for no pro-ration of contributions, they may make pro-rated HSA contributions based on the number of months they are covered under the HSA health plan. In this case, they need not remain HSA eligible after the last pro-rated deposit. • An additional HSA catch-up contribution is available for members age 55 or older. This catch- upcontribution amount is set by statute and remains $1,000 per year for 2011 and 2012. • Contributions in excess of the maximum allowable amount or contributions made on behalf of an employee who is not an eligible individual will be included in the employee's income regardless of who made the contribution and a 6% excise tax will be imposed. • If excess contributions are returned to the employee before the end of the employee's time for filing a tax return for the year the excess contributions were made (including any extensions), the employee will only be liable for income tax on the excess and not the excise tax. The individual owners of the account are responsible for ensuring that contributions do not exceed the annual maximum. Q: Who is eligible for an HSA? A: Eligible individuals must be covered by a qualified High Deductible Health Plan (QHDHP) and only a ClHDHP. A Ctualified High Deductible Health Plan is a health plan that has a deductible of at least $1,200 for individuals and at least $2,400 for family coverage for 2011. These amounts remain unchanged for 2012. Maximum 2011 HSA funding is $3,050 for individuals and $6,150 for families under a QHDHP. These deductibles will be increased to $3,100 for individuals and $6,250 for families in 2012, and will continue to be indexed in the future. CONFIDENTIAL. PAGE a