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Health Savings Account (HSA) & Flexible Spending Accounts (FSAs)

State of Tennessee | 2018

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Having an HSA, along with an LPFSA

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What’s an HSA? An HSA is an account you can contribute to with pretax money deducted from your paycheck. This money is used for eligible health care expenses.

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Why do people love the HSA? • Use your funds for current &

future eligible health expenses • Unused funds roll over from year

to year • Enjoy investment options • Your HSA stays with you if you

switch employers, change insurance plans, or retire

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What’s the best part?

The State and Higher Ed’s will contribute to your HSA!!

Note -- Any Local Ed or Local Gov agency may/may not choose to contribute to the HSA – check with your individual agency.

$250/individual $500/family

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HSA Contributions

*The IRS annual health care HSA pretax contribution limit is:

o Individual: $3,450 o Family: $6,900

• Your funds are available as they’re deducted from your paycheck.

• Your funds can be used by you and your spouse, child (to age 26) or tax dependent who is permanently and totally disabled

• Funds are used for eligible health care expenses, such as: deductibles, copays, prescriptions, dental and vision care, etc.

*includes any employer contributions that you may receive in your HSA (if applicable)

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Growing your HSA funds for the future Once you have a minimum balance of $1,000 in your HSA, you can open an investment account and start investing your HSA dollars. You can take advantage of the following benefits:

• Access to a diversified group of mutual funds, each professionally managed by an investment adviser

• Integration with Morningstar® research data • 401(k)-like investment capabilities with no transaction fees for trading • Tax-free growth • No Investment Fees

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Available investment options ($1,000 to invest)

• Vanguard Developed Markets Index Fund Admiral Shares VTMGX • Vanguard 500 Index Fund Admiral Shares VFIAX Vanguard Mid‐Cap Growth

Fund VMGRX • Vanguard Small‐Cap Index Fund Admiral Shares VSMAX • Vanguard Mid-Cap Growth Fund Investor Shares VMGRX • Vanguard Total Bond Market Index Fund Admiral Shares VBTLX • Fidelity Puritan FPURX • JP Morgan Large Cap Growth Fund Select Shares SEEGX American Funds

2020 Target Date Retirement Fund Class R-6 RRCTX • American Funds 2025 Target Date Retirement Fund Class R-6 RFDTX • American Funds 2030 Target Date Retirement Fund Class R‐6 RFETX • American Funds 2035 Target Date Retirement Fund Class R‐6 RFFTX • American Funds 2040 Target Date Retirement Fund Class R‐6 RFGTX • American Funds 2045 Target Date Retirement Fund Class R‐6 RFHTX • American Funds 2050 Target Date Retirement Fund Class R-6 RFITX

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What’s a Limited Purpose FSA?

• An LPFSA lets you set aside pre-tax money from your paycheck to pay for eligible dental and vision costs.

• The IRS annual pretax contribution limit is $2,600

• Funds are available at the start of the plan year.

• Carryover up to $500 into the next plan year.

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Available only to State and Higher Education employees (does not include offline agencies, Local Education or Local Government groups)

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An LPFSA works great with an HSA • Both the LPFSA and HSA can

be used to pay for eligible dental and vision costs

• Remember HSA funds roll over year to year and an LPFSA has a carryover option of up to $500.

• Having both accounts means you can use funds in your LPFSA first (before they run out) without having to tap into your HSA.

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Having a health care FSA and/or a dependent care FSA

What’s the cost savings benefit?

Here’s an example of how having these accounts can help reduce your taxes and increase your take home pay! *This is example is based on 7.65% FICA and 15% tax bracket. Note: Be advised that this example is for illustrative purposes only. These projections are only estimates of tax information and should not be assumed to be tax advice. Be sure to consult a tax advisor to determine the appropriate tax advice for your situation. Actual tax savings depends on several variables, including state and local tax rates and the tax bracket of the individual.

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Annual Salary Health Care FSA Annual

Contribution

Dependent Care FSA Annual Contribution

Savings

$30,000 $1,500 $0 $340

$50,000 $1,750 $4,000 $1,303

$70,000 $2,000 $4,500 $1,472

Health Care FSA The IRS annual health care FSA pretax limit is $2,600.

• If you & your spouse have a health care FSA, you can each contribute $2,600.

• Your entire contribution is available at the beginning of the plan year. • Carryover up to $500 into the next plan year. • You have until April 30 to pay yourself back/submit claims for

reimbursement • Your funds can be used by you and your spouse, child (to age 26)

or tax dependent who is permanently and totally disabled. • Funds are used for eligible health care expenses, such as:

deductibles, copays, prescriptions, dental and vision care.

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• Available only to State and Higher Education employees (does not include offline agencies, Local Education or Local Government groups)

• FSA is not available to State or Higher Education employees who choose to enroll in the CDHP/HSA

Dependent Care FSA The IRS annual dependent care FSA pretax contribution limit is $5,000/family

• Funds are available as they’re deducted from your paycheck, and added to your account. • Eligible expenses are used for -- your eligible dependents up to age 12. Or for a

spouse/dependent unable to take care of him/herself • To use your funds, you must be working. If you are married, your spouse must either be

working, looking for work, be a full-time student or incapable of self-care • You have until April 30 to pay yourself back/submit claims for reimbursement

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Available only to State and Higher Education employees (does not include offline agencies, Local Education or Local Government groups)

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Using your funds & extra account features

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Use the PayFlex Card®. Pay for an eligible expense with cash, check or a personal credit card. Then, pay yourself back from your account online. Use the online features to pay providers directly from your account. Debit card only applies to the HSA, FSA, and L-FSAs, and not to the DC-FSA.

Ways to use your funds

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More about the PayFlex Card

The easy way for you to spend the money in your PayFlex account/s.

Simply swipe the card and select “debit” or “credit.” • If you choose “debit,” you may need a PIN to complete the transaction. • After you swipe the card, our system automatically confirms whether you have enough

funds to pay for the expense.

What can I purchase with the card? You can use the card to pay for eligible expenses allowed under your plan with the funds you have available.

Quick note: If you have more than one account with PayFlex, you’ll receive 1 card to use for all accounts.

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Help keep your PayFlex Card active Common scenarios when PayFlex may need documentation

1. You used the PayFlex Card for an expense that was “estimated” or “pending”. 2. The description PayFlex received from the merchant doesn’t list the actual “type” of

service/expense. 3. You used your PayFlex Card at a merchant that doesn’t accept health care cards.

If we need documentation from you for a card purchase, we’ll post an alert message on the PayFlex member website. Or we’ll send you a Request for Documentation notice by e-mail or mail, based on your account settings. You can sign up to receive e-mail notifications by logging in to your PayFlex member website and clicking My Settings. Important notes to keep in mind

• Save all your Explanations of Benefits (EOBs) from your insurance carrier as well as your itemized statements and detailed receipts for your card purchases.

• If you don’t respond to our requests, your card may be suspended until you send in the requested documentation or payment.

• If your card is suspended, you can still get reimbursed for eligible expenses. Pay for an eligible expense with another form of payment and submit a claim.

• After PayFlex receives/processes your documentation, your card will be active again.

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Engagement tools

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Virtual Advisor

Interactive tool to help employees understand the benefits

of FSAs, HSAs and

HRAs

PayFlex Mobile

Provides real-time access to manage

account(s)

PayFlex Coach

Four-week texting

program to educate new and returning members

PayFlex Videos

Watch and learn about

our products all

year long

E-Card Series

Ready-to-go emails to

help educate

your employees throughout

the year

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Manage your account with PayFlex Mobile®

The PayFlex app makes it easy to: • Manage your account funds • View PayFlex Card® purchases • View a list of common eligible expense items • Use same username and password as the PayFlex member website Available for iPhone® and iPad® mobile digital devices, as well as Android™ smartphones.

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• Flyers • Videos • FAQs • Helpful tools and calculators • Eligible expense listing Questions? Visit stateoftn.payflexdirect.com, or call 1-855-288-7936. We’re here to help Monday-Friday, 7 a.m. – 7p.m. CT and Saturday, 9 a.m. – 2 p.m. CT.

Your PayFlex member website

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There may be fees associated with a Health Savings Account (“HSA"). These are the same types of fees you may pay for checking account transactions. Please see the HSA fee schedule in your HSA enrollment materials for more information. This material is for informational purposes only and is not an offer of coverage. It contains only a partial, general description of plan benefits or programs and does not constitute a contract. It does not contain legal or tax advice. You should contact your legal counsel if you have any questions or if you need additional information. In case of a conflict between your plan documents and the information in this material, the plan documents will govern. Eligible expenses may vary from employer to employer. Please refer to your employer’s Summary Plan Description (“SPD”) for more information about your covered benefits. Information is believed to be accurate as of the production date; however, it is subject to change. PayFlex cannot and shall not provide any payment or service in violation of any United States (US) economic or trade sanctions. For more information about PayFlex, go to payflex.com. Include the following when HSA Investments is mentioned: Investment services are independently offered through a third party financial institution. By transferring funds into an HSA investment account you can potentially benefit from capital appreciation in the value of mutual fund holdings. However, you will also be exposed to a number of risks, including the loss of principal, and you should always read the prospectuses for the mutual funds you intend on purchasing to familiarize yourself with these risks. The HSA investment account is an optional, self-directed service. We do not provide investment advice for HSA investment account participants. You are solely responsible for any investment account decisions you make. Mutual funds and brokerage investments are not FDIC-insured and are subject to investment risk, including fluctuations in value and the possible loss of the principal amount invested. The prospectus describes the funds’ investment objectives and strategies, their fees and expenses, and the risks inherent to investing in each fund. Investors should always read the prospectus carefully before making any investment decision. System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance, and other factors. PayFlex Mobile® is a registered trademark of PayFlex Systems USA, Inc. © 2017 PayFlex Systems, USA 69.25.333.1. C (7/17)- state of tn