CDs / IRAs / HSAs
Apple Valley Bank believes in offering a wide variety of terms, all with competitive market rates.
Individual Retirement Accounts are Better than Ever Today!
An Individual Retirement Account (IRA) is an excellent tool for retirement savings. Unlike most investments, depending on the type of IRA you choose, contributions may be tax deductible and will grow either tax-deferred or tax-free.
A Coverdell Education Savings Account (ESA) (formerly Education IRA) is a great way for parents, grandparents, and others to help meet the rising costs of a student's education.
Recent tax law changes have made IRAs and ESAs even better.
Making up for Lost Time
Education Savings Account
FDIC - Insured Deposits for Retirement: Now Guaranteed up to $250,000
For the first time in more than 25 years, Congress has raised the limit on the federal deposit insurance coverage that protects your retirement savings.
The new law effective April 1, 2006 provides up to $250,000 of protection for the combined total of the traditional and Roth IRAs, and certain other retirement accounts an individual may have on deposit. These retirement accounts are insured to $250,000 separately from any other deposits you may have at Apple Valley Bank & Trust Co.
The increase in FDIC coverage for retirement accounts is good news for the many people who have saved substantial sums for their retirement and want to deposit more than $100,000 at one bank - for safety, convenience or other reasons - knowing that up to $250,000 will be completely protected by FDIC insurance.
For more information, visit the FDIC web site at www.fdic.gov or call toll free 1-877-ASK-FDIC (1-877-275-3342).
What is a Health Savings Account?
Health Savings Accounts, or HSAs, were created by Congress to combat rising medical costs by providing an incentive for more consumers to pay for "first dollar" medical expenses. An HSA is a special tax-advantaged savings account designed to cover current and future medical expenses for individuals and families covered by a High Deductible Health Plan (HDHP). The account beneficiary (the person who establishes the account) owns the HSA and makes decisions regarding contributions and distributions, allowing more control over how his or her health care dollars are spent. What's more, unspent dollars may accumulate year after year.
Who is Eligible to Participate?
You are eligible for a regular HSA contribution if you:
What is Considered a High Deductible Health Plan?
An HDHP is a plan with an annual deductible no less than $1,100 for self-only coverage or $2,200 for family coverage.*
Are There Other Requirements for the HDHP?
Yes. For HSA purposes, the HDHP must limit out-of-pocket expenses to no more than $5,500 for self-only coverage or $11,000 for family coverage.*
*These limits are subject to Cost of Living Adjustments
What are an HSA's Benefits?
HSAs can provide significant tax benefits to eligible individuals. Not only can HSAs provide tax benefits related to paying qualified medical expenses, they may also provide benefits similar to many tax-favored retirement plans. A summary of HSA tax benefits include:
What are an HSA Owner's Responsibilities?
If you are eligible, you can establish an HSA in much the same way you would establish an IRA - with a qualified trustee or custodian. Each year, your are responsible for determining your allowable annual HSA contribution and whether you have qualified medical expenses eligible for reimbursement with nontaxable HSA distributions.
How Much Can I Contribute to My HSA?
The maximum annual contribution amount is set each year and is indexed for inflation. In 2007 the limit for a self-only contribution is $2,850 or $5,650 for families.
Additionally, a "catch-up" contribution is available for eligible individuals who are age 55 or older by the end of their taxable year and have not enrolled in Medicare. In 2007 the "catch-up" contribution is $800.
What are Qualified Medical Expenses?
In order for HSA assets to retain their tax-free status, they may only be withdrawn and used for certain expenses. Some common expenses include:
How are HSA Distributions Taxed?
The qualified medical expenses must be incurred after the HSA has been established. HSA distributions used exclusively to pay for or reimburse qualified medical expenses incurred by you, your spouse, or your dependents are not included in gross income.
Any other distributions are included in income unless rolled over. Distributions not used to pay for or reimburse qualified medical expenses or not rolled over are subject to an additional 10 percent tax unless made after your death, your disability, or your attainment of age 65.
Can I Return a Mistaken Distribution?
If you mistakenly distribute assets from your HSA, you may be able to return the assets to the same HSA. However, the law does not require a financial organization to accept the return of a mistaken distribution. If you are unable to return a mistaken distribution, you will need to be prepared to provide the Internal Revenue Service (IRS) with clear and convincing evidence that the HSA distribution was the result of a mistake of fact due to reasonable cause. A mistaken distribution can be returned no later than April 15 following the first year you knew or should have known the distribution was a mistake.
How Do I Claim the Federal Tax Deduction for My HSA Contribution?
Contributions to an HSA are fully deductible, the earnings grow tax deferred, and distributions to pay or reimburse qualified medical expenses are tax free.
You may deduct contributions made by anyone other than your employers as long as they do not exceed the maximum annual contribution amount. Employer contributions are not wages for federal income tax purposes.
Who Can Contribute to My HSA?
If you meet eligibility requirements for an HSA, you, your employer, your family members, and any other person (including non-individuals) may contribute to your HSA. This is true whether you are self-employed or unemployed.
How is HSA Activity Reported?
Each year, your HSA custodian/trustee reports to the IRS on IRS Form 5498-SA the contributions made to your HSA and on IRS Form 1099-SA any HSA distributions you take. In addition, you file IRS Form 8889, Health Savings Accounts (HSAs), as part of your federal income tax return to show your HSA contribution and distribution activity.
What Happens to My HSA in the Event of My Death?
If your spouse is the beneficiary of your HSA, the HSA becomes his/her HSA.
If your beneficiary is not your spouse, the HSA ceases to be an HSA as of the date of your death. If your beneficiary is your estate, the fair market value of the HSA as of the date of your death is included as income on your financial income tax return. For other beneficiaries, the fair market value of your HSA is included as income for the recipient in the tax year of your death.
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286 Maple Avenue, Cheshire, CT 06410
Phone: 203-271-1268 Fax: 203-271-1540