Health Savings Accounts

Helping You Insure Your Future

As health care costs continue to rise, and management of your health care expenses becomes more your responsibility everyday, Bank of Quincy is pleased to provide Health Savings Accounts (HSAs) to help you manage these expenses. But is a HSA right for you? We've provided some straight answers to your HSA questions.

What is a Health Savings Account?

A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for the purpose of paying or reimbursing qualified medical expenses of you, your spouse, and your dependents.

Features of Bank of Quincy's HSA

• $100 minimum balance to open an HSA
• $3.00 monthly maintenance fee
• Duplicate checks will be provided at no charge
• Receive an ATM/Visa Check Card for a $5.00 sign up fee
• No minimum balance to maintain
• Monthly account statements
• View your account balance online
• Deposited funds will earn interest on balances over $100. Click here to view current rates.

Am I Eligible for an HSA?

You are eligible to make or receive an HSA regular contribution if, with respect to any month, you:

• Are covered under a high-deductible health plan (HDHP);
• Are not also covered by any other health plan that is not an HDHP (with certain) exceptions for plans providing preventive care and limited types of permitted insurance and permitted coverage);
• Are not enrolled in Medicare; and
• Cannot be claimed as a dependent on another person's tax return.

What is an HDHP?

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

Are There Other Requirements for the HDHP?

Yes. For HSA purposes, 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 single coverage and no more than $11,200 for family coverage. These amounts are subject to COLAs.

How is an HSA Established?

You establish an HSA the same way you establish an IRA - with a qualified custodian.

Who Can Contribute to My HSA?

If you meet the eligibility requirements for an HSA, you, your employer, your family members, and any other person (including non-individuals) may contribute to your HSA. This is true whether you are self-employed or unemployed.

What Happens to My Funds if I Do Not Use Them Within the

Year? An HSA is not a "use it or lose it" account. Your funds will not expire if you do not use them within the year. Funds in your HSA rollover into the next calendar year when there is a balance.

How Much Can I Contribute to My HSA?

Beginning in 2007, HSA contributions are no longer limited by a health plan's deductible amount, thus raising contribution amounts for most HSA holders. Please refer to the table below for 2007 and 2008 contribution limits.

2007 HSA Maximum Contribution Limits

Self-Only Coverage: $2,850
Family Coverage: $5,650

2008 HSA Maximum Contribution Limits

Self-Only Coverage: $2,900
Family Coverage: $5,800

An HSA owner may take a one time (once-in-a-lifetime) tax-free distribution from his or her IRA, and transfer that amount to an HSA. The provision does not apply to SEPs or to SIMPLE retirement accounts.

Catch-Up Contribution Limits

Additionally, a "catch-up" contribution is available for eligible individuals who are age 55 or older by the end of their taxable year and have not enrolled in Medicare. The chart that follows shows these additional amounts.

Tax Year	Catch-up Amount
2007	$800
2008	$900
2009 & after	$1,00

How Do I Withdraw Funds?

Write a check or use your HSA debit card to pay for qualified medical expenses to your health services provider. You may also make a direct withdrawal of funds from Bank of Quincy. It is very important to save your receipts and statements. You will need them to complete your annual tax return.

What are the Federal Tax Benefits of an HSA?

Contributions to an HSA are fully deductible, the earnings grow tax deferred, and distributions for qualified medical expenses are tax-free. Consult with your tax or legal professional for guidance.

How Do I Claim the Federal Tax Deduction for My HSA Contribution?

Contributions made by you, your family members, and any other person on your behalf, which do not exceed the maximum annual contribution amount, are deductible by you when determining your adjusted gross income for your federal income tax return. You cannot deduct employer contributions, and these contributions will not count as wages for federal income tax purposes.

When Is The Contribution Deadline For Funding an HSA?

Regular and catch-up HSA contributions can be made at any time for a taxable year up to and including your federal income tax return due date, excluding extensions, for that taxable year. The due date for most taxpayers is April 15.

How Are HSA Distributions Taxed?

Distributions from your HSA used exclusively to pay for qualified medical expenses for you, your spouse, or your dependents are excludable from your gross income. Any other distributions are includable in your gross income and are subject to an additional 10 percent tax on the amount includable, except in the case of distributions made after your death, your disability, or your attainment of age 65. HSA distributions that are not rolled over will be taxed as income in the year distributed, unless they are used for qualified medical expenses. HSA custodians/trustees are not required to determine whether HSA distributions are used for qualified medical expenses. Any qualified medical expenses must be incurred only after the HSA has been established.

What Happens to My HSA in the Event of my Death?

Spouse Beneficiary

If your spouse is the beneficiary of your HSA, the HSA becomes his/her HSA.

Nonspouse Beneficiary

If your beneficiary is not your spouse, the HSA ceases to be an HSA as of the date of your death. If your beneficiary is your estate, the fair market value of the HSA as of the date of your death is taxable on your final return. For other beneficiaries, the fair market value of your HSA is taxable to that person in the tax year that includes such date.

For your reference, please refer to IRS Publication 502 - Covered Medical Expenses and IRS Publication 969 - Health Savings Account.

For more information about Bank of Quincy's Health Savings Account, contact one of our customer service representatives at (217) 223-7100.

*This information is effective for tax-year 2007 and thereafter. This information is intended to provide general information concerning federal tax laws governing HSAs. It is not intended to provide legal advice or to be a detailed explanation of the rules or how such rules may apply to your individual circumstances. For specific information, you are encouraged to consult your tax or legal professional. The IRS's web site, ww.irs.gov, may also provide helpful information.