HEALTH SAVINGS ACCOUNT INVESTMENT CAPABILITIES

[Pages:2]HEALTH SAVINGS ACCOUNT INVESTMENT CAPABILITIES

Facts for Account Holders

Now that you are enrolled in the Health Savings Account (HSA), you can begin growing your healthcare dollars tax-free. Healthcare Bank offers you the ability to invest in mutual funds. Multiple investment options make it easy for you to grow your savings for future healthcare needs.

1. What mutual funds are offered in Healthcare Bank's investment portfolio? Healthcare Bank's investment portfolio includes the following funds:

Interest Bearing Account (Default) AllianceBerstein Int; Growth A First American Real Estate Secs A Ivy Asset Strategy A James Balanced Golden Rainbow JP Morgan Market Exp Index A Keeley Small Cap Value Nationwide S&P 500 Index A Pimco Total Return Admin T Rowe Price Capital Appreciation Advisor Class Templeton Global Bond A

Ticker Symbol AWPAX FREAX WASAX GLRBX OMEAX KSCVX GRMAX PTRAX PACLX TPINX

ANY INVESTMENTS IN MUTUAL FUNDS ARE NOT FDIC-INSURED, ARE NOT GUARANTEED BY HEALTHCARE BANK AND MAY LOSE VALUE.

Consumers invest at their own risk. Fund ratings viewed on our website represent past performance and are not a guarantee of future results. Investment returns and principal value will fluctuate and investor's share, when sold, may be worth more or less than their original costs. The mutual fund shares are made available through the services of a registered broker-dealer and are offered by Prospectus only. Investors should read and review the Prospectus carefully prior to investing.

2. What criteria were used to select the funds for this portfolio?

Healthcare Bank selected from a number of funds chosen by a Registered Investment Advisor (RIA). Decision

criteria included:

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Variety in investment options to represent multiple fund companies

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Mutual funds are selected and reviewed periodically in accordance with the Healthcare Bank investment policy

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Mutual funds which represent various risk tolerances

3. What criteria must I meet to be eligible to invest my HSA dollars in mutual funds? You must maintain a minimum cash balance of $2,000 in your health savings account in order to invest. Each time the balance in your cash account exceeds $2,100, the excess over $2,000 is swept into your investment account and distributed among the investment options you have selected. For example, if you have $1,990 in your cash account and are contributing $80 per pay period to your health savings account, after one pay period your cash balance will be $2,070. After two pay periods, your cash balance will increase to $2,150, which will trigger a sweep of funds into your investment account. At this time, $150 would be moved into the mutual funds you have selected, leaving your cash balance at $2,000.

4. What will happen if my HSA balance dips below the investment threshold? If you receive distributions from your account that cause your cash balance to drop below $1,900, investments will be proportionately liquidated to restore your cash balance to the minimum threshold. For example, suppose you have $2,000 in your cash balance, $1,000 in Mutual Fund A, and $500 in Mutual Fund B, and you request a distribution of $300 from your health savings account. This money will be issued from your cash account, which will leave it with a balance of $1,700. When the distribution clears, this will trigger $300 to sweep from your investment account into your cash account. The mutual fund holdings in your investment account will be liquidated proportionately to accommodate the funds transfer, so in this example $200 of Mutual Fund A and $100 of Mutual Fund B would be sold to reach the total of $300.

5. Will Healthcare Bank's mutual fund portfolio ever change? The list of funds for HSA's aims to provide fund options that remain mostly stable over time to avoid fund turn over and disruption for the account holder. Also, recognizing the nature of HSA accounts, the list of recommended funds looks to include "conservative", "moderate" and "aggressive" asset allocation options for account holders to choose among while offerings in specific asset classes may be more abbreviated. There may also be times when search criteria need to include fee reimbursement options available in fund structures such as 12b-1 or sub-transfer fees. In this case the fund universe shrinks to only those funds offering that type of feature.

6. Can my employer's contributions to my HSA be deposited directly into mutual funds? No. Only your HSA at Healthcare Bank can accept new HSA-eligible deposits. As the account holder, you are the only party allowed to initiate mutual fund transactions.

7. Can assets held in mutual funds be used to pay for my eligible HSA claims? Distributions from your health savings account are issued from the cash balance of your account. If your distribution request will cause the balance in your cash account to drop below $1,900, mutual funds will automatically be liquidated to replenish your cash account to the minimum balance threshold. If your distribution request is for more than $2,000, please allow an extra 2-5 business days for the funds to be issued to you, as mutual funds will need to be liquidated first in order to accommodate the request, and the settlement process can take 2-5 days to complete.

8. What options are available to me for controlling the allocation of mutual funds in my investment account? The online portal allows you to specify how future deposits to your investment account are allocated as well as re-allocate your existing dollars. You may also elect to automatically rebalance your fund allocations on a monthly basis to maintain a set ratio among the funds you have selected.

9. Can money from my HSA cash account be automatically invested to purchase more mutual fund shares? Yes. You can establish an Automatic Invest Option--an auto-transfer of assets from your HSA into one or more mutual funds each time a pre-established balance threshold is met.

10. Can HealthSCOPE Benefits' customer care representatives initiate mutual fund buy or sell transactions on my behalf or provide investment advice? No, these representatives are not permitted to address specific questions about the funds or provide any investment advice. Only you, the account holder, can initiate mutual fund transactions.

11. Can you summarize this process? The process is actually quite easy to understand if you just keep in mind that your cash account must maintain a balance of $2,000 in order for you to be able to have an investment account, and there is a $100 "neutral zone" around this $2,000 threshold before funds are moved from your investment account to your cash account or from your cash account to your investment account. Of course, your HealthSCOPE Benefits team is glad to assist with any additional questions you might have.

NOTE: Mutual funds are not FDIC-insured, not guaranteed by Healthcare Bank or HealthSCOPE Benefits and may lose value. Contact a tax, legal or accounting professional for personal advice on tax-related filings and issues. Federal and state regulations are subject to change.

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