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WEST PALM BEACH, Fla. – With predictions of a Health Savings Account (HSAs) boom in 2006, opportunity has been knocking for credit unions to get in on this potential revenue maker early. HSAs are tax-free savings accounts that can be used to pay for medical expenses including prescription and over the counter drugs incurred by individuals, spouses or dependents. Unused HSA money rolls over from year to year and can then be used to pay for medical care up to the plan’s deductible. With rising health insurance premiums, more employers are turning to consumer directed health programs offering high deductible health plans (HDHPs) to employees to help manage costs. Individuals who are covered by HDHPs can make tax-deductible contributions to HSAs. Supporters believe the combination of HDHPs and HSAs will encourage wiser health care spending while motivating consumers to shop for the best value. In just the first half of 2005, over one million new HSAs were opened-double the expectations of industry observers. A Diamond Cluster International study suggests that by 2010 HSAs will account for more than 10% of insured lives- resulting in 15-25 million individual HSA accounts holding more than $75 billion in assets within five years. Of that $75 billion pie, financial institutions have the potential to capture some $3.5 billion in revenues driven by account and asset management fees. Recognizing the potential, vendors are jockeying to be in a position to help credit unions offer members HSAs. In April 2005, CUNA Mutual Group launched an HSA administrative support program, which offers credit unions access to services including operational forms needed to manage an HSA program, toll-free call center support to answer all HSA questions, tax reporting for the 2005 tax year, training for credit union staff and marketing tools to boost member awareness and education. Also tossing their hat in the HSA ring this year were Fidelity Information Services, a division of Fidelity National Financial Inc and Fiserv. Fiserv Health President Jim Cox says, though the accounts may be small initially credit unions should think of the future aggregation the products can bring -similar to when CUs ventured into IRAs. Experts say that once group HSAs are set up elsewhere, it is difficult to get the employer to switch, so it is vital that financial institutions begin educating their members, particularly during open enrollment periods if they hope to capture these accounts. Credit unions in California got a major HSA boost when Gov. Arnold Schwarzeneger signed into law legislation that allows state-licensed credit unions to offer their members HSAs effective Jan. 1,2006. In other regulatory news, the Treasury Department and IRS issued new HSA maximum contribution levels HDHP out-of-pocket spending limits for next year. In 2006, the maximum annual HSA contribution for an eligible individual with self-only coverage jumps to $2,700 and $5,450 for family coverage. In addition, catch up contributions for individuals who are 55 or older are now $700. Maximum annual out-of-pocket amounts for HDHP self-coverage have increased to $5,250 and $10,500 for HDHP family coverage. HDHP minimum deductibles have also increased to $1,050 for self-only coverage and $2,100 for family coverage. [email protected]

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