Health Savings Account

An HSA is a tax-advantaged account that you set up with a qualified HSA trustee or custodian to pay or reimburse yourself for qualified medical expenses incurred by you, your spouse or your family members. You must enroll in a so-called "high deductible health plan" (HDHP) and satisfy other eligibility requirements to establish an HSA. The money deposited in your HSA is deductible on your federal income tax return. The money and the earnings can then be withdrawn tax-free to cover qualified medical expenses. Unused balances roll over from year to year.

Anyone (not just the self-employed) is eligible for an HSA, if the following eligibility requirements are met:

• The individual is covered by an HDHP
• The individual is not enrolled in Medicare
• The individual is not covered by other health insurance that is not an HDHP with limited exceptions
• The individual is not eligible to be claimed as a dependent on another person's tax return

For 2013, a high-deductible health plan (HDHP) is a health plan with the following attributes:

• A minimum deductible of at least $1,250 for self-only coverage and at least $2,500 for family coverage
• A maximum out-of-pocket expense limit for allowed costs of not more than $6,250 for self-only coverage and not more than $12,500 for family coverage

Since you will not have checks for your HSA, you will be issued a Benefit Access card. Your Benefit Access card will allow you to access the funds in your HSA to conveniently pay for qualified medical expenses. You should receive your Benefit Access card within 10 business days of opening your HSA. If you have not received your Benefit Access card within 10 business days, you may call BB&T at 800-BANK-BBT (800-226-5228) to check on the status of your Benefit Access card.

If you use an in-network provider, the in-network provider can file your claim for you. This is recommended, as it will ensure that you receive your health plan's discounted PPO price, instead of having to pay full price.

Or, you could simply save your medical bills and submit them to the insurance company or plan administrator yourself, either all at once, or after you have reached a certain limit in bills.

Maybe. Generally, you are only allowed to have the following insurance coverage at the same time as an HDHP:

• Dental, vision, disability, long-term care, certain employer-provided wellness programs and preventive care insurance or coverage
• Certain types of health care, FSAs and HRAs that provide limited coverage
• Insurance coverage where substantially all the coverage relates to liability incurred under workers' compensation laws, tort liabilities or liabilities relating to ownership or use of property (such as auto insurance)
• Insurance coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered

Unfortunately, you cannot establish and contribute to an HSA unless you have coverage under an HDHP.

Yes, you will receive a monthly statement for the deposit portion of your HSA. If you have elected to participate in a Mutual Funds Investment Sweep subaccount, you will receive a quarterly statement for that portion of your HSA.

The Department of the Treasury provides valuable information related to HSAs. You may also email the Department of the Treasury at HSAinfo@do.treas.gov.

Annual contributions for 2013 are capped at $3,250 for self-only coverage or $6,450 for family coverage.

Use the 2013 HSA maximum annual contribution worksheet to quickly determine your maximum contribution.

If you are married, special rules apply for determining your annual HSA contribution limit and allocating it between you and your spouse (if he or she also has an HSA).

The annual maximum HSA contribution will change January 1 of each calendar year based on the Consumer Price Index. There are no maximum limits on the account accumulation.

If you are at least age 55 at any time during the tax year, the annual HSA contribution limit is $1,000 for 2013  and all years going forward. You may also contribute the full catch-up amount without regards to when you became eligible. 

However, if you become ineligible to contribute during the year (for instance, if you become covered under an impermissible health insurance plan or if your HDHP coverage ends), you will have to make a corrective distribution by the due date of the filing of your federal income tax return for the year (including extensions) to avoid penalties and/or excise tax on the amount of your contribution that exceeds the annual contribution limit.

If you and your spouse are both eligible individuals and you each have an HSA and turn 55, then you each can make catch-up contributions. If only one spouse has an HSA, only that spouse can make a catch-up contribution.

Yes, you can contribute your entire annual contribution at the beginning of the year, up to the applicable contribution limit. However, if you become ineligible to contribute during the year (for instance, if you become covered under an impermissible health insurance plan or if your HDHP coverage ends), you will have to take a corrective distribution by the due date of the filing of your federal income tax return for the year (including extensions) to avoid penalties and/or excise tax on the amount of your contribution that exceeds the annual contribution limit.

Contributions to your HSA can be made by anyone, including you, your employer, family members, or from a combination of sources. All contributions are aggregated to determine whether you have contributed the maximum allowed.

No, it is your responsibility to keep track of the amounts deposited and spent from your account, just like a normal savings or checking account.

Effective 1/1/2007 a new provision allows a one-time option to rollover IRA assets to an HSA, limited to the annual HSA contribution amount. Consult your tax advisor about the tax and transfer benefits applicable to health savings accounts.

The provision allows certain amounts in a health FSA or HRA to be distributed from the health FSA or HRA and contributed to an HSA without violating the otherwise applicable requirements for such arrangements. The amount that can be distributed from a health FSA or HRA and contributed to an HSA may not exceed an amount equal to the lesser of (1) the balance in the health FSA or HRA as of September 21, 2006 or (2) the balance in the health FSA or HRA as of the date of the distribution. Contributions must be made directly to the HSA before January 1, 2013. The provision is limited to one distribution with respect to each health FSA or HRA of the individual. The amount of this FSA rollover will not decrease your maximum allowable HSA contribution.

Initially, your HSA will be a bank deposit account that will earn tiered interest rates for balances in the cash portion of the HSA. These funds are insured by the FDIC to the maximum extent provided by law.

After your account reaches a cash balance of $500 in excess of $3,000 (the HSA investment threshold amount), you will have the opportunity to invest in a set menu of mutual funds by setting up an HSA Mutual Fund Investment Sweep subaccount to your HSA. At a later date, we may allow other fund options, and will provide you with at least 30 days notice prior to making any changes. Mutual fund investments require a minimum investment of $500.

Any mutual funds that you purchase in your Sweep Investment subaccount are not FDIC-insured, are not a deposit or other obligation of BB&T are not guaranteed by BB&T or any of its affiliates, and are subject to investment risk, including the possible loss of the principal amount invested.

Once your HSA deposit balance reaches $3,500 for the first time you will see an icon on your BB&T OnLine^® HSA Account Summary screen that will provide you with a link to a page where you may set up your Mutual Fund Investment Sweep subaccount and make selections from the menu of available mutual funds.

Any mutual funds that you purchase in your Sweep Investment subaccount are not FDIC-insured, are not a deposit or other obligation of BB&T, are not guaranteed by BB&T or any of its affiliates, and are subject to investment risk, including the possible loss of the principal amount invested.

Information on mutual fund investment options is available, including prospectuses on BBTFUNDS.com.

You will be able to check your account information by logging on to BB&T OnLine and clicking on the icon next to your HSA Deposit Account on the Summary Screen. BB&T OnLine will show your cash balance in your deposit subaccount, the net asset value of your mutual fund investments in your Investment Sweep subaccount, and your available balance. Your available balance is the amount of funds held in cash in your HSA, plus 70% of the net asset value of mutual funds held in your HSA Investment Sweep subaccount, adjusted for pending transactions.

The automatic sweep requires a minimum investment of $500. Thus, it will occur whenever your cash balance exceeds the HSA investment threshold amount by $500 or more. You may only disable this automatic sweep by closing your Investment Sweep subaccount.

Your BB&T OnLine HSA Account Summary screen will feature a link to your HSA Investment Sweep subaccount, where you may make changes to your investment options. From this page, you may redeem shares in mutual funds and re-invest the proceeds in other mutual funds from the menu of funds available, or change the percentages of swept funds that are allocated to your mutual fund investments. You also may direct BB&T to liquidate your entire investments in the HSA Investment Sweep subaccount, close that Investment Sweep subaccount and transfer the funds automatically to your HSA bank deposit. You can later re-establish the HSA Investment Sweep subaccount at no additional charge. You cannot, however, direct BB&T to liquidate one mutual fund selection and not others. Changes in the allocation of your mutual fund investments, or any liquidation of the entire investment in your HSA Investment Sweep subaccount can be directed without the imposition of any charges or fees.

Under certain conditions, BB&T may automatically liquidate mutual fund shares in your HSA Sweep Investment subaccount. If the available balance in your HSA drops below $1,000, BB&T will automatically liquidate mutual fund shares in the HSA Sweep Investment subaccount and transfer the proceeds in order to restore the HSA deposit to at least $1,000. Also, if you incur an expense using your Benefit Access card that, at the time the transaction is processed, is in excess of the cash balance in your HSA, but not in excess of your available balance, we will liquidate mutual fund shares in the HSA Sweep Investment subaccount to cover the shortfall. A $500 minimum transfer amount is required. If your Investment subaccount holds shares in more than one mutual fund, we will liquidate shares from each such mutual fund on a pro rata basis according to its relative value in your Investment subaccount portfolio. Your available balance is the amount of funds held in cash in your HSA, plus 70% of the net asset value of mutual funds held in your HSA Investment Sweep subaccount, adjusted for pending transactions.

Paying for your qualified medical expenses as they occur and reimbursing yourself in later years allows the HSA to grow tax-deferred. You must retain records of qualified medical expenses not reimbursed so they can be reimbursed in subsequent years.

Maximum contributions are also limited by your HDHP deductible and the month in which your HDHP and HSA are established (and you meet the other HSA eligibility requirements), so it is important to set up your HSA as soon as you have applied for an HDHP.

The funds belong to you. Funds can be withdrawn for any purpose, at any time. However, if funds are withdrawn for reasons other than to pay for qualified medical expenses, the amount withdrawn is included in your gross income for federal income tax purposes and is subject to a 20% excise tax. If the amount is withdrawn after you reach the age at which you are eligible to enroll in Medicare (generally, age 65), die or become disabled, there is no 20% excise tax (but the amount is still included in your gross income).

Qualified Medical Expenses

Funds used to pay for the following qualified medical expenses are tax-free and penalty-free if they are not reimbursed by insurance or otherwise:

• Amounts paid for medical care, as defined in Section 213(d) of the Internal Revenue Code (the Code)
• Medicines that are insulin or prescribed medicines (determined without regard to whether the is available without a prescription)
• Premiums for COBRA continuation coverage
• Premiums and expenses for qualified long-term care insurance
• Health insurance premiums for individuals receiving federal or state unemployment compensation
• Medicare and retiree health insurance premiums, (excluding Medicare Supplement premiums) once you have reached the age at which you are eligible to enroll in Medicare (generally, age 65)

Funds may be used for qualified medical expenses for your spouse or dependents, even if they are not covered by the HDHP.

IRS Publication 502 - Medical and Dental Expenses generally describes expenses that are deemed to be for medical care within the meaning of Code Section 213(d). Amounts paid for medical care under Code Section 213(d) include expenses for:

• Ambulance services
• Dental treatment (including braces, fillings, extractions, dentures, x-rays, etc.)
• Eye examinations, glasses, contact lenses, surgery
• Hospital services
• Medical services (fees and expenses charged by physicians, surgeons, specialists, and other health care providers)
• Nursing home and other nursing services
• Prescription medicines
• Psychiatric care

This list is only an example of some expenses that would qualify for the medical and dental expenses deduction under Code Section 213(d). You should consult your tax advisor for more complete information.

Nonqualified Medical Expenses

Expenses for health insurance premiums, other than those specifically listed above, are not qualified medical expenses. Examples of other expenses that are not qualified medical expenses are listed in IRS Publication 502. You should consult your tax advisor for more complete information.

Long-Term Care Insurance

It has been estimated that 45% of those turning 65 today will enter a nursing home at some point during their life. Nearly 10% will spend five years or more living in a nursing home. Since Medicare does not pay for nursing home expenses, long-term care insurance could be a smart investment.

Long-term care premiums can be paid for from your HSA. The actual cost of your long-term care insurance can be much lower when paying for it with pre-tax dollars. Especially if those pre-tax dollars have had time to grow tax-free also.

No. If you use your HSA to reimburse your qualified medical expenses incurred before your HSA is established, the reimbursements will be included in your gross income for federal income tax purposes and may be subject to the 20% excise tax. We recommend you establish your HSA as soon as possible once you obtain HDHP coverage and meet the other HSA eligibility requirements.

You can only use your HSA to pay health insurance premiums if:

• You are collecting federal or state unemployment benefits
• You have COBRA continuation coverage through your employer or former employer
• You are paying certain long-term care insurance premiums; or
• You have reached the age at which you are eligible to enroll in Medicare (generally, age 65) and the premiums are for health coverage other than a Medicare supplemental policy

In January of each year, you should receive Form 1099-SA, which will indicate the total distributions you took from your HSA during the previous year. Distributions are not taxed if you spent the money on qualified medical expenses.

In January of each year, you will receive an HSA Statement of Account, which serves as a substitute 5498-SA form. This statement will include your Fair Market Value. The Fair Market Value will include the balance in your HSA tiered rate account and your mutual fund investment balance as of year end. If you make additional contributions prior to April 15, we will send you an additional statement showing your HSA contributions.

No. It is your responsibility to keep track of your own qualified medical expenses.

No. There is no time limit for when you can reimburse yourself for your qualified medical expenses. You should keep legible receipts of your qualified medical expenses, and records of when you do reimburse yourself.

Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent without tax penalty. See For what purpose can HSA funds be used?

If your surviving spouse is your named beneficiary, your HSA will be treated as your surviving spouse's HSA. If you have no surviving spouse or your spouse is not the beneficiary, then the account will cease to be an HSA and will be included in the federal gross income of your estate or the income of your nonspouse beneficiary in the year in which you die.

If you become permanently disabled, you may withdraw your funds at any time, without the 10% excise tax. Withdrawals will be subject to federal income tax at that time if they are not used to pay qualified medical expenses. See For what purpose can HSA funds be used?

Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year's coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.