Find answers to frequent questions and definitions of CDHC terms.
The employee owns the HSA as soon as funds are contributed – whether the contribution comes from the employer or the employee.
Funds may be used for any reason, however only eligible medical expenses are tax-free. Nonqualified expenses are subject to income tax. If a member uses funds for nonqualified expenses before age 65, they will have to pay an additional penalty tax.
For calendar year taxpayers, the deadline for contributions is generally April 15 following the year for which the contributions are made. The maximum contribution may be made on the first day of the year in a lump sum.
No, you can contribute in a lump sum or in any amount or frequency you wish.
Employer contributions must be “comparable”; that is they must be in the same dollar amount or same percentage of the employee’s deductible for all employees with the same category of coverage. For this purpose, generally categories of coverage are either “self-only” or “family,” although they should consult the comparability regulations regarding the ability to subdivide the family category. Employers can also vary the level of contributions for full-time vs. part-time employees, and employees covered by a collective bargaining agreement are not covered by the comparability rules if health benefits were part of the agreement.
Yes, but the company can only offer matching contributions through a Section 125 plan. Remember that the nondiscrimination rules still apply.
HSA funds will remain in the account and can be used for eligible expenses. However, the account will no longer be permitted to receive contributions.
Members will receive Form 5498-SA that states all contributions for the previous calendar year – including employer and other contributions to the HSA. In
addition, each member will receive a 1099-SA that shows the distribution from the HSA account.
The employer establishes the HRA account and has complete flexibility to offer an HRA with any kind of insurance plan. Unlike HSAs, members do not have to
be enrolled in a high deductible health plan to have an HRA account.
The HRA is funded solely by the employer and it may not be funded through employee salary reduction or through a cafeteria plan. The employer decides if any unused funds will roll over to the next year.
There are no limitations on employer contributions, which are excluded from an employee’s gross income.
Yes, HRAs are subject to the COBRA continuation rules and the employer is responsible for sending the COBRA notice.
Yes, but the IRS requires that the employer decide what account must be used first – the FSA or the HRA.
Yes, as with an FSA account, the IRS requires that all
claims be validated. Therefore, it is important that employees save any explanation of benefits or receipts for all claims.
Offering an FSA provides potential tax savings due to reduced payroll tax, and unused funds are forfeited back to the employer.
Yes. However, when combined with an HSA, the FSA must be a “limited purpose” account.
A limited purpose FSA restricts payments for certain benefits such as vision, dental or preventive care benefits.
The employer establishes the contribution requirements.
The employee, the employer or both may contribute to the account.
Yes. FSAs must comply with COBRA rules and the employer is responsible for sending the COBRA notification.
Yes, the IRS requires that all claims be validated. Therefore, it is important that employees save any explanation of benefits or receipts for all claims.
A specified dollar amount that a member must pay out-of-pocket for a specified service at the time the service is rendered.
A method of cost-sharing in a health insurance policy that requires a member to pay a stated percentage of all remaining eligible medical expenses after the deductible amount has been paid.
100% total amount is covered by the health plan and you do not have to pay anything.
A flat amount a member must pay before the insurer will make any benefit payments.
Dollar amount set by a health plan that limits the amount a member has to pay out of his/ her own pocket for particular health care services during a particular time period.