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Prepared by 6 Frequently Asked Questions: Health Savings Accounts 1. What is an HSA? A Health Savings Account (HSA) is an account that allows you to set aside money for your future medical expenses when you are enrolled in a qualified high deductible health plan (HDHP). An HSA provides tax advantages to you, while you make decisions on how to spend your health care dollars. The account is set up in your name, with a trustee. Scott Management is using PayFlex as the trustee for your account. 2. Who is eligible for an HSA? You must be enrolled in the Scott Management qualified high deductible health plan (HDHP) in order to make or receive HSA contributions. The HDHP is a HSA plan and, in general, will cover the same services and benefits that your current medical plan covers. There are several key provisions for the plan to be a qualified HDHP: · The majority of expenses, including prescription drugs, will be subject to the medical plan deductible. · After the deductible is met, most expenses are paid at the in-network level. Prescription drugs will be subject to a co-pay. · If you are enrolled in family coverage, the family deductible must be met before any expenses are eligible for reimbursement under the HSA plan, even if only one family member has expenses. · Preventive services, such as well-child care and routine cancer screenings, are the only benefit not subject to the deductible. You cannot have an HSA if you are enrolled in any other non-HDHP health coverage, including a health care flexible spending account (FSA) or Medicare. These restrictions include coverage through your spouse’s employer. You can remain enrolled in certain other benefits with your employer or your spouse’s employer, such as disability and dental care. 3. What are the tax-advantages of an HSA? In general, your contributions and any employer contributions are not taxable income to you, as long as you were enrolled in a qualified HDHP at the time contributions were made. (Please see questions 11 and 12 of this FAQ that explains potential taxation of contributions) The investment earnings on funds in your HSA grow tax-free. You do not pay taxes on distributions from your HSA when used for qualified medical expenses. (However, if you use the HSA for non-medical expenses, the distribution is taxable, plus a 20% penalty. If you are age 65 years or older, the 20% penalty is waived for non-medical expenses). 4. What are the IRS contribution limits? For 2023, the annual contribution limits are $3,850 for single HDHP coverage and $7,750 for family HDHP coverage. These limits are indexed and increase slightly each year. If you are age 55 to 64, you can make a catch-up contribution in addition to the above limits. For 2023, the catch-up contribution is $1,000. You can only make one catch-up contribution per HSA (even if you and your spouse are both age 55-64). Once you are age 65 and enrolled in Medicare, you will no longer be able to make contributions into your HSA. However, you can continue to use your funds in the HSA.

Prepared by 7 Frequently Asked Questions: Health Savings Accounts 5. How do I make contributions into my HSA? You can make contributions through a pre-tax payroll election. Or, you can make contributions directly to your HSA and deduct the contribution, up to IRS limits, on your federal income tax return. You can only make contributions into an HSA for each month that you are enrolled in a qualified high deductible health plan (HDHP) and are not enrolled in any other non-HDHP health plan. Your spouse and children can be covered by both your HDHP and another non-HDHP health plan, but then your spouse cannot make contributions towards your HSA or another HSA. Your employer may also make contributions into your HSA to help you offset the expense of the high medical plan deductible. 6. How are my HSA funds invested? Your HSA deposits are initially deposited into an interest-bearing checking account. Once your HSA checking account balance reaches a certain balance, you may elect to transfer the excess balance to an HSA investment account. If you need funds from your HSA for expenses, the investments are sold and the money is placed in the account for you to access. Contact PayFlex to learn more about investment options for your HSA funds. In general, HSA funds are not insured. 7. How do I use the funds in my HSA? You can use your HSA to reimburse yourself for qualified out of pocket medical expenses incurred by you, your spouse, and tax dependents (even if they are not enrolled in the HDHP). You access the funds by writing a check from your HSA to yourself or a provider. Additionally, PayFlex will provide you a debit card that you can use at certain medical providers and pharmacies. The debit card will automatically withdraw money from your HSA to pay for an out of pocket expense. You are responsible for getting receipts for medical care and keeping proof of medical expenses on file for the IRS. You do not file receipts to get funds from your HSA. 8. What are qualified medical expenses? Any “qualified medical expense” allowed by federal tax law is permitted, which includes any expense that goes towards your high deductible. Please see IRS Publication 502 for a detailed list of eligible expenses (effective 1/1/2020, over-the-counter drugs no longer require a prescription). Health insurance premiums are not eligible expenses, unless the premiums are for (a) long term care insurance, (b) COBRA coverage, (c) Medicare premiums (except Medigap) if you are age 65 and older, or (d) health care coverage while you are receiving unemployment benefits. 9. What if I have an out of pocket medical expense that is more than my HSA account balance? You can only use what is in your HSA account balance. You will have to pay out of pocket for any expense that exceeds your HSA balance. 10. What are my tax reporting requirements? · Your employer will report your pre-tax contributions and any employer contributions in Box 12 on your Form W-2. · PayFlex, the trustee of your HSA, will send you a Form 1099 for any distributions and Form 5498 for any contributions. · When you file your federal income tax return, you will have to complete and attach Form 8889, “Health Savings Accounts”.

Prepared by 8 Frequently Asked Questions: Health Savings Accounts 11. What happens to my HSA if I lose eligibility for the HDHP or terminate employment with Scott Management? The HSA is in your name and you remain the owner of the account. If you lose eligibility or terminate employment, you do not forfeit any balance in the account, and you can continue to use the funds in your account for medical expenses. However, you can no longer contribute to the HSA unless you remain covered by a HDHP, either through COBRA or through another qualified HDHP. Also, you will be responsible for any banking fees that were previously paid by your employer. There is potential taxation of HSA contributions if you terminate HDHP coverage before the end of the calendar year if your HSA contributions exceed the monthly IRS maximum. For example, say your employer contributed $1,500 to your HSA on October 1, and you only remain covered for the next 4 months. In 2023, the IRS only allows $320.83 per month of tax-free contributions while you are covered. Therefore only $1,283.33 ($320.83 x 4 months) is tax-free. You would be responsible for taxes on the excess contribution of $216.67 ($1,500-$1,283.33). 12. Can I join the HSA mid-calendar year? If you become eligible for the HDHP mid-year, you can have an HSA. You can contribute up to the monthly IRS limit, or even up to the full annual IRS limit. If you contribute more than the monthly IRS limit, you may be taxed on the contributions allocated to the calendar months prior to your HDHP enrollment if you do not remain enrolled in the HDHP as of October 1 and for the next 12 months. For example, say you enrolled in single HDHP coverage on July 1st. Your contributions plus your employer contributions through the end of the year equal the IRS annual limit of $3,850 (2023). If you terminate HDHP coverage before the end of the next full calendar year, you will be taxed and penalized on the contributions allocated to January 1 – June 30 of the year you first enrolled but were not covered by an HDHP. If you join mid-year, remember you cannot be covered by any other non-HDHP plan if you wish to make contributions to your HSA. Other coverage includes health care flexible spending coverage that your spouse may have at his/her employer. You will need to be excluded from all health care flexible spending account coverage or have limited “HSA compatible” health care flexible spending account coverage. 13. Where can I get additional information? Please contact your employer’s Human Resources Department if you have additional questions. You may also refer to IRS Publication 502 (Medical and Dental Expenses) and IRS Publication 969 (Health Savings Accounts & Other Tax-Favored Health Plans), which are available online under “More Forms & Publications” at www.irs.gov. PayFlex 1-844-PAYFLEX https://www.payflex.com/ Employee Contributions Per Pay Period Effective Oct 1st, 2020 Employee Contributions Per Pay Period Effective Oct 1st, 2020 Employee Contributions Per Pay Period Employee Only Employee + Spouse