Q. What is a Health Savings Account (HSA)?
A. An HSA is a tax-advantaged account that can be used to pay for qualified health expenses tax-free. Contributions to an HSA can be made only while covered under a qualified HSA-eligible health plan. HSA funds accumulate over time with interest, tax-free; are portable; and can be used to pay for non-health expenses on a taxable basis.

Q. When were HSAs approved?
A. HSAs were developed as part of Medicare legislation and signed into law late 2003. They have been available since January 1, 2004.

Q. Can a Health Reimbursement Arrangement (HRA) or Flexible Spending Account (FSA) also be offered along with a Health Savings Account?
A. Generally HSAs cannot be offered in conjunction with these other tax-advantaged accounts; however, according to the IRS guidance, an HSA could be offered with an FSA or HSA in limited circumstances, such as if the FSA/HRA was limited to dental, vision or preventive care expenses.

Q. Who is eligible to apply for an HSA?
A. An eligible individual:

• Is covered by a HSA-eligible health plan
• Is not covered by any other health plan that is not HSA-eligible (e.g., on a spouse’s plan, except for vision or dental coverage)
• Is not entitled to benefits under Medicare
• May not be claimed as a dependent on another person’s tax return

Q. What are the advantages to an account holder with an HSA?
A. HSAs allow full tax advantage to funds saved for qualified medical expenses: contributions are tax-deductible, interest earnings accrue tax-free, distributions (if made for qualified health expenses) are tax-free. Account holders can use the funds for non-health expenses on a taxable basis. Additionally, funds can accumulate for future medical expenses and are portable from one employer to the next. Account holders have complete control over how to spend the money as they own the funds.


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Q. What should you consider when offering an HSA?
A. You should carefully weigh all consumer plan options before choosing one(s) to best fit your employees’ needs. HSAs give your employees the opportunity to plan for future health expenses and offer the portability of coverage. The tax advantages of the accounts are valuable to both you and your employees.
Consider the following information about HSAs:

• The employee immediately owns the money contributed to the account
• The employee’s funds are portable after termination of employment
• You do not control how the money is used
• Qualified health expenses include all medical services listed under IRS Section 213(d), the same section governing FSA coverage
• Employees can choose to use their funds for non-qualified expenses; however, the funds are subject to tax. In addition, a 10 percent additional tax applies except following disability, age 65 or death.

Q. What role does OptumHealth Bank play in HSAs?
A. OptumHealth Bank is an FDIC-insured bank dedicated to the health care industry. The bank will be the custodian of your employees’ HSA funds and will service their accounts.

Q. Are preventive care services covered under an HSA?
A. Yes, though preventive services are not required to accumulate toward the health plan deductible. Preventive care services also may have a separate, lower deductible under the HSA-eligible health plan.

Q. Can the health plan be network-based?
A. Yes, as long as the plan has a deductible tied to network-based services. For example, a plan with both in-network and out-of-network coverage would qualify, as long as there is a deductible tied to in-network services, and that deductible meets the threshold for single or family coverage according to Internal Revenue Service guidelines. A separate, out-of-network deductible can be applied to out-of-network services and could be greater, but not less than, the IRS limits.

Q. Who can contribute to an HSA?
A. Eligible employees, employers or any other individuals can contribute to an HSA. When an employer contributes to the Health Savings Account, the funded amount is excluded from the employee’s gross income. As a result, contributions are not subject to withholding from wages for income tax, FICA tax, some state and local taxes, Federal Unemployment Tax or the Railroad Retirement Tax. Contributions to an employee’s Health Savings Account through a cafeteria plan are treated as employer contributions. The employee cannot deduct employer contributions to the HSA.

Q. What are the tax rules of an HSA?
A. An HSA is generally deferred from tax, and its use is exempt from tax if used for qualified expenses. Earnings on amounts in an HSA are not taxable.


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Q. When can contributions be made to the HSA?
A. Contributions can be made only after the HSA has been opened. If you choose to offer HSA enrollment via:

• Batch file with affirmation: OptumHealth Bank can accept contributions prior to receiving the employee’s signed and completed HSA Confirmation & Signature Request. OptumHealth Bank will not, however, allow distributions from the HSA until a signed HSA Confirmation & Signature Request has been received.
• Batch file without affirmation: OptumHealth Bank cannot accept contributions until the employee’s signed and completed HSA Confirmation & Signature Request has been received.
• Paper application: contributions cannot be accepted by OptumHealth Bank until the employee’s signed and completed application has been received.

Q. Do HSAs earn interest?
A. Yes. In addition to the savings associated with pre-tax contributions, the funds are deposited in interest-bearing accounts. Plan participants are 100 percent vested in both the employee and employer contributions in their accounts.

Q. How does an account holder access funds from an OptumHealth Bank HSA?
A. An account holder can use a Health Savings Account MasterCard® Debit Card to access HSA funds for direct payment at a doctor’s office, pharmacy or health care facility that accepts MasterCard debit cards. The Health Savings Account Card^SM can also be used at any ATM displaying the MasterCard logo. Online bill payment is available at OptumHealthBank.com

Q. Under a family plan, how are HSA funds distributed if the individual has met the single deductible, but the family deductible has not yet been met?
A. If an individual meets the single deductible, remaining HSA funds can still be used for other eligible family members’ medical expenses until they meet their deductible requirements.

Q. What happens if the contribution amount exceeds the maximum amount allowed in a given tax year?
A. The amounts that exceed the maximum contribution (“excess contribution”) are not eligible for deduction from the employee’s gross income. Also, an additional tax of 6 percent on the excess amount is imposed on the account beneficiary for each taxable year. Certain exceptions apply to the excise tax, e.g., if funds are withdrawn prior to the filing deadline. An account holder may recover an excess contribution made to the HSA to avoid the 6 percent additional tax by taking a distribution from the HSA in an amount equal to the excess contribution, including associated interest, before the day that the income tax return for that year is due.

Q. Are rollover and transfer contributions to HSAs permitted
A. In some cases. Rollovers from Archer Medical Savings Accounts (MSAs) and transfers from other HSAs are permitted. Rollovers from Health Reimbursement Accounts (HRAs) or Flexible Spending Accounts (FSAs) are only permitted if your employer offers this as an option. You may roll over money from an IRA to an HSA but only once in your lifetime and only up to your maximum HSA contribution limit for the year. You should consult a tax advisor on the best strategy for your situation.

Q. How are distributions from an HSA taxed?
A. Distributions from the HSAs are not taxed if they are used exclusively to pay for qualified health expenses for the account beneficiary, covered spouse or covered dependents. Any amount not used for qualified health expenses for individuals noted above is taxable and subject to a 10 percent additional tax. The additional tax does not apply to distributions made after the account beneficiary’s death, disability or age 65.

Q. Do I need to verify that distributions from the HSAs are for qualified services?
A. No. Account holders need to make those determinations and should maintain records of their medical expenses to verify the expenses are for qualified services, which are therefore excludable from their gross income. The Internal Revenue Service may request receipts during a tax audit. Employers, plan administrators and OptumHealth Bank are not responsible or liable for misuse of HSA dollars by plan participants.

Q. What forms do I need to file for contributions I make to my employees’ HSAs?
A. Your contributions to an HSA must be reported on the employee’s W-2 form. The IRS has released updated forms and instructions on how to report HSA contributions, deductions and distributions.

Q. What tax forms will OptumHealth Bank provide to my employees at the end of the year?
A. OptumHealth Bank will supply Form 1099-SA (to report distributions from an HSA) and Form 5498-SA (to report HSA contribution information) to your employees, as required by IRS regulations.

Q. Are HSA funds portable?
A. Yes. Account holders can take their HSA funds with them when they move to another employer. They can also continue to keep their HSAs at OptumHealth Bank. Funds are not forfeited after termination of employment.

Q. Does the use-it-or-lose-it rule apply to an HSA?
A. No. Any unused amounts in the HSA will be carried over to subsequent plan years.

Q. Can an account holder use HSA funds for services that were obtained prior to enrolling in the HSA?
A. In order to be tax-free and eligible for reimbursement, the expenses must be incurred after the HSA has been opened for the account holder.

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Q. Do account holders have to transfer HSA funds to another HSA when they move to another employer?
A. No, account holders can keep their funds at OptumHealth Bank.

Q. Can funds to cover administration fees be added to the account in excess of the deductible amount? Can these funds be added pre-tax (if they exceed the deductible) as well?
A. No, but employers can pay the administration fees directly. For specific information about contribution and deductible amounts as they relate to HSAs, including catch-up contributions, please refer to the IRS Guidelines section.

Q. What are the requirements for a HSA-eligible health plan?
A. Please refer to the IRS Guidelines section of this site for specifics.

Q. How much can be contributed to the HSA?
A. Employers, employees and/or other individuals can contribute tax-deductible funds each year up to the amount of the HSA-eligible health plan’s annual deductible. Please refer to the IRS Guidelines section for specifics.

Q. Is there an exception to these contribution maximums?
A. Yes. Individuals age 55 and older can contribute an additional monthly catch-up contribution. Please refer to the IRS Guidelines section of this site for specifics.

FAQs About HSA Investment Capabilities

• Quality – Funds are well established
• Diversity – Multiple fund types provide a tailored approach to meet consumers’ growth objectives and risk tolerance
• Flexibility – Account holders can easily transfer assets between their HSA deposit account and mutual fund investments
• Non-Proprietary – Unlike most competitors, we can consider and include multiple fund groups in our standard offering
• Consumer-Directed – Investment options are easy to use and understand, and are accessible online or by automated
  voice response when using a telephone.

Q. What criteria were used to select the funds for this portfolio?
A. OptumHealth Bank selected from a number of funds chosen by a Registered Investment Advisor (RIA). Decision criteria included:

• Variety in investment options to represent multiple fund companies
• Mutual funds with high value as defined by expense ratio, as well as historic performance
• Mutual funds which represent various risk tolerances

Q. Are there any criteria an OptumHealth Bank account holder must meet before they are eligible to invest HSA assets in mutual funds?
A. You must maintain a minimum available balance in your HSA that exceeds your minimum investment threshold before you can make investments.  Investments can be made in $100 increments.  Refer to your schedule of fees in order to determine the Investment Threshold that applies to your account.

Q. What happens if an OptumHealth Bank HSA deposit account balance dips below its minimum investment threshold?
A. While the HSA deposit account has no minimum balance requirements, account holders are not eligible to invest money from their OptumHealth Bank HSA deposit account into mutual funds unless the deposit account has a balance that exceeds the minimum investment threshold.


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Q. What are the key benefits to account holders if they participate in OptumHealth Bank’s HSA mutual fund investments?
A. Key benefits include:

• Auto-Enrollment – If they have an active OptumHealth Bank HSA deposit account, account holders are automatically set up to begin investing as long as they meet the minimum balance requirement for investments. No additional enrollment form or personal information is needed.
• Low Minimum Balance – An account holder need only maintain a balance that exceeds their minimum investment threshold in their deposit account at OptumHealth Bank in order to be eligible to purchase mutual funds.
• Automatic Invest Option – Account holders may set up an automated recurring mutual fund purchase whenever their account balance reaches its investment threshold (established by the account holder in advance). If account holders do not want to automate purchases, manual orders can be initiated online or by phone at any time.
• Integrated Statements – Account holders can view their HSA deposit account balance and any HSA investment fund balances in one convenient online location.

Q. What is the difference between an OptumHealth Bank HSA deposit account and the HSA investment account?
A. The key difference is:

• HSA Deposit Account – This is an interest-bearing account with traditional account access tools (e.g. debit card). This account will accept all new HSA-eligible deposits and withdrawals, and must be in place prior to investing. OptumHealth Bank's deposits are insured by the Federal Deposit Insurance Corporation at least $100,000 for each depositor.
• HSA Investment Account – This account allows consumers to place buy and sell orders for mutual funds, and is not FDIC insured. The mutual funds are not guaranteed by OptumHealth Bank and may lose value.

Q. Will OptumHealth Bank’s mutual fund portfolio ever change?
A. Based on analysis and work of the Registered Investment Advisor, in conjunction with OptumHealth Financial Services’ investment committee, we believe these funds are appropriate for the intentions of the HSA investor. OptumHealth Financial Services’ investment committee will review funds on a quarterly basis and make adjustments to the portfolio, as needed.

Q. Are monies invested in mutual funds FDIC insured?
A. No. Mutual funds are not insured by the FDIC, not guaranteed by OptumHealth Bank, and may lose value. Account holders are reminded to invest at their own risk.

Q. Can an employer’s contributions to an employee’s HSA be deposited directly into mutual funds?
A. No. Only the employee’s (account holder) FDIC-insured deposit account at OptumHealth Bank can accept new HSA-eligible deposits. The employee is the only party allowed to initiate mutual fund transactions.

Q. Can assets held in mutual funds be used to pay for eligible HSA claims?
A. HSA assets invested in mutual funds cannot be directly accessed to cover medical claims. Account holders who wish to use mutual funds to pay for a claim, must first sell shares of the fund and then transfer the proceeds into their HSA deposit account at OptumHealth Bank.

It is important to note that assets invested in mutual funds will not be automatically sold and transferred back into the HSA deposit account. All sell orders must be initiated by the account holder.


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Q. Are assets that have been transferred between mutual funds and the HSA deposit account available immediately?
A. Mutual fund buy or sell transactions may take up to three business days to execute or settle. Employees must take this time into consideration when selling mutual funds to cover expected HSA claims.

Q. Can money from an employee’s HSA deposit account be automatically invested to purchase additional mutual fund shares?
A. Yes. Account holders can establish an automatic transfer of assets from their OptumHealth Bank HSA deposit account into one or more mutual funds each time a pre-established balance threshold is met.

For example:

• The HSA deposit account balance is currently $1,900.
• The account holder can activate the Automatic Invest Option by establishing a dollar balance threshold. In this example, let’s assume $2,200 is selected.
• A $600 contribution is made to the HSA deposit account, bringing the available balance to $2,500.
• Since the balance is above the Automatic Invest Option threshold established, a $300 mutual fund purchase is automatically executed.
• A balance of $2,200 remains in the HSA deposit account.
• Subsequent automatic fund purchases are suspended until the balance rises to at least $100 above the $2,200 threshold established, at which time another fund purchase will execute.

Q. Can OptumHealth Bank Customer Service Representatives initiate mutual fund buy or sell transactions on behalf of account holders or provide investment advice?
A. No, these representatives are not permitted to address specific questions about the funds or provide any investment advice. Only the account holder can initiate mutual fund transactions.

If the account holder has a UnitedHealthcare health plan, they can access additional information on HSA investments by visiting myuhc.com. All other account holders should log onto OptumHealthBank.com for more details. Individuals may also directly access the mutual fund Web sites or call the fund companies for more information.

For a printable version of the HSA investment FAQs please download:
HSA Investment FAQs (72 KB)

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Contact us to learn how OptumHealth Financial Services can benefit your organization.