1) What is a Health Savings Account?

A Health Savings Account (HSA) is designed to help eligible individuals with a High Deductible Health Plan (HDHP) save for qualified medical expenses on a tax-advantaged basis.  An HDHP is a health insurance plan that generally offers lower premiums in exchange for a higher deductible.  Individuals can save by contributing money saved on premiums to their HSA and then using that money to pay for medical expenses.

2) Am I eligible for an HSA?

If you meet the following criteria in any one month, you are eligible:

• You are covered under a high-deductible health plan (HDHP) on the first day of that month;
• You are not covered under another type of health plan that is not an HDHP (certain exceptions apply);
• You are NOT enrolled in Medicare (generally, are under 65 years old);
• You may not be claimed as a dependent on another individual’s tax return.

3) What is an HDHP?

An HDHP is a plan with an annual deductible of at least $1,100 for individual coverage or $2,200 for family coverage.  These amounts are for the year 2007 and are subject to cost-of-living adjustments (COLAs).

4) Are there other requirements for the HDHP?

Yes.  The HDHP must limit out-of-pocket expenses.  For 2008, the maximum out-of-pocket expenses, which include money applied to your deductible and your coinsurance for covered charges, must be no more than $5,600 for individual coverage and no more than $11,200 for family coverage.  These amounts are subject to COLAs.

5) How is an HSA established?

Just like an IRA, there is a qualified trustee or custodian.

6) Who can contribute to my HSA?

Once you have met the requirements, anyone may contribute to your HSA, regardless of your employment status.

7) How much can I contribute to my HSA?

For 2008, you can contribute up to $2,900 for individual coverage and $5,800 for family coverage or you and/or your family deductible amount, whichever is less.

In addition, a "catch-up" contribution is available for eligible individuals who have attained age 55 by the end of their taxable year but have not reached age 65.  For 2008, the amount is $900.

8) What are the Federal Tax benefits of an HSA?

100% of your contribution is deductible.  Furthermore, the earnings grow tax deferred and all qualified distributions are tax free.  Be sure to consult with your tax or legal professional for guidance.

9) How do I claim the Federal Tax Deduction for my HSA contribution?

Any contributions made by you and any other person on your behalf are deductible as long as they do not exceed the maximum annual contribution amount.  Employer contributions are not deductible.  However, any employer contributions do not count as wages for federal income tax purposes.

10) When is the contribution deadline for funding an HSA?

Contributions for the taxable year can be made in one or more payments, at the convenience of the individual or the employer, at any time prior to the time prescribed by law (without extensions) for filing the eligible individual's federal income tax return for that year, but not before the beginning of that year.  For calendar year taxpayers, the deadline for contributions to an HSA is generally April 15 following the year for which the contributions are made.  Although the annual contribution is determined monthly, the maximum contribution may be made on the first day of the year.

11) How are HSA distributions taxed?

Qualified distributions from your HSA are excludable from gross income.  Any other distributions are included in your gross income and are subject to an additional 10 percent tax on the amount included, except in the following cases:

• Your death
• Your disability
• You reach the age of 65

Any HSA distributions that are not rolled over will be taxed as income in the year they are distributed, unless used for qualified medical expenses.  HSA custodians/trustees are not required to determine whether HSA distributions are qualified.

The qualified medical expenses must be incurred only after the HSA has been established.

12) What happens to my HSA in the event of my death?

If you are married and your spouse is your beneficiary, the HSA becomes his/her HSA.

If your beneficiary is not your spouse, the HSA ceases to be an HSA effective on the date of your death.  The proceeds will be included in the beneficiary's gross income for the year of death.

13) What are the basic features of Cumberland Valley National Bank’s Health Savings Account?

Cumberland Valley National Bank & Trust Company offers a Health Savings Account with a premium tiered interest rate, Free MasterCard® Debit Card, Free Online Banking, including online statements and check images, Free Online Bill Payment and Monthly Account Statements.  In addition, when your Health Savings Account is $10,000.00 or more, you will have access to the Bank’s Wealth Management Services that allow you to invest a portion of your HSA in a variety of mutual funds.  The interest rate and annual percentage yield may change from time to time.   

14) How do I pay for my healthcare expenses with my Health Savings Account?

Your Cumberland Valley National Bank Health Savings Account is a checking account.  You can pay for your expenses just as you would with any checking account:

• Use your debit card anywhere MasterCard is accepted.
• By Check

15) How do I know how much money is in my account?

Just as with any other checking account at Cumberland Valley National Bank, you may check your balance through one of the following ways:

• Online Banking
• By Phone
• Monthly Statement

16) How do I know whether my expenses are qualified or not?

It is your responsibility to be sure that you are paying qualified health care expenses from your Health Savings Account.

The best way for you to be sure if your expenses are qualified is to refer to Section 213 of the IRS Code, under Publication 502: Medical and Dental Expenses.  To order IRS Publication 502, call 1-800-TAX-FORM (1-800-829-3676), or go to the IRS website.

Please consult with your tax advisor regarding these matters.  Cumberland Valley National Bank & Trust Company is not responsible for determining if your contributions or distributions qualify, nor do we provide tax advice. 

17) Can I still participate in my Employer’s FSA (flexible  spending account)?

You can have an HSA account and still participate in a flexible spending account for certain qualified expenses.  They are as follows:

• Premiums for medical, dental & vision Insurance.
• Dependent Care (including elderly care)