2016

Tax-Advantaged Accounts Guide Health Savings Accounts & Flexible Spending Accounts

Tax-Advantaged Accounts Guide Health Savings Accounts & Flexible Spending Accounts What Is a Health Savings Account?  2 How Can I Contribute to My HSA?  3 HSA Regulations and Eligibility Requirements  5 What Is a Health Care Flexible Spending Account?  8 Flexible Spending Account Carryover Option  9 FSA Eligibility Requirements  12 Dependent Care FSA  13 Appendix A: Eligible Dependents for Purposes of HSA Reimbursements  14

www.rochester.edu/benefits The University reserves the right to modify, amend or terminate the Plans at any time, including actions that may affect coverage, cost-sharing or covered benefits, as well as benefits that are provided to current and future retirees. This documents provides only a summary of the main features of the plans. Detailed information on the benefit plans is available on the Benefits website www.rochester.edu/benefits. A paper copy of this information is available for free from the Benefits Office. This booklet only provides a brief summary of the plan terms, in the event of a conflict between this booklet and the official plan document or SPD, the plan document or SPD shall be controlling. The University of Rochester believes that the FSA and EAP Plans are “grandfathered health plans” under the Patient Protection and Affordable Care Act or health care reform).

Health Savings Account What Is a Health Savings Account (HSA)? A Health Savings Account (HSA) is a tax-advantaged savings account available to eligible individuals enrolled in a High Deductible Health Plan as defined by the IRS (i.e., YOUR HSA-Eligible Plan). An HSA allows you to save tax-free dollars to pay for out-of-pocket qualified medical expenses (as defined by the IRS) incurred once your account is open. You can use your HSA funds for your own qualified medical expenses as well as for your spouse and eligible tax dependents, or you can save the funds for future qualified medical expenses. An HSA, like most bank accounts, is owned by the accountholder, therefore, you are responsible for meeting requirements pertaining to participation, contributions, disbursements, and year-end tax filing requirements.

Benefits of a Health Savings Account

• You Own Your HSA: You are responsible for your HSA, it is yours to keep, year after year, there is no “use it or lose it” penalty, unused funds continue to roll over in your account each year and collect tax-free interest. • Take It with You: HSAs are portable, you can keep your HSA if you retire, leave the University or change your health care plans, you can also designate a beneficiary to inherit your account. • Investment Options: You can grow your HSA with investment options, earnings from your HSA investments are not taxed as long as the funds remain in your HSA. • Tax Savings: An HSA offers triple tax savings: • Pre-tax or tax deductible contributions • Tax-free interest and investment earnings • Tax-free distributions, when used for qualified medical expenses

How Does a Health Savings Account Work? An eligible individual would enroll in the YOUR HSA-Eligible Plan and elect to make pretax payroll contributions to a Health Savings Account (HSA). The HSA, as with most bank accounts, is owned by the accountholder (you) and would be administered by your Third Party Administrator’s (Excellus or Aetna) HSA vendor—either HSA Bank for Excellus members or PayFlex for Aetna members. The account establishment date is governed by the state banking laws in which the HSA vendor (HSA Bank or PayFlex) resides. Depending on the applicable state banking laws, the HSA will be opened on the first day of the pay period following the date the enrollment form is submitted (if submitted before any applicable administrative processing deadline), or the first day of the calendar month following or coincident with the effective date of

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enrollment into the YOUR HSA-Eligible Plan, whichever is later. If you elect to contribute to a new HSA or elect to receive the University HSA funding during the annual open enrollment period, your HSA will be established January 1, 2016, subject to compliance with the USA Patriot Act. Please note, Health Savings Accounts are banking accounts and therefore are subject to compliance with the USA Patriot Act. The Patriot Act regulations require all banks to implement Customer Identification Programs (CIP) to prevent financing of terrorist operations and money laundering. Therefore, if necessary, your HSA vendor (HSA Bank or PayFlex) may require you to provide additional documentation (i.e., a copy of your license) to complete the Customer Identification Program (CIP). Your HSA will not be established until the CIP process has been completed. Once the account is established, your HSA administrator (HSA Bank or PayFlex) will mail you a debit/credit card. Additional cards are available, for a fee, upon request. You may change your annual contribution amount at any time throughout the year (your annual contribution amount, including any employer funding, cannot exceed the IRS maximum—$3,350 for single coverage, $6,750 if covering one or more dependents). Once the funds are available in your account, you can use your HSA card to pay for qualified expenses.

How Can I Contribute to My HSA?

• Pre-Tax Payroll Contributions: You can make pre-tax payroll contributions each pay period by electing an annual contribution amount during the annual open enrollment period (amount can be changed throughout the year). • Direct Contributions: You can make after-tax direct contributions to your HSA and claim the contribution on your annual tax return. • Catch-Up Contributions: If you are 55 or older, you can contribute an additional $1,000 to your HSA through pre-tax payroll deductions, (you can elect to make catchup contributions in HRMS during the Open Enrollment period or by contacting the Benefits Office throughout the year to request the necessary paperwork). This is a “catch-up” contribution that you can make each year you are eligible to contribute to an HSA. If you turn 55 or enroll in the YOUR HSA-Eligible Plan mid-year (prior to December 1st), you will need to prorate your contributions based on the number of months remaining in the calendar year. However, if you turn 55 or enroll in the YOUR HSA-Eligible Plan mid-year, you can contribute the full $1,000 catch-up contribution if you will remain eligible to contribute to an HSA for the full following calendar year. • Consolidate Your HSA Funds: If you have an HSA elsewhere, you can transfer those funds to your new HSA through the University.

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The elected annual contribution amount must be within IRS guidelines (2016 minimum: $100 for family coverage, maximum (including employer funding): $3,350 for single coverage; $6,750 for family coverage). Coverage Type

Maximum Contribution

Single coverage

$3,350

Family coverage

$6,750

University Funded HSA The University has decided to provide a one-time employer funding to a Health Savings Account for eligible employees in the YOUR HSA-Eligible Plan or who are enrolled in the YOUR HSA-Eligible Plan during the 2016 Open Enrollment period. Throughout 2016, if enrolling in the YOUR HSA-Eligible Plan and attesting to their eligibility to have an HSA, newly hired, rehired, and newly benefit-eligible employees will be eligible for the prorated University-funded HSA. During the election period, if you attest to your eligibility to have an HSA (see the eligibility requirements on page 5), the University will provide $200 towards an HSA for an employee electing single coverage or $400 towards an HSA for an employee electing coverage with one or more covered dependents. If you receive the employer funding and choose to contribute additional funds to your HSA, the total contribution amount for 2016 (employer funding + your contributions) cannot exceed the IRS annual contribution maximum for 2016. See the 2016 Health Program Guide for additional information.

How to Use Your HSA Funds You only have access to the funds currently in your account. • Swipe Your Card at the Point of Service: Use your HSA debit/credit card at the point of service to pay for qualified medical expenses (i.e., swipe your card at the pharmacy to pay for your prescriptions—please note: you can swipe your card as a credit or debit card—if you choose to use it as a debit card, additional fees are applicable). • Online Bill Pay: Use online bill payment to pay your provider directly from your HSA. • Reimburse Yourself Later: Pay for a qualified medical expense out-of-pocket, then reimburse yourself from your HSA. If you don’t have sufficient funds in your HSA, you can pay out-of pocket and reimburse yourself once your HSA funds are available via an online bank transfer into your personal checking or savings account or write yourself a check from your HSA. You are able to reimburse yourself for any qualified expense incurred after your account is opened—even if it’s years later.

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Qualified Expenses You can use your HSA to pay for qualified medical expenses including out-of-pocket costs counting towards your deductible, coinsurance, copays and out-of-pocket maximum. The qualified medical expenses must be incurred on or after the effective date of your HSA and can be for you, your spouse, and your tax dependents, even if you have single coverage under the YOUR HSA-Eligible Plan. Qualified medical expenses are designated by the IRS and include the following: • Acupuncture • Hearing aids and batteries • Ambulance

• Insulin

• Chiropractor

• Nursing care

• Contact lenses (including saline solution and enzyme cleaner)

• Orthodontia

• Dental treatments • Diabetic supplies

• Refractive surgery: LASIK, LASEK, PRK, CK

• Durable Medical Equipment

• Rental of medical equipment

• Eye examination

• Wheelchair

• Prescribed drugs and medicine

• Eyeglasses You may also consult IRS Publication 502 for information on whether an expense qualifies as an eligible health care expense but keep in mind that you generally cannot use the HSA to pay insurance premiums (except for COBRA, long-term care, insurance while you are unemployed, retiree health insurance, or Medicare Part A,B,C, or D premiums) even though they appear in Publication 502. Please note: If you use HSA funds for ineligible expenses, you’ll have to pay income taxes on that amount in addition to a penalty tax of 20%. If you are age 65 or older or disabled at the time of the withdrawal, you will not have to pay the penalty tax; however, you are still responsible to pay the income taxes.

HSA Regulations and Eligibility Requirements • You cannot be reimbursed for any qualified health care expenses incurred before the date your HSA is opened. • You cannot contribute to an HSA if you are eligible to be claimed as someone’s dependent on their tax return. • You cannot be enrolled in another health care plan—for example, through your spouse or Medicare (parts A, B, and/or D). • You, your spouse, or any other person eligible to reimburse your expenses through a Health Care FSA cannot enroll in a Health Care FSA through the University or another employer.   Health Savings Account  5

• You cannot contribute to an HSA if you, your spouse, or any other person is eligible to reimburse your claims through an HRA. • Expenses for domestic partners and children are not eligible for reimbursement from the HSA on a pre-tax basis unless they are your tax dependents under the Internal Revenue Code. • Only certain types of expenses are eligible to be paid by funds in an HSA. Distributions from your HSA will be reported to you and the IRS on Form 1099-SA for all withdrawals even if they were used to pay for qualified expenses and are not taxable. If the distribution was used for a non-qualified expense, such as an over-the-counter medication (unless you have a prescription), you must report that amount as income on your federal tax return, and you also may be required to pay a 20% excise tax. Please consult with your tax advisor for more information.

Tax Reporting There are several required tax forms for HSA reporting: • Form 1099-SA: reports all account distributions. A distribution from your HSA for a qualified expense is not taxable. The 1099-SA is produced by your HSA vendor (PayFlex or HSA Bank) and mailed to you in January. • Form 5498-SA: reports all contributions, both employer and employee, and earned interest. The individual has until April 15 to contribute for the tax year. Form 5498-SA is produced by your HSA vendor (PayFlex or HSA Bank) and mailed to you in May. • Form W-2: reports all pre-tax payroll deductions. Your W-2 is produced by the University and available to you after the end of the calendar year. • Form 8889: reports all contributions, withdrawals, interest, excess contributions, and any withdrawals for non-qualified expenses. Form 8889 is completed by the HSA accountholder and submitted with tax filing. Both HSA Bank and PayFlex have forms available to remove funds that exceed your annual contribution limit as well as forms to return any funds used for non-eligible expenses. If done before the end of the tax filing deadline, you will not be penalized.

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Administrative Fees

Continuing for 2016: The University will pay the 2016 Accountholder Monthly Administrative Fee for employees enrolled in the YOUR HSA-Eligible Plan with an HSA through the University Health Program. Aetna/PayFlex

Excellus/HSA Bank

ATM Withdrawal

Description

N/A

$2.00

Monthly Paper Account Statement (online statement available at no cost)

$1.50

No charge

Stop Payment

$25

No charge

Return Deposited Check

$25

No charge

Insufficient Funds

$25

$30

Limited Purpose Flexible Spending Account (FSA) If you enroll in the YOUR HSA-Eligible Plan and contribute to an HSA, you are able to contribute to a Limited Purpose FSA. This type of FSA can provide reimbursement for qualified dental or vision expenses but cannot reimburse any out-of-pocket health care expenses until the plan deductible has been satisfied; otherwise, the Limited Purpose FSA works like a Health Care FSA. The maximum contribution amount set by the IRS for 2016 is $2,550.

Useful Tools and Additional Information Account holders can visit the PayFlex website (for Aetna members) or HSA Bank website (for Excellus members) to take advantage of the account management tools to: • View their account balance • Complete a transaction • View transaction history • Make a direct contribution, transfer, or withdrawal • Receive year-to-date account information Aetna members can visit the PayFlex website at: www.PayFlexDirect.com or call PayFlex Customer Service: 1-888-678-8242 Excellus Members can visit the HSA Bank website at www.hsabank.com or call HSA Bank Customer Service: 1-866-471-5940 For additional information regarding the University Health Program, contact the University of Rochester Benefits Office at 585-275-2084 or view the Benefits website: www. rochester.edu/benefits.

Information Regarding IRS Rules and Regulations

• IRS Publication 502: List of Qualified Medical Expenses: www.irs.gov/pub/irs-pdf/p502.pdf • IRS Publication 969: For Use in Tax Preparation: www.irs.gov/pub/irs-pdf/p969.pdf   Health Savings Account  7

Flexible Spending Account What Is a Health Care Flexible Spending Account (FSA)? A Health Care Flexible Spending Account (FSA) is a tax-advantaged savings account that allows you to set aside money for eligible expenses on a pre-tax basis. A Health Care FSA reimburses you for qualified out-of-pocket medical, dental, prescription, or vision services, including expenses applied towards your deductible, copays, and coinsurance.

Benefits of a Health Care Flexible Spending Account

• Immediate Access to Your Full FSA Election: You can reimburse yourself for qualified medical expenses incurred once your FSA is effective even if you have not yet placed the funds in your FSA. • Pre-Tax Payroll Deductions: Your payroll contributions are made pre-tax (FICA and federal income taxes are not deducted from your contributions). • Tax-Free Reimbursements: Your reimbursements for qualified medical expenses are also tax free.

You choose your annual FSA contribution amount

Health Care Flexible Spending Account

Tax-free reimbursement for qualified medical, dental, or vision expenses

Pre-tax payroll deductions are taken each pay period

How Does a Health Care Flexible Spending Account Work? An eligible Faculty or Staff member would elect to contribute an annual amount to a Health Care FSA during their enrollment period (either during the annual open enrollment period or within 30 days of their hire date) or within 30 days of a corresponding qualifying event. Your Health Care FSA would be administered by your designated Third Party Administrator’s (either Aetna’s or Excellus’) FSA vendor. Aetna’s FSA vendor is PayFlex, and Excellus’ FSA vendor is Lifetime Benefit Solutions. 8  2016 Tax-Advantaged Accounts Guide

• Important: You cannot elect, terminate, or change your FSA election mid-year without a corresponding qualifying event—see the 2016 Health Program Guide for a list of corresponding qualifying events. If you elect to contribute to an FSA during the open enrollment period, your FSA will be effective January 1. If you elect to contribute to an FSA within 30 days of your hire date or within 30 days of a qualifying event, your FSA will be effective the first day of the month following or coincident with the date of hire, appointment, or change to eligible status or the first day of the pay period following the date the enrollment form is submitted (if submitted before any applicable administrative processing deadline), whichever is later. Your annual FSA contribution amount will be prorated based on the number of pay periods remaining in the calendar year. Each pay period, your contribution will be automatically deducted from your paycheck—before taxes—and deposited into your FSA. Once your FSA is effective, you can be reimbursed for any qualified expenses incurred by you or your eligible dependents.

Flexible Spending Account Carryover Option Traditionally, the IRS regulations have included a “use it or lose it” rule, FSA contributions can only be used to reimburse expenses incurred during the current Plan Year (January 1st–December 31st). However, the IRS regulators have issued guidance modifying the “use-it-or-lose-it” rule for health care flexible spending accounts (FSA) to allow employers the option to let participants carry over up to $500 of their unused balances from one plan year to the next. Faculty and staff members with a 2015 Health Care FSA or a Limited Purpose FSA will be able to carry over up to $500 of unreimbursed 2015 FSA dollars to the 2016 Plan Year. (You will still be able to submit reimbursement claims for health, dental, or vision expenses incurred during the 2015 Plan Year up to April 30, 2016.) The Plan has been amended to allow you to carry over up to $500 of unused amounts remaining in your Health Care FSA at the end of a Plan Year to be used for eligible medical expenses incurred during the next Plan Year, beginning with any unused amounts remaining at the end of the 2015 Plan Year. This change applies only to the Health Care FSA, which includes the Limited Purpose FSA; carryovers are not permitted under the Dependent Care FSA. The following rules will apply to carryovers under the Health Care FSA: • No more than $500 of your unused Health Care FSA amount for a Plan Year may be carried over for use in the next Plan Year. Example: At the end of the 2015 Plan Year, your unused Health Care FSA amount is $800. You may carry over up to $500 to reimburse 2016 Plan Year expenses. However, the entire $800 is also available to reimburse 2015 Plan Year expenses during the 2015 run-out period. Assume that, during the run-out period for 2015, you submit and are reimbursed for 2015 expenses of $350. This leaves you with a carryover of $450 ($800– $350), which can be used for 2016 expenses. On the other hand, if you do not submit

  Flexible Spending Account  9

2015 expenses during the run-out period, you will be able to carry over the maximum permitted amount of $500. • Carryovers may not be cashed out or converted to any other taxable or nontaxable benefit and will not count toward the maximum dollar limit on annual salary reductions under the Health Care FSA. Example: Assume that for 2016, you elect the $2,550 maximum Health Care FSA salary reduction amount permitted under the plan. Your election will not affect your carryover, and you can also carry over the maximum permitted amount of $500 from 2015 to 2016. • Eligible medical expenses incurred in the current Plan Year will be reimbursed first from your unused amounts credited for that Plan Year and then from amounts carried over from the preceding Plan Year. Carryovers that are used to reimburse a current Plan Year expense will reduce the amount available to pay your preceding Plan Year expenses during the run-out period, cannot exceed $500, and will count against the $500 maximum carryover amount. Example: At the end of the 2015 Plan Year, your unused Health Care FSA amount is $800. You elect Health Care FSA salary reductions of $2,550 for 2016. In January 2016, you submit 2016 eligible medical expenses of $2,700. The entire $2,700 will be reimbursed with the $2,550 you elected for 2016 and $200 of the $800 remaining from 2015. You will then have $600 remaining to reimburse any 2015 eligible medical expenses submitted during the rest of the 2015 run-out period, and you may carry over up to $300 ($500 maximum less the $200 already reimbursed). Thus, if you submit 2015 runout expenses of $750 in February 2016, only $600 of these expenses can be reimbursed, and you will have no amounts remaining to reimburse 2016 expenses. • If you enroll for a Health Care FSA for the new Plan Year, your funds will carry over to the same type of FSA you have elected for your new contributions. Example: If you were enrolled in a general Health Care FSA in 2015, but you enroll for a Limited Purpose FSA for 2016, your remaining 2015 funds will be carried over to the Limited Purpose FSA and will no longer be available for general medical expenses. • If you are otherwise eligible for the Health Care FSA for a Plan Year, but you do not make a Health Care FSA election, you may still use any carryovers from the preceding Plan Year for current or preceding Plan Year eligible medical expenses (in accordance with Plan terms). • If you waive University health care plan coverage, your Health Care FSA funds will remain in the same type of FSA (the general Health Care FSA or the Limited Purpose FSA) that you had the prior Plan Year. • If you enroll for University health care plan coverage, your Health Care FSA funds will carry over to the general Health Care FSA if you are enrolled in the YOUR PPO Plan option and to the Limited Purpose FSA if you are enrolled in the YOUR HSA-Eligible Plan option.

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Note: Under IRS rules, if you carry over any unused general Health Care FSA amounts to a general Health Care FSA for the next Plan Year, you (and any other individual whose expenses can be reimbursed by your Health Care FSA) cannot contribute to an HSA during the entire next Plan Year. Therefore, if you are not making a new FSA election and you are also waiving University health care plan coverage for the new Plan Year, but you (or someone else whose expenses can be reimbursed by your Health Care FSA) would like to contribute to an HSA during the next Plan Year, you must either waive (decline) a general Health Care FSA carryover before that Plan Year begins or request that your remaining general Health Care FSA funds be rolled over to the Limited Purpose FSA, using a form available from the Benefits Office. If you waive the carryover, you may continue to submit claims for expenses incurred during the current Plan Year until the end of the run-out period (April 30th of the following Plan Year), to be reimbursed from your available general Health Care FSA amounts. If those claims do not use up your entire general Health Care FSA balance for the current Plan Year, any unused amounts will be forfeited in accordance with your waiver. Example: Before the beginning of the 2016 Plan Year, you were enrolled in the General Health Care FSA. For 2016, you opt out of the University health care plans and the University FSA because you are enrolled in your spouse’s HSA-eligible plan. You have funds remaining in your general Health Care FSA at the end of 2015 and waive the carryover so that your spouse may contribute to his/her own HSA. On December 31, 2015, you have an unused Health Care FSA amount of $300. Because of the waiver, the $300 will not be carried over to the 2016 Plan Year. However, it will remain available to reimburse expenses incurred during the 2015 Plan Year until the end of the run-out period for that Plan Year. Any unused amount remaining at the end of the run-out period will be forfeited. • You must be a participant in the Health Care FSA as of the last day of the Plan Year to benefit from the carryover. Termination of employment and cessation of eligibility will generally result in a loss of carryover eligibility unless a COBRA election is made.

How to Use Your Flexible Spending Account You can set up your reimbursements to be directly deposited into your personal banking account; otherwise, you will be reimbursed with a check from your FSA administrator. • Expenses processed as part of your University Health or Dental coverage (i.e., copays, coinsurance, and expenses that count towards the deductible) will be automatically reimbursed through your Health Care FSA unless otherwise requested. If you have a Limited Purpose FSA, you will need to submit your expenses manually. • If you or your eligible dependents incur qualified expenses not covered by the University Health or Dental Plans, or if you did not elect coverage through the University, you can submit a manual request for reimbursement from your FSA administrator. • If you cover your domestic partner or their children on your University Health and/or Dental Plan(s), you must turn off the automatic reimbursement feature through your FSA administrator (Lifetime Benefit Solutions or PayFlex.)

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Qualified Expenses You can be reimbursed from your FSA for qualified medical expenses including out-ofpocket costs counting towards your deductible, coinsurance, and copays. The qualified medical expenses must be incurred on or after the effective date of your FSA. Qualified medical expenses are designated by the IRS and include the following: • Acupuncture • Hearing aids and batteries • Ambulance

• Insulin

• Chiropractor

• Nursing care

• Contact lenses (including saline solution and enzyme cleaner)

• Orthodontia

• Dental treatments • Diabetic supplies

• Refractive surgery: LASIK, LASEK, PRK, CK

• Durable Medical Equipment

• Rental of medical equipment

• Eye examination

• Wheelchair

• Prescribed drugs and medicine

• Eyeglasses You may also consult IRS Publication 502 for information on whether an expense qualifies as an eligible health care expense, but keep in mind that you generally cannot use the Health Care FSA to pay insurance premiums or for long-term care expenses, even though they appear in Publication 502.

Eligibility Requirements • You are eligible to elect an FSA if you are actively employed in a full-time or part-time position at the University, including members of 1199 SEIU. • You can elect an FSA in addition to your University Health Care Plan; however, you can elect an FSA through the University even if you waive your University Health Care coverage. • The IRS regulates the FSA maximum election amount ($2,550 for the 2016 Plan Year). • Per IRS rules and regulations, qualified medical expenses include expenses incurred by you, your spouse, all dependents you claim on your tax return, and certain additional dependents, including your child(ren) through the end of the calendar year in which they turn age 26 even if they do not qualify as your tax dependents, regardless of whether they are covered under one of the University Health Care Plans. For more information on eligible dependents, see appendix B of the 2016 Health Program Guide.

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Dependent Care Flexible Spending Account The Dependent Care FSA is a tax-advantaged savings account designed to help you save money on daycare expenses for dependent children so you and your spouse can work or go to school. The maximum contribution amount set by the IRS for 2016 is $5,000; qualifying dependents include: • Children under age 13, whom you claim as a tax dependent on your federal income tax return (special rules apply for divorced parents). • A disabled spouse and any other dependent on your tax return who resides with you and is physically or mentally disabled. Allowable expenses eligible for reimbursement from your Dependent Care FSA include: • Child Care Center • Nursery School • Before and after school care See IRS Publication 503 for a complete list of eligible expenses.

Useful Tools and Additional Information Accountholders can visit the PayFlex website (for Aetna members) or Lifetime Benefit Solutions website (for Excellus members) to take advantage of the account management tools such as: • View your account balance • Enroll in direct deposit • Submit a claim for reimbursement • View any upcoming payments for claims submitted • View your claim history • Print claim forms and educational materials Aetna Members can visit the member portal at www.PayFlexDirect.com or call Aetna/ PayFlex Customer Service: 1-888-678-8242. Excellus Members can visit the Limited Benefit Solutions website at www.Lifetime BenefitSolutions.com or call Lifetime Benefit Solutions Customer Service: 1-800-327-7130 For additional information regarding the University Health Program, contact the University of Rochester Benefits Office at 585-275-2084 or view the Benefits website: www. rochester.edu/benefits.

Information Regarding IRS Rules and Regulations • Publication 502—List of Qualified Medical Expenses: www.irs.gov/pub/irs-pdf/p502.pdf

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Notice of Medical Plan Grandfather Status under the Patient Protection and Affordable Care Act The University of Rochester believes that the FSA and EAP (including Lifestyle Management) Plans are “grandfathered health plans” under the Patient Protection and Affordable Care Act (the Affordable Care Act or health care reform). As permitted by this law, a grandfathered health plan can preserve certain basic health coverage that was already in effect when the law was enacted. Being a grandfathered health plan means that your plan may not include certain consumer protections of the Affordable Care Act that apply to other plans. However, grandfathered health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the elimination of lifetime limits on benefits. Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to University of Rochester, the Plan Administrator at 1-585-2752084. You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This website has a table summarizing which protections do and do not apply to grandfathered health plans.

Appendix A Eligible Dependents for Purposes of HSA Reimbursements • Your spouse, if your marriage is recognized by federal law. • Your biological child, stepchild, adopted child, child placed for adoption, or foster child (defined as a child placed with the employee by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction), or a descendant of any such child, your brother/sister, half-brother/half-sister, stepbrother/stepsister, or descendent of any such sibling (e.g., niece/nephew), • whose principal place of abode is your household for more than half of the calendar year (temporary absences due to special circumstances, e.g., illness, education, business, vacation, or military service, are disregarded), • who is younger than you and is under age 19 (or age 24 if a full-time student) as of the end of the calendar year or who is permanently and totally disabled, regardless of age, • who has not provided more than one-half of his or her own support* that year, • who has not filed a joint tax return (other than only for claim of refund) with his or her spouse for the year, and • who is a citizen or resident of the United States or resident of Canada or Mexico (there is an exception for adopted children). • In the case of divorced or separated parents, a child is treated as a dependent of both parents. 14  2016 Tax-Advantaged Accounts Guide

• Your relative (child described above or descendent of such child (e.g., grandchild), your sibling described above or descendent of any such sibling (e.g., niece/nephew), your parent, parent’s ancestor (e.g., grandparent), stepparent, aunt/uncle, parent in-law, son/ daughter-in-law, brother/sister-in-law, • who receives over half of his or her support* from you for the calendar year • who is a citizen or resident of the United States or resident of Canada or Mexico (there is an exception for adopted children), • who is not anyone else’s Qualifying Child. • Someone other than a spouse who has the same principal place of abode as you for the entire calendar year (temporary absences due to special circumstances, e.g., illness, education, business, vacation, or military service, are disregarded), • who is a member of your household for the entire calendar year (and the relationship must not violate local law), • who receives over half of his or her support* from you for the calendar year • who is a citizen or resident of the United States or resident of Canada or Mexico (there is an exception for adopted children), • who cannot be claimed as anyone else’s Qualifying Child on their federal tax return.

* To determine whether you provide more than half of the total support for your relative or other person sharing your principal place of abode, you must compare the amount of support you provide with the amount of support the individual receives from all sources, including Social Security, welfare payments, the support you provide, and the support the individual provides from his or her own funds. Support includes food, shelter, clothing, medical and dental care, education, and similar expenses. If you believe you might provide more than half of the support for the individual, you should complete the support worksheet in IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information).  Please note that an individual could qualify as a tax dependent for purposes of the health benefits, but not on your tax return, if that individual earns more than the exemption amount as defined in Code Section 151(d) ($4,000 for 2016), but still receives more than half of his or her support from you. NOTE: This is not the same definition as applies to determine whether an individual is eligible to contribute to their own HSA. This is only the definition that applies when determining whether you can submit expenses to your HSA on behalf of your dependent.

  Appendix A  15

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UNIVERSITY COMMUNICATIONS · 1696-10/14/2015