HEALTH SAVINGS ACCOUNTS

MAKING THE MOST OF HEALTH SAVINGS.

S AV I N G F O R N O W

INVESTING FOR THE FUTURE.

HSA AND HDHPTo open or contribute to a health savings account (HSA), you must be covered by a qualified high-deductible health plan (HDHP). An HSA may be funded by your contributions, your employer’s contributions, or both. Contributions can easily be made by payroll deduction through your employer.

HSA ADVANTAGESHDHPs combined with the tax advantages of HSAs provide employers and employees with alternatives to the rising costs of health care by:

■ Reducing premium cost. ■ Paying out-of-pocket costs with pre-tax dollars. ■ Investing money for future needs. ‡

Some of the significant advantages of using an HSA include:

■ Contributions to the HSA and qualified expenses dispersed from the HSA are not subject to tax.

■ Contributions may be invested in a variety of funds, providing excellent long-term growth potential. ‡

■ Interest and investment earnings are tax-free.

■ Funds roll over from year to year so there is no “use it or lose it.”

■ HSAs are individually owned and portable so they are never forfeited when you change employment, when you are no longer covered by an HDHP, or when you retire.

■ Upon death, the HSA becomes property of a designated beneficiary. A spousal beneficiary receives it as an HSA and any other beneficiary as a taxable event.

■ At age 65, or in the event you become disabled, disbursements for non-qualified health care expenses may be made without penalty but will be subject to income tax.

TAX SAVINGSContributions made via pre-tax payroll deductions are not subject to federal, state*, Social Security, or Medicare tax. Contributions made outside of payroll are exempt from federal and state* income tax.

*State tax applies to HSA contributions and earnings in Alabama, New Jersey, and California.

WHAT IS AN HSA?

A health savings account (HSA) is a tax-exempt savings vehicle used to accumulate money for eligible health care expenses. Your HSA may be used

to pay for health care expenses as they occur, or the funds may remain in your account until you need them later in life.

Please see important disclosure on the last page.

ELIGIBILITYIn addition to having an HSA qualified HDHP, to be eligible for an HSA, you cannot receive benefits under Medicare or be claimed as a dependent on any other person’s tax return. Additionally, the law prohibits you from opening or contributing to an HSA if you are covered by any other health plan that is not an HDHP. However, this provision excludes specific accident, injury, disability, dental, vision, and long-term care insurance as well as limited purpose flexible spending accounts (those which only pay for expenses such as vision, dental, and orthodontia).

ENROLLMENTOnce you have determined you are eligible for an HSA, you must take the necessary steps to establish your account and set up your pre-tax payroll deductions (if applicable). Your employer will provide specific directions for this process. When you enroll, an account will be created for you at Alerus Retirement and Benefits (Alerus) and with our trustee partner, as referenced in the terms and conditions of

your HSA agreement. You will be issued two Alerus Health Benefit cards for point-of-sale use to pay for approved health care expenses.

CONTRIBUTIONSIf you are eligible for an HSA, you may contribute up to the maximum allowed by law for each tax year. These limits are based on your level of HDHP coverage (Single or Family) and are adjusted annually for inflation. HSA owners who are or will attain age 55 during a tax year are also eligible to make a catch-up contributions. The catch-up contribution is only available for the HSA owner; spouses would have to establish their own HSA to take advantage of the catch-up. Refer to the insert for the current contribution amounts.

If you are married and each spouse has single HDHP coverage, you can both contribute the single amount into your own HSA. If at least one spouse has family coverage, the family amount can be split any way you choose between both accounts.

If you begin HDHP coverage mid-year, you may contribute the entire annual maximum contribution allowed. However, you must remain HSA-eligible through the following calendar year in order for the entire contribution to be excluded from taxation.

EXAMPLE: An employee begins coverage in an HDHP in May and puts the entire annual maximum into his/her HSA. In order for the entire amount to be excluded from taxation, the employee must remain on the HDHP through December of the following year. If the employee ceases to be covered by an HDHP, then one-third of the contribution (January through April) is ineligible and would need to be withdrawn and taxed.

WITHOUT HSA

WITH HSA

Annual Wages $40,000 $40,000

Expenses Paid by HSA Taxable Wages

N/A $3,000

Expenses Not Paid by HSA $40,000 $37,000

Take Home Pay $3,000 N/A

SAVINGS FROM HSA N/A $750

The saving example above may vary by state and income tax bracket. Additionally, any unused money

will stay in the account for future healthcare expenses.

Please see important disclosure on the last page.

DISTRIBUTIONSYou can take a distribution from your HSA at any time. Distributions for eligible health care expenses are tax-free.

If you take a distribution from your HSA for non-health care expenses, the distribution will be subject to income tax and a 20 percent excise tax until age 65 and then only income tax would apply. If you are disabled or reach age 65, you can receive non-health care distributions without penalty, but such distributions are subject to income tax.

ELIGIBLE EXPENSESYour HSA covers a wide variety of health care expenses as defined by Section 231(d) of the Internal Revenue Code. These expenses must be necessary for the treatment or alleviation of a specific injury or illness, including:

■ Hospital or clinic services, prescription medications and many other health-related expenses.

■ Some services not covered by the HDHP and therefore do not accumulate toward your deductible, such as dental, orthodontia, or vision expenses.

■ Eligible expenses incurred by your spouse and qualified tax dependents, even if they are not covered by your HDHP.

■ Premiums for COBRA, long-term-care insurance (federal limits apply) and health coverage you have while receiving unemployment compensation. Additionally, once you reach age 65 your HSA also covers Medicare and other health plan premiums, with the exception of Medicare supplements.

Eligible health care expenses do not include services which have been reimbursed by another source or any expense for which you have claimed a tax deduction.

EXAMPLES OF ELIGIBLE MEDICAL EXPENSES

Acupuncture

Alcoholism Treatment

Ambulance

Artificial Limbs/Teeth

Bandages

Birth Control Pills

Blood Pressure Monitoring Devices

Blood Sugar Test Kit

Body Scan

Chelation (EDTA) Therapy

Chiropractors

Circumcision

Copays/Deductibles

Contact Lenses/Related Material

Counseling (excludes marriage)

Crutches

Dental Treatment

Dentures

Diabetic Supplies

Diagnostic Services

Drug Treatment

Egg Donor Fees

Eye Exams/Glasses

Fertility Treatment

Flu Shots

Glucose Monitoring Devices

Guide Dog

Hearing Aids

Home Care

Hormone Replacement Therapy

Hospital Services

Immunizations

Inclinator

Insulin

Laboratory Fees

Laser Eye Surgery

Learning Disability

Medical Records Charge

Medical Services

Nursing Services

Obstetrical Expenses

Occlusal Guards

Operations

Optometrist

Organ Donors

Orthodontia

Osteopath

Oxygen

Physical Exams

Physical Therapy

Prescription Drugs

Prosthesis

Psychiatric Care

Psychoanalysis

Psychologist

Reading Glasses

Screening Tests

Sleep Deprivation Treatment

Smoking Cessation Programs

Sterilization Procedures

Supplies for Medical Condition

Surgery

Therapy

Transplants

Vaccines

Vasectomy

Vision Correction Procedures

Wheelchair

X-Ray Fees

For more information about eligible HSA expenses, consult IRS Publications 502 and 969 at www.irs.gov.

Please see important disclosure on the last page.

DEBIT CARD — USE IT TO GET MORE OUT OF YOUR HSA

■ Swipe your debit card at places where you and your family members have health care services.

■ Request a distribution payment online. Payment can be sent to you or to the service provider for a small fee (to cover the cost of postage).

■ Complete and submit a Distribution Request Form and payment is sent to you by check or direct deposit.

SUBMIT A CLAIMGo online to alerusrb.com or the Alerus Health Benefits mobile app to submit reimbursement requests.

Regardless of the method used to request funds, only the amount in your account is available. This amount may fluctuate due to interest earnings, investment returns, or appropriate fees.

YOUR RESPONBILITIESAs the account owner, you are responsible for the following important items pertaining to your HSA:

■ Determining that you are eligible to establish and fund an HSA, and that you remain eligible throughout the year.

■ Ensuring your contributions do not exceed the annual limit, including the prorated limit if you lose HSA eligibility during the year.

■ Maintaining records of all health care documentation.

■ Filing Form 8889 with your income taxes.

SAVING RECEIPTSSince the HSA is in an individually owned Trust, it is the account owner’s responsibility to retain records for all health care expenses paid from the account. It is important to retain all receipts and adequate records for expenses paid with HSA funds in the event of an IRS audit, such as:

■ Medical Plan Explanation of Benefits (EOB). ■ Prescription Drug Receipts ■ Itemized Provider Statements

Our Expense Tracker assists you with this process by allowing you to securely upload and store your itemized health care documentation on our website. This secure storage solution means no shoebox full of receipts sitting on your shelf! Plus, you are able to fax expenses for reimbursement whenever you choose. Documentation can be added to the Expense Tracker online or via our mobile app.

Additionally, it may be prudent to keep a copy of your HDHP coverage since such coverage is required to open or contribution to an HSA. If HSA funds are used for non-qualified expenses, income and excise tax will apply.

Please see important disclosure on the last page.

L I V I N G T O D A Y

THRIVING TOMORROW.

INVESTING HSA FUNDS ‡The money contributed to your HSA will be deposited into an interest-bearing, FDIC-insured account. Once your HSA balance exceeds $2,000, you will have the option to invest in a variety of mutual funds. You will be required to maintain a minimum $2,000 “threshold” or cash balance in order to invest additional money in the mutual fund options. If you elect to invest in the mutual funds, you will be asked to define your investment threshold. This can be any amount above the $2,000 minimum. Investment products are not insured by the FDIC; are not deposits or obligations of a bank; and involve investment risk, including possible loss of principal amount invested.

Your debit card will always be linked to the balance in your cash account. Keep this in mind when deciding the right threshold amount for your HSA. Remember, you can easily transfer your HSA funds from cash to mutual funds, and vice versa, at any time.

Discover more information on managing investments on the alerusrb.com HSA login page under Resources.

AUTO-SWEEPIf you swipe your debit card for $100 or more, it will trigger an auto-sweep, meaning money is transferred from the mutual fund investments back to your cash account to replenish the available cash balance. The sale from the mutual funds will be pro-rata by fund balance. If the swipe is under $100, the auto-seep will not happen until additional swipes occur, bringing the cumulative total to $100 or more.

Please see important disclosure on the last page.

ONLINE ACCOUNT ACCESSOnce you are enrolled, you may access your account online at alerusrb.com. This one-stop portal provides you with anytime, anywhere access to your HSA, allowing you to:

■ Review your account balance, activity, transaction detail, request reimbursements, and view investment details.

■ Access your HSA investment portal including fund performance and prospectus information for the available mutual funds.

■ Access monthly account summary reports. ■ Upload and store itemized receipts for health care

expenses to your Expense Tracker. ■ Retrieve your monthly statements and HSA tax

forms.

LOGGING INFirst time users will need your Social Security number, date of birth, and hire month and year to create an account.

■ Go to alerusrb.com, click Login. ■ At the Access MY ALERUS prompt, click Create

account, enter the required information, click Create account.

■ Create a Username and Password and provide a valid email address (future password resets will be verified over email).

■ Review electronic consent and terms of use documents, click Accept.

■ Select a phone number and method (text or phone call) to have a code sent to verify your identity, click Submit.

■ Enter the six-digit verification code you receive, click Submit.

Please see important disclosure on the last page.

MOBILE ACCOUNT ACCESSYou can also manage your HSA on the go! The Alerus Health Benefits mobile app allows you to:

■ View your account balance, activity, and transaction details.

■ Submit new items to the Expense Tracker using your device’s camera.

■ Easily contact our Client Service Center.

DOWN LOAD THE APPThe Alerus Health Benefits mobile application is available for iPhone, iPad, iTouch, and Android devices. To access this free mobile app:

■ Search for Alerus Health Benefits at the Apple App Store or Google Play, or;

■ Download the application directly at alerusrb.com.• Log into your account and select Download

Mobile App from the message center.

LOGGING IN ■ User ID: First initial of first name + last four digits of

Social Security Number (SSN). ■ Password: Last four digits of SSN.

Visit alerusrb.com for additional HSA information and resources.

This material is provided for informational and discussion purposes only. Services are offered through Alerus Financial, N.A., which does not provide legal or tax advice. Please consult your tax or financial advisor to determine how this information may apply to your own situation. Statements of fact are from sources considered reliable but no representation or warranty is made as to their completeness or accuracy. The opinions presented in this communication are subject to change without notice.

‡ Investment products 1) Not FDIC insured 2) Not guaranteed by bank 3) May lose value.

FUTURE YOUWILL THANK YOU.

INFO@ALERUS.COM :: 877.661.4727