Health Savings Account -

HSA PresentationJohn Alden Life Insurance Company

Welcome to John Alden

About John Alden

United States Individual Medical market leader

In business over 110 years

More than 1,000,000 customers

John Alden – an HSA Leader

First to offer MSAs in the individual market

In the forefront of HSA legislation John Alden sold the first HSA in the

country Experts in account administration One of the only custodial accounts in

the country that provides seamless administration with no fees.

What is an HSA? An HSA is a tax-favored savings account

designed to allow for the accumulation of funds to pay for qualified healthcare expenses and to save for the future. It works in combination with a qualified high deductible health insurance plan.

Huge New OpportunityHSAs are:

New Tax-Free Flexible Permanent Portable A significant improvement over

MSAs

We make HSAs simple and easy.

Easy to explain An HSA is a tax-favored savings account

designed to allow for the accumulation of funds to pay for qualified healthcare expenses and to save for the future.

The HSA works with a qualified high deductible health insurance plan. Together they provide:

Premium Savings Tax Advantages Investment Opportunities

Federal Guidelines Annual Contribution limits for 2004 are the

lesser of: 1) 100% of the amount of the deductible or 2) $2,600 – individual or $5,150 – family.

Individuals 55 and over are allowed to contribute an additional $500 for 2004.

Unused funds from an MSA plan may be rolled over into an HSA account with no penalty.

No first dollar benefits except for wellness

HSA Deductibles

Single Family

Qualified high deductible: $1,000 $2,000

Maximum Out-of-Pocket: $5,000 $10,000

John Alden – New Deductibles $1,000 $2,000

$1,500 $3,000

$2,050 $4,100

$2,550 $5,100

$4,950 $9,900

Family Deductibles

What is a common family deductible?

Under John Alden Life Insurance Company plans, a common family deductible refers to the accumulation of all medical expenses for all covered persons to meet a single deductible. In order for a plan to be a qualified high deductible family plan, no one individual can have a deductible of less than $2,000.

HSAs Plus High Deductible Plans Invested funds are tax-free. Funds gain interest that’s tax-free. Withdrawals for qualified expenses are

tax-free. Funds can be withdrawn at age 65 - only

ordinary income tax applies. Funds can be withdrawn, at age 65, tax-free for

non Medicare covered medical expenses and prescriptions.

A 10% penalty plus ordinary income tax applies if funds are withdrawn before 65 for non medical expenses.

Funds can be used to pay Medicare Part A&B premiums (not medical supplement premiums).

Eligible ExpensesQualified Withdrawals: Eligible medical expenses as defined under

Section 213 (d) of the IRS Code.— Medically necessary services— Deductibles and Coinsurance— Glasses— Dental— Non-prescription drugs

Qualified Long-Term Care Premiums COBRA Continuation Premiums Premiums while unemployed Medicare Part A&B Premiums (but not supplemental

premiums)

Withdrawals after age 65Non-qualified Withdrawals: Under age 65

— Ordinary income tax and a 10% penalty on withdrawals for non-qualified expenses

65 or older— No penalty— Subject to income tax but likely at a lower rate – just like a 401k, for non-qualified expenses

Cost Comparison Scenario Family – Coverage (Husband and Wife

are both 37 years old with two children) 28% federal tax bracket Living in Illinois $1,500 in claims

Cost Comparison

Coinsurance:

Premium paid Your share - medical care expenses

($1,500 claim)

Expenses subtotal

Tax Savings on HSA deposits

Net expenses (out-of-pocket minus savings)

Total net savings with HSA Plan

HSA Account Balance $3,050!

Typical Family Plan(three times single deductible)

$1,00080%/20%

$7,115

$1,000 for deductibles, $100 for coinsurance,

$550 for other non-covered medical expenses

+$1,650

= $8,765

$0

$8,765

Fortis Health HSA PlanCommon family deductible:

$5,100 100%

$3,125

$1,500 for medical expenses and $550 for

dental/eyewear expenses

+$2,050

= $5,175

$1,428

$3,747

=$5,018

Tax-Deferred Investment Options

John Alden HSA MSAver HSA Any custodial account the client

chooses

John Alden HSA

Several contribution options Monthly, quarterly, semi-annual, annual

No additional fees No administrative, set-up or user fees

Very competitive interest rates Optional automatic claims payment

MSAver HSA Account options

Checkbook Debit card

Brokerage account provides access to stocks, bonds and

mutual funds

How Can Funds Be Used? Withdraw any time for eligible medical expenses

glasses … dental … deductible … coinsurance … long term care premium … etc.

(See John Alden Medical Expense Sheet, Form # 28557) Non-eligible withdrawals before age 65

Taxed as ordinary income Plus 10% penalty

Age 65 or Medicare eligibility withdrawals Lower tax bracket No penalty Tax-free for non-Medicare covered medical

expenses and prescriptions

Money Withdrawal Methods HSA Check book

HSA Mastercard Debit Card

Clients Save Premium, Reduce Taxes and Build Savings

Unused funds accumulate from year to year.

— Use the money to pay for qualified expenses tax-free as they occur

— Save money tax-free for future medical expenses

— Accrue savings and build a tax-sheltered nest egg for

retirement

Want More Information?

For more information contact:

David Velke 703-330-0971