Health Savings Account

UPMC Consumer Advantage offers a Health Savings Account (HSA) powered by ACS/Mellon. HSAs are an important part of a revolution in health care funding — a revolution offering you health care savings, control, and ownership. With the UPMC Consumer Advantage HSA, you can take advantage of tremendous tax savings and build a reserve for current and future health care expenses so you can continue to enjoy the security of health care coverage that protects you and your family.

An HSA is a savings account that is owned by the employee and can be funded by the employee, employer, or both. It is like a health care “piggy bank” with federal tax advantages:

• Contributions are tax-free.
• Potential interest and investment gains accumulate tax-free.
• Distributions are tax-free when used to pay for qualified medical expenses.
• The remaining balance rolls over from year to year, regardless of job changes
  or retirement.
• In addition to the federal advantages, most states mirror this tax-free status with state tax deductions and/or rebates.

Tax-free HSA funds can be used to pay for almost all health care expenses, such as doctor and hospital visits, copayments, eyeglasses, and prescriptions. And qualified health care expenses paid from your HSA may apply toward your plan’s deductible. If your combined expenses — whether small expenses, routine costs, or a serious accident or injury — exceed your health plan deductible, an out-of-pocket maximum caps your costs while your coverage continues. You can view a full list of qualified health care expenses at the IRS website, www.irs.gov.

Growing Your HSA
Each year, you may contribute an amount up to the annual IRS limit. For 2008, that maximum equals $2,900 for individuals and $5,800 for families. If you are age 55 or older, you may make additional catch-up contributions of up to $900.To contribute, you can make pretax contributions through automatic payroll deduction, if available, or through an after-tax lump sum check, taking a deduction on your taxes at the end of your tax year. And unlike other medical savings accounts, the HSA has no provision insisting you “use or lose” your account dollars at year’s end. Any funds you do not use in a given plan year remain in your account, building a larger, interest-bearing account for future health care expenses.

Invest in Interest-bearing Savings
As your interest-bearing checking account balance grows, the UPMC Consumer Advantage HSA features investment options from well-known fund families. Your choices include multiple equity, balanced, and fixed income options. Fact sheets, prospectuses, and historical performance information for all funds are available at www.hsamember.com.

Life Transitions with Your HSA
If you leave your company for any reason, your HSA goes with you. You can continue to contribute to your account as long as you continue enrollment in a qualified high-deductible health plan. You can also continue to withdraw your funds, tax-free, for qualified medical expenses. If you withdraw funds before age 65 for non-qualified expenses, regular income taxes plus a 10 percent penalty may apply. At age 65, you may withdraw your HSA funds, tax-free, to pay health expenses and certain insurance premiums (excluding Medigap policy premiums).

Distributions for non-medical expenses will be treated as gross income, without incurring tax penalties. At death, any remaining HSA funds will pass to your named beneficiary for
a taxable distribution without penalties. If your beneficiary is your spouse, your spouse may assume ownership of the account. As the new owner, your spouse has the option to retain the account as an HSA, continuing contributions so long as he or she participates in
a high-deductible health plan and follows all rules for eligibility.