1 Common Terms

2 10 Things to Know

3 How to Fully Activate Your Health Savings Account

Have Questions About Health Savings Accounts? Find the Answers Here.

10 Paying Eligible Expenses

12 Managing Your Account

13 Flexible Spending Accounts (FSAs)

13 Medicare

Health Savings AccountA health savings account is a tax-advantaged personal account that you can use to pay eligible medical, prescription drug, dental and vision expenses. You can also use a health savings account to save for future healthcare expenses and invest for potential growth. See p.  2.

Annual Contribution The annual contribution is the amount of before-tax money you put into your health savings account each year. You set the amount on UPoint during your enrollment period and can start, stop or change it anytime throughout the year. See p. 5.

Terms & ConditionsThe Terms & Conditions are the legal rules, specifications and standards of your account. If you’ve never activated your account before and want to open it, you need to agree to the Terms & Conditions on UPoint when enrolling. See p. 3.

Account ActivationAfter you agree to the Terms & Conditions on UPoint and complete your enrollment, you need to activate your account at www.netbenefits.com to be able to contribute, spend and invest your funds. See p. 3.

FidelityFidelity is our health savings account administrator. You can activate your account, see your current balance and manage your investments on their website at www.netbenefits.com.

Common Terms

4 Eligibility

4 Account Details

6 Putting Money in Your Account

10 Growing Your Savings

There’s no deadline to spend the money in your account because the balance carries over from year to year. The money is yours to keep whether you change medical plans, leave McKesson or retire.

You get three tax breaks:

You can set an annual contribution amount on UPoint during your initial enrollment period and each Annual Enrollment. The amount you set is split equally between pay periods and deducted before taxes from your paychecks throughout the year. Although you can start, stop or change your contribution amount anytime on UPoint, it’s a good idea to set it during Annual Enrollment so you can stretch your paycheck deductions out across the entire year. If you don’t set a contribution amount during Annual Enrollment, your contribution automatically becomes $0 on January 1.

You can start, stop or change your contribution amount anytime throughout the year on UPoint.

You need to agree to the Terms & Conditions on UPoint when setting your contribution amount. You only need to do this once, not every year. If you can’t agree to the Terms & Conditions on UPoint, call Fidelity at 888.625.7747 to open your account.

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McKesson contributes to your account once per year if you enroll in the HSA Plus or Kaiser Plus medical plan. The contribution puts the word “plus” in the plan’s name. The amount McKesson chips in to your health savings account depends on who you cover:

• $750 Employee Only

• $1,100 Employee + Spouse/Domestic Partner or Employee + Child(ren)

• $1,500 Employee + Family

You can only contribute up to the IRS limit each year, and anything McKesson contributes to your account counts toward the limit. For 2020, the IRS maximum contribution amount is: $3,550 for Employee Only $7,100 for Employee + Spouse/Domestic Partner, Employee + Child(ren) and Employee + Family

You can invest the money in your health savings account. Fidelity offers a variety of options, such as stocks, bonds, treasury notes, money market accounts and mutual funds.

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A health savings account is a personal account you can use to save money for eligible medical, prescription drug, dental and vision expenses. If you enroll in the HSA, HSA Plus or Kaiser Plus plan, you may be eligible for a health savings account.

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You need to activate your account to begin contributions, use or invest your funds. You only need to activate your account once on Fidelity’s website at www.netbenefits.com, not every year.

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* Some states subject contributions, interest, dividends and capital gains to state income tax. Check with your tax advisor to see how your account is affected.

10 Things to Know

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Out-of-pocket expenses you paid before you were enrolled in a health savings account aren’t qualified for reimbursements from your account.

• A lower taxable income when you make before-tax or tax-deductible contributions to your account.*

• Tax-free withdrawals for eligible medical, prescription drug, dental and vision expenses.

• Tax-free earnings from interest and investments on amounts in your health savings account.*

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STEP 1: Agree to the Terms & Conditions on UPoint.

When enrolling on UPoint, you’ll see a Health Savings Account page. Set your annual contribution amount and agree to the Terms & Conditions. You aren’t required to set a contribution amount during enrollment, but to open your health savings account for future contributions, or to get McKesson’s contribution, you must agree to the Terms & Conditions.

I enrolled in a McKesson medical plan with a health savings account for the first time ever and agreed to the Terms & Conditions on UPoint. Do I need to activate my health savings account? Yes. Go to www.netbenefits.com and create a username and password. Once you’re logged in, click Activate in the Health Savings Account box to activate your account.

STEP 2: Activate Your Account on Fidelity’s website.

After agreeing to the Terms & Conditions on UPoint, complete these three easy steps to activate your account:

1.1. Log on to Log on to www.netbenefits.com..

2.2. Click Click Activate in the Health Savings Account box. in the Health Savings Account box.

3.3. Follow the onscreen prompts to complete the required Follow the onscreen prompts to complete the required information to activate your account. information to activate your account.

Completing your account activation allows us to deposit your contributions (and the McKesson contribution if you’re enrolled in the HSA Plus or Kaiser Plus plan) into your account.

I agreed to the health savings account Terms & Conditions on UPoint last year and activated my account on Fidelity’s website. Do I need to do that again during Annual Enrollment?No. You only need to accept the Terms & Conditions and activate your account once, even if you change McKesson medical plans.

How to Fully Activate Your Health Savings Account

First-Time EnrolleesIf this is your first time enrolling in a McKesson medical plan with a health savings account, getting your health savings account up and running is a two-step process. Be sure to complete both steps so you can use your account. You only need to activate your account once, not every year.

If you see the word Open in the Health Savings Account box, click Open and follow the onscreen prompts to complete the required information to activate your account.

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Account Details

Which medical plan do I need to choose to get a health savings account? You need to enroll in a qualifying high-deductible health plan (HDHP), such as the HSA, HSA Plus or Kaiser Plus plan, to contribute to a health savings account.

How do healthcare plans and health savings accountswork together?A high-deductible health plan, such as the HSA, HSA Plus and Kaiser Plus plans, and a health savings account make a great team. You can use your health savings account to pay for eligible medical, prescription drug, dental and vision expenses. Eligible expenses include your annual deductible, coinsurance, out-of-pocket expenses and expenses not normally covered by healthcare plans. For a list of eligible expenses, go to www.mckesson.com/totalrewardslibrary > Financial Health.

I’m eligible for part-time benefits. Can I have a health savings account?Yes, if you enroll in the HSA medical plan and meet the eligibility requirements on the left.

How do I contribute to my health savings account?You can contribute to a health savings account three ways:

1. Before-tax paycheck deductions. You set the amount you want to contribute on UPoint during Annual Enrollment (or your initial enrollment period). The amount you enter is split evenly between your paychecks in 2020 and deducted automatically before taxes.

2. Tax-deductible contributions you send directly to Fidelity, our health savings account administrator. You can send Fidelity your contributions by personal check or bank transfer on Fidelity’s website, then deduct that amount on your tax return.

3. Tax-deductible contributions to your own bank. If you’re eligible for a health savings account, you can choose to open a health savings account with your own bank.

Can I set my health savings account contribution to $0? Yes. If you don’t want to put money in your health savings account for 2020, enter $0 on UPoint.

Eligibility

Am I eligible to put money in a health savings account? You’re eligible to put money in a health savings account for each month that you:

• Are enrolled in a high-deductible health plan, such as the HSA, HSA Plus or Kaiser Plus plan.

• Don’t have other health coverage that isn’t a high-deductible health plan, including standard healthcare flexible spending account (FSA) benefits (e.g., under your spouse/domestic partner’s employer).

• Aren’t enrolled in Medicare or Veterans’ benefits (TRICARE).

• Can’t be claimed as a dependent on another person’s tax return.

If I’m not eligible to put money in a health savings account, can I still enroll in the HSA, HSA Plus or Kaiser Plus plan?Yes. Even if you’re not eligible to put money in a health savings account, you can still enroll in the HSA, HSA Plus or Kaiser Plus plan.

Part-time employees who have worked at McKesson for at least six months and are scheduled to work 20-29.9 hours per week are eligible for the HSA medical plan only.

Can I have a health savings account if my spouse already has one? Yes, you can each open and contribute to your individual health savings account. If either of you covers your children, your combined annual contributions can’t be above the Family coverage limit. See your annual contribution limit on p. 6 or 7.

Can I have a health savings account and an IRA?Yes.

I enrolled in TRICARE. Can money be put in my health savings account?No. If you’re enrolled in TRICARE, no money can be put in your health savings account. If you choose the HSA Plus or Kaiser Plus plan and McKesson contributes to your account, contact Fidelity at 800.544.3716 as soon as possible to withdraw McKesson’s contribution from your health savings account to avoid excise taxes. Let Fidelity know to report the McKesson contribution as a taxable excess contribution, and you need to report the contribution as “other income” on your tax return.

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How do I manage my account and keep tabs on my balance and investments throughout the year?Log on to Fidelity’s website at www.netbenefits.com to see your current balance, claims, investment returns and more.

I contributed to a health savings account outside of McKesson. Can I roll over the funds in my old account to a health savings account with Fidelity?Yes. Log on to www.netbenefits.com and choose Contributions from HSA Quick Links. Then, choose Other Ways to Contribute and select Transfer money. Your health savings account with Fidelity is considered established as of the date your previous account was established. For example, if you activated your new account in January 2020, but had your previous account since July 1, 2019, you can use your new health savings account to pay for eligible expenses incurred on or after July 1, 2019.

I set a contribution amount for my health savings account last year. Do I need to set it again during Annual Enrollment?Yes. If you want an amount to be automatically deducted from your paychecks and put into your health savings account for all of 2020, you need to set a contribution amount on UPoint during Annual Enrollment.

If you don’t set a contribution amount during Annual Enrollment, the paycheck deduction for your health savings account becomes $0 on January 1.

If you decide you want to contribute after January 1, you can change your contribution amount anytime throughout the year on UPoint.

How do I start, stop or change my health savings account contribution amount during the year?Click the HSA Contribution tile on UPoint or call the HR Support Center at 855.GO.MCKHR (855.466.2547) and press 1. Your changes are applied to your remaining pay periods for the year as soon as administratively possible.

If I enroll in the HSA Plus or Kaiser Plus medical plan for the first time ever, when do I get McKesson’s contribution in my health savings account?It depends on when you enroll, how soon you agree to the Terms & Conditions on UPoint, and when you activate your account at www.netbenefits.com.

Enrolling during Annual Enrollment If you agree to the Terms & Conditions on UPoint during Annual Enrollment, you have until March 30, 2020, to activate your account and get McKesson’s contribution. If you activate your account after March 30, you lose McKesson’s contribution.

Enrolling during your enrollment period If you agree to the Terms & Conditions on UPoint during your new hire enrollment period (or another enrollment period outside of Annual Enrollment) and activate your account at www.netbenefits.com within 90 days of your coverage start date, you get McKesson’s contribution as soon as administratively possible in 2020. You have 90 days from your coverage start date to activate your health savings account or you lose McKesson’s contribution.

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Putting Money in Your Account

All-Year EnrolleesIf you enroll in the HSA, HSA Plus or Kaiser Plus plan for all of 2020 and don’t have a standard healthcare FSA through your spouse, this section is for you. If you enrolled for part of the year or your spouse had a balance in a standard healthcare FSA after December 31, 2019, see p. 7.

How much money can be contributed to my health savings account?The IRS limits how much money can be put in your health savings account every year. Use the chart below to see the maximum amount you can choose to contribute for 2020 based on your medical plan. Note that EE = employee, SP = spouse and DP = domestic partner.

2020 IRS Health Savings Account Contribution Limits

CoverageMcKesson

Annual Contribution*

Your Monthly Contribution

Maximum

Annual Contribution

Maximum

HSA

EE Only $0 $295.83 $3,550

EE + SP/DP or EE + Children or EE + Family

$0 $591.66 $7,100

HSA Plus and Kaiser Plus

EE Only $750 $233.33 $3,550

EE + SP/DP or EE + Children

$1,100 $500 $7,100

EE + Family $1,500 $466.66 $7,100

If you’re age 55 or older in 2020, you can make an annual catch-up contribution of up to $1,000 ($83.33 per month).

For more information about health savings account limits, read IRS Publication 969 and Form 8889 at https://www.irs.gov/pub/irs-pdf/p969.pdf. You can also contact your tax advisor.

Do I have to make all of my yearly 2020 health savings account contributions by December 31, 2020?If you’re a calendar-year taxpayer, the last day to make contributions to your health savings account for 2020 is April 15, 2021.

What happens if I contribute more than the IRS limit? Your contribution amount (including McKesson’s contribution) can’t exceed the IRS limit. If your contribution amount exceeds the limit, you need to withdraw the excess amount to avoid a tax penalty. See the chart on the left for 2020 contribution limits. Speak with a tax advisor to make sure you aren’t going over the annual limit. McKesson doesn’t monitor the limit on your health savings account. If you know you’re over the limit, you can withdraw the amount you’re over before the tax-filing deadline to avoid penalties.

What if I don’t want to put money in my health savings account?Putting money in a health savings account is voluntary. If you enroll in a medical plan that’s compatible with a health savings account and don’t want to put money in your account, simply enter $0 in the Annual Contribution field on UPoint when enrolling. If you change your mind later, you can start, stop or change your contribution amount anytime throughout the year by clicking the HSA Contribution tile on UPoint and entering a different amount.

My medical plan comes with a McKesson contribution. If I have to change my coverage level during the year, what happens to the McKesson contribution?If you add dependents to your coverage and change coverage levels, McKesson makes an additional contribution to your health savings account. For example, if you go from Employee Only to Employee + Family coverage, McKesson adds an additional $750 to your health savings account to match the $1,500 contribution amount for your new coverage level. If you remove dependents and have to change coverage levels, you can keep the full McKesson contribution. For example, if you change from Employee + Spouse/Domestic Partner to Employee Only coverage, you keep the full $1,100 McKesson contribution you received at the beginning of the year.

* You need to activate your health savings account within the first 90 days of coverage to get McKesson’s contribution.

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Partial-Year EnrolleesIf you enroll in the HSA, HSA Plus or Kaiser Plus plan for part of the year or your spouse had a balance in a standard healthcare FSA after December 31, 2019, this section is for you.

How much money can be contributed to my health savings account?Unless you satisfy the full contribution rule, the most you can set aside for the remainder of the year is the number of months that you’re eligible for a health savings account times 1/12 the annual contribution maximum. For example, if you’re eligible for only three months and have Employee Only coverage, you can contribute $887.50 ($3,550 divided by 1/12 times 3 months). Your McKesson contribution counts toward your maximum if you’re enrolled in the HSA Plus or Kaiser Plus plan in 2020. Use the chart below to see the maximum amount you can choose to contribute for 2020 based on your medical plan. Note that EE = employee, SP = spouse and DP = domestic partner.

2020 IRS Health Savings Account Contribution Limits

CoverageMcKesson

Annual Contribution*

Your Monthly Contribution

Maximum

Annual Contribution

Maximum

HSA

EE Only $0 $295.83 $3,550

EE + SP/DP or EE + Children or EE + Family

$0 $591.66 $7,100

HSA Plus and Kaiser Plus**

EE Only $750 $233.33 $3,550

EE + SP/DP or EE + Children

$1,100 $500 $7,100

EE + Family $1,500 $466.66 $7,100

If you’re age 55 or older in 2020, you can make an annual catch-up contribution of up to $1,000 ($83.33 per month).

For more information about health savings account limits, read IRS Publication 969 and Form 8889 at https://www.irs.gov/pub/irs-pdf/p969.pdf. You can also contact your tax advisor.

* You need to activate your health savings account within the first 90 days of coverage to get McKesson’s contribution.

** McKesson’s contribution counts toward your maximum if you’re enrolled in the HSA Plus or Kaiser Plus plan in 2020.

What is the full contribution rule? You satisfy the full contribution rule if you enroll in the HSA, HSA Plus, Kaiser Plus plan (either as an active employee or through COBRA***), or another high-deductible health plan for part of the year, stay enrolled through December 1, 2020, and remain enrolled in the plan for all of 2021. If you don’t remain enrolled in the plan for all of 2021, you’re subject to normal income tax and a tax penalty on any health savings account contributions for 2020 that exceed the amount equal to the number of months you’re eligible for a health savings account times 1/12 of the applicable annual limit ($295.83 for Employee Only coverage and $591.66 for all other coverage).

For example, if you have HSA Plus Employee Only coverage for only five months in 2020, the maximum you can contribute to your health savings account for 2020 is $1,479.16 ($3,550/12 x 5). Any 2020 contributions (including McKesson’s contribution) in excess of that amount are subject to normal income tax and a tax penalty.

*** COBRA = Consolidated Omnibus Budget Reconciliation Act.

Do I have to make all of my 2020 health savings account contributions by December 31, 2020?No. If you’re a calendar-year taxpayer, the deadline for making contributions to your health savings account for 2020 is April 15, 2021. If you want to put money in your health savings account at the beginning of the year, keep in mind that any amount that is applied to months you’re ineligible (for example, because you don’t qualify for a health savings account) may be subject to an excise tax. To avoid the excise tax, withdraw the money by the time your federal income tax return is due (extensions included).

Can I set aside the full IRS annual limit in my health savings  account?Yes, but only if you satisfy the full contribution rule.

Example

Karen enrolls in the HSA plan with Employee Only coverage effective August 1, 2020. The IRS annual limit for Employee Only coverage is $3,550. As long as Karen stays enrolled in the HSA plan for the rest of 2020, she can choose to put in the full $3,550. However, to avoid tax penalties, Karen needs to stay enrolled in the HSA plan or another HSA-qualified medical plan for all of 2021 as well.

Do contributions I made to my health savings account at another job count toward the IRS limit?Yes. All contributions you make to a health savings account in 2020 count toward the IRS limit, whether made while at McKesson, another employer or on your own. Be sure to account for your previous 2020 contributions when setting your monthly contribution amount on UPoint so you don’t exceed the IRS annual limit.

What happens if I contribute more than the IRS limit?You need to withdraw the amount you’re over before filing your income tax return to avoid penalties. You may need to pay income tax on the excess amount you withdraw. See pp. 8 and 9.

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Partial-Year Enrollees (continued)

What if I become eligible for a health savings account for part of the year, but end my coverage before December 1?If you enroll in the HSA, HSA Plus or Kaiser Plus plan for part of the year and your coverage ends for any reason before December 1, 2020, the amount you can set aside is equal to the number of full months that you’re health savings account eligible times 1/12 the annual contribution maximum ($3,550 for Employee Only coverage and $7,100 for all other coverage).

Example

Steve enrolls in the HSA plan with Employee Only coverage effective June 1, 2020. He gets married and switches to his wife’s plan that isn’t compatible with a health savings account on September 1, 2020. Because Steve isn’t eligible to put money in a health savings account on December 1, 2020, he can only put aside up to $887.50 (3 months x $295.83). He can only contribute 3/12 of the annual maximum (for June, July and August).

What if my coverage begins on or after December 1?You won’t be able to contribute to your health savings account through before-tax payroll deductions. However, you can make tax-deductible contributions directly to Fidelity for the month of December 2020 or, if you satisfy the full contribution rule, for all of 2020 up to the IRS annual limit.

What happens if I leave McKesson and enroll in my new employer’s non-HDHP medical plan?The money in your health savings account is yours to keep if you leave McKesson. However, you’re only eligible to contribute to a health savings account while you’re enrolled in a high-deductible health plan (HDHP). This means if you already contributed to a health savings account or got a contribution from McKesson for 2020, and leave before the year ends, you may need to withdraw funds from your account that exceed the contribution limit and report them as taxable income on your tax return. See example to the right.

Example

Megan enrolls in the HSA Plus plan with Employee Only coverage for 2020. She’s excited about McKesson’s contribution of $750 and chooses to contribute $2,800 (or $233.33 per month) of her own money to reach the IRS maximum of $3,550 for 2020. But in April, Megan gets an offer from another company and decides to leave McKesson. Her new employer’s non-HDHP coverage is effective May 1, 2020.

Because Megan was only covered by the HSA Plus plan for four months, she may need to withdraw some funds from her 2020 contributions to avoid a tax penalty. She does the math to figure out if she contributed too much. Megan’s total health savings account contribution for 2020 is $1,683.33 ($233.33 per month for January, February, March and April, plus a McKesson contribution of $750). For 2020, the annual limit for Employee Only coverage is $3,550 and the monthly limit is $295.83 ($3,550 divided by 12) making her 2020 contribution limit $1,183.33 ($295.83 x 4 months).

This means Megan over-contributed to her health savings account by $500 ($1,683.33 - $1,183.33). To avoid tax penalties, Megan needs to withdraw $500 (adjusted for earnings/losses) from her health savings account no later than April 15, 2021. She contacts Fidelity, moves the excess contribution to her checking account and plans to report the excess contribution and any earnings as taxable income on her 2020 tax return.

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Partial-Year Enrollees (continued)

What happens if I leave McKesson and continue my coverage through COBRA? The money in your health savings account is yours to keep. And, as long as you continue your HSA, HSA Plus or Kaiser Plus coverage through COBRA or continue other qualified HDHP coverage, you remain eligible to contribute to your health savings account.

What happens if I change my coverage level mid-year and then leave McKesson?You’ll need to figure out your maximum contribution amounts at each coverage level to determine if you over-contributed. Take a look at the example below.

Effective Date Action Total

January 1, 2020 Carl is enrolled in the HSA Plus plan with Employee Only coverage. McKesson contributes $750 to his health savings account and he contributes $233.33 per month for 3 months: $750 + ($233.33 x 3) = $1,449.99

April 1, 2020 Carl enrolls his wife in his plan and elects Employee + Spouse coverage. McKesson adds $350 to his account and Carl starts contributing $500 per month for 2 months: $350 + ($500 x 2) = $1,350.00

June 1, 2020 Carl starts a new job with non-HDHP coverage. He can no longer contribute to a health savings account so he adds up the contributions to his health savings account to see if he overcontributed: $1,449.99 + $1,350 = $2,799.99

The maximum Carl could contribute to his health savings account is three months of Employee Only coverage at $295.83 a month plus two months of Employee + Spouse coverage at $591.66 a month: $887.49 + $1,183.32 = $2,070.81

McKesson’s and Carl’s contributions were $729.18 over the IRS limit: $2,799.99 - $2,070.81 = $729.18

Carl needs to withdraw $729.18 (adjusted for earnings/losses) from his health savings account no later than April 15, 2021. He contacts Fidelity, moves the excess contribution to his checking account and plans to report the excess contribution and any earnings as taxable income on his 2020 tax return.

Example

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Growing Your Savings

How does my health savings account grow?Your health savings account grows from:

• Your before-tax contributions*

• The money McKesson contributes to your account if you enroll in the HSA Plus or Kaiser Plus plan

• Tax-free earnings from interest and investments*

* No matter which state you live in, the money you set aside in your health savings account is generally exempt from federal taxes, unless you use it for ineligible expenses. Some states subject contributions, interest, dividends and capital gains to state income tax. Check with your tax advisor to see how your account is affected.

Which states tax the money I put in my health savings account?California and New Jersey tax the money you and McKesson put in a health savings account. If you live in one of these states, you may need to pay state income tax on the money you and McKesson contribute to your health savings account.

The money you and McKesson contribute is reported as state wages in Box 16 of your W-2 form. Check with your tax advisor for more guidance.

Which states tax my investment gains?You pay state taxes on any interest, dividends or capital gains earned from your health savings account in California, New Jersey, New Hampshire and Tennessee. New Hampshire and Tennessee only tax dividend and interest earnings after a certain dollar amount, depending on whether you’re filing individually or are married and filing jointly. If you live in one of these states, you may have to report and pay state taxes on those amounts when you file your tax return. Check with your tax advisor for more guidance.

Can I invest the money in my health savings account?Yes. You control your health savings account and can select and manage your investment funds through Fidelity.

Does McKesson select and manage the investment funds for my health savings account?No. Health savings accounts are personal savings accounts and aren’t part of any ERISA** plan sponsored by McKesson. You’re solely responsible for managing your health savings account and deciding how to invest your health savings account contributions.

** ERISA = Employee Retirement Income Security Act of 1974.

Paying Eligible Expenses

How can I pay for eligible medical, prescription drug, dental and vision expenses with my health savings account?Once you activate your account, Fidelity mails you a health savings account debit card. You can order up to four extra debit cards for your dependents at www.netbenefits.com.

Swipe your Fidelity health savings account debit card at your doctor’s office, lab or pharmacy. If your medical provider doesn’t accept the card or sends you a bill, you can log on to www.netbenefits.com to pay the provider directly from your account. In some cases, you may need to wait to pay for an eligible expense with your health savings account until after your plan discount is calculated and you get a bill.

Can I pay vision and dental expenses with my health savings account?Yes. You can use your health savings account to pay for eligible dental and vision expenses, as well as medical and prescription drug expenses.

What if I don’t have enough money in my health savings account to cover an expense?If you don’t have enough money in your account to pay for an eligible expense, you pay for the expense out of pocket. Once you have enough money in your account, you can reimburse yourself on Fidelity’s website at www.netbenefits.com or on the Fidelity mobile app. Download the app at www.fidelity.com/mobile/overview.

How can I use the money in my health savings account? You can use the money in your account for any purpose. If you use it to pay for eligible medical, prescription medication, dental or vision expenses, your withdrawals are tax-free. If you use the account to pay for ineligible expenses, the withdrawal is subject to regular income tax and an additional 20% tax. After age 65 or Medicare eligibility, withdrawals for ineligible expenses aren’t subject to the 20% penalty, although they are subject to income tax.

Find a list of eligible expenses at www.mckesson.com/ totalrewardslibrary > Financial Health.

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Whose medical, prescription drug, dental and vision expenses can I pay for with my health savings account?You can use your health savings account on a tax-free basis to pay eligible medical, prescription drug, dental and vision expenses for:

• Yourself

• Your spouse (your domestic partner’s expenses generally aren’t eligible for reimbursement, unless you claim them as dependent on your tax return)

• Anyone you claim as a dependent on your tax return — even if that person isn’t covered by your medical plan

• Anyone you could have claimed as a dependent on your tax return except that (1) the person filed a joint return; (2) the person had gross income of $4,200 or more in 2019; or (3) you, or your spouse if filing jointly, could be claimed as a dependent on someone else’s tax return.

You normally can’t use your health savings account to pay expenses for adult children between ages 24-26. Even though your children up to age 26 can be covered by your medical plan, the IRS doesn’t consider them dependents for health savings account purposes, unless you claim them as dependents on your federal income tax return.

Can I pay my domestic partner’s medical, prescription drug, dental and vision expenses with money from my health savings account?You can’t pay your domestic partner’s healthcare expenses with money from your health savings account unless he or she is your tax dependent. You can find more information about the IRS rules for domestic partners at www.irs.gov.

Can I use my health savings account to pay expenses for dependents who aren’t covered by my health plan?Yes, as long as the expense is eligible and not covered by another health plan. Dependents include anyone you claim as a dependent on your tax return.

Can I use my health savings account to pay for non-prescription medications?No. You can’t use your health savings account to pay for non-prescription medications (other than insulin).

You can use your health savings account to pay for a medication only if the medication:

• Requires a prescription.

• Is available without a prescription (an over-the-counter medication) and you get a prescription for it.

• Is insulin.

These restrictions don’t apply to over-the-counter items other than medications, such as equipment, supplies, and medical devices, including crutches, bandages, blood-sugar test kits and eyeglasses.

Can I use my health savings account to pay insurance premiums?Generally, you can’t use your health savings account to pay insurance premiums. However, the following premiums are eligible expenses:

• Long-term care coverage

• Healthcare coverage while you get unemployment benefits

• Healthcare continuation coverage required under any federal law (e.g., Consolidated Omnibus Budget Reconciliation Act — COBRA)

• Retiree insurance premiums (other than premiums for a Medicare supplemental policy, such as Medigap) if you’re age 65 or older

Can I spend my health savings account on ineligible expenses?Yes, but you’ll need to pay income tax, plus a 20% tax penalty if you spend the money on ineligible expenses before you reach age 65. You need to report the money you spend on ineligible expenses on your tax return. The 20% tax penalty doesn’t apply if you spend the money after you’re age 65, become completely and permanently disabled, or die.

How can a health savings account work as a retirement account?You can invest your money through Fidelity. In this way, your health savings account helps you meet your long-term financial goals. Also, if you choose to pay for your current expenses out-of-pocket, you can keep more money in your health savings account to use for medical, prescription drug, dental and vision expenses in retirement.

Who makes sure that I use my health savings account for eligible expenses?You do. You need to make sure you use your health savings account dollars for eligible expenses. Keep your receipts, invoices and statements to prove how you spent your account dollars in case you’re audited by the IRS. You should keep records demonstrating that:

• The distributions were exclusively to pay or reimburse eligible expenses.

• The eligible expenses weren’t previously paid or reimbursed from another source.

• The eligible expenses weren’t taken as an itemized deduction in any year.

You don’t have to send these records with your tax return. Keep them with your tax records.

Do I need to give Fidelity receipts for my health savings account claims?No. Fidelity doesn’t ask for proof of your health savings account claims. However, keep all your receipts in case you’re audited by the IRS.

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Managing Your Account

How can I track my health savings account balance?To track your balance, log on to Fidelity’s website at www.netbenefits.com and find Quick Links on your homepage in the Health Savings Account box. You can use the Quick Links to check your balance, see your statements, invest your funds and pay claims.

What happens if I have money left in my health savings account at the end of the year?That money is yours to keep and use for as long as you have the account.

What happens to my health savings account if I don’t enroll in a high-deductible health plan next year?If you don’t enroll in a high-deductible health plan, the account is still yours, and you can use the account balance to pay for eligible medical, prescription drug, dental and vision expenses, or save it for future eligible expenses. However, you need to be enrolled in a high-deductible health plan to add money to your health savings account.

Also, if you rely on the full contribution rule (see p. 7) to make a full year’s worth of health savings account contributions, you’ll need to be enrolled in a high-deductible health plan (such as the HSA, HSA Plus or Kaiser Plus) for all of the following year to avoid federal tax penalties.

What happens to my health savings account if I leave McKesson?You own your health savings account. You can keep your health savings account with Fidelity or transfer your dollars to another qualifying bank or provider.*

If you leave McKesson and your health savings account stays with Fidelity, you may be responsible for Fidelity’s account service fee. Contact Fidelity for details or visit https://www.fidelity.com/why-fidelity/pricing-fees.

* If you withdraw the money from your current health savings account bank or provider and don’t transfer or roll the account over to another qualifying bank or provider within 60 days of the withdrawal, the money is taxable, and you’ll likely need to pay tax penalties.

What happens if I contribute more than the IRS limit?McKesson doesn’t monitor the limit on your health savings account. If you know you’re over the limit, you can withdraw the amount you’re over before the tax-filing deadline to avoid penalties. Contact Fidelity at 800.544.3716 or go to www.netbenefits.com to request a Return of Excess (ROE) form. Follow the instructions on the form to complete your withdrawal and keep a copy for your tax records.

I currently have a health savings account with my bank. Can I transfer that health savings account balance to Fidelity?Yes. Log on to www.netbenefits.com and choose Contributions from HSA Quick Links. Then, choose Other Ways to Contribute and select Transfer Money.

Can I transfer the money in my health savings account into an IRA?Yes, but you’ll need to pay taxes.

How can I transfer my health savings account without paying taxes?You can transfer your account balance into another qualifying health savings account and not pay taxes.

What happens to my health savings account if I die?Like your other assets, your health savings account goes to your beneficiaries. You can name your beneficiaries when you open your health savings account. If your beneficiary is your spouse, the health savings account isn’t taxable. However, if your beneficiary isn’t your spouse, the health savings account is taxable.

How do I name beneficiaries for my health savings account online?Use the Fidelity Online Beneficiary Add/Change/Cancel feature by following these steps:

1. Log on to www.netbenefits.com.

2. Choose Beneficiaries from the HSA Quick Links.

3. Add or Edit your beneficiary information for your health savings account.

Who can close my health savings account?Only you can close your account.

Do I pay administration fees for my health savings account? McKesson pays your administration fees if you’re an active employee enrolled in the HSA, HSA Plus or Kaiser Plus plan and have a health savings account with Fidelity. If you leave McKesson and your health savings account stays with Fidelity, you may be responsible for Fidelity’s account service fee. Contact Fidelity for details or visit https://www.fidelity.com/why-fidelity/pricing-fees. If you open your health savings account with another bank or provider, you’ll pay any administration fees.

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Medicare

Can money be put into my health savings account if I’m covered by Medicare? No. Money can’t be put into your health savings account for any month you’re covered by Medicare Part A, B or D or in any other Medicare benefit.

Can money be put into my health savings account if I’m eligible for Medicare (for example, I’m age 65 or older) but haven’t enrolled? Yes. If you’re Medicare-eligible but aren’t actually covered by Medicare Part A, Part B, Part D or any other Medicare benefit, money can be put into your health savings account until the month you’re covered by Medicare.

What if I’m only covered by Medicare for part of the year? The amount you can contribute for the year is prorated based on the number of months you’re covered by Medicare. No money can be put into your health savings account for the months you’re covered by Medicare.

How much can I contribute? The maximum contribution amount equals your annual IRS contribution limit multiplied by the number of months you’re not covered by Medicare divided by 12.

Example

Karen enrolls in the HSA Plus plan with Employee + Family coverage effective January 1, 2020. Karen enrolls in Medicare Part A effective July 1, 2020.

The maximum amount that Karen can contribute (with McKesson’s contribution) to her health savings account equals her 2020 IRS contribution limit x 6 months not covered by Medicare ÷ 12 months.

$7,100 x 6 ÷ 12 = $3,550

Karen’s and McKesson’s combined 2020 contributions can’t exceed $3,550.

Flexible Spending Accounts (FSAs)

Can I contribute to a health savings account if I have an HSA-compatible healthcare FSA?Yes. The IRS lets you contribute to both types of accounts at the same time. When you have both accounts, you can pay eligible dental and vision expenses with your HSA-compatible healthcare flexible spending account (FSA) and keep more money in your health savings account to save or invest.

Part-time employees (scheduled to work 20-29.9 hours per week) aren’t eligible for McKesson flexible spending accounts (FSAs).

Can I put money in a health savings account if I have a standard healthcare FSA?No. Having a standard healthcare FSA disqualifies you from contributing to a health savings account.

Can I put money in a health savings account if I have a dependent care FSA?Yes. You can put money in a health savings account and have a dependent care flexible spending account (FSA).

My spouse has a standard healthcare FSA. Can I put money in a health savings account?No. You can’t put money in a health savings account, even if you’re covered by different medical plans. The IRS doesn’t allow you, or your spouse, to put money in a health savings account if you have a standard healthcare FSA.

My spouse has an HSA-compatible healthcare FSA. Can I put money in a health savings account?Yes. HSA-compatible healthcare FSAs cover only dental and vision expenses and are also known as “limited-purpose FSAs.”

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Is McKesson responsible for determining whether money can be put into my health savings account because I’m covered by Medicare? No. McKesson has no way of knowing if you’re covered by Medicare.

What happens if McKesson makes a contribution to my health savings account after the date my Medicare coverage is effective? The amount McKesson contributes is an excess contribution. To avoid tax penalties on the excess contribution, you need to notify Fidelity and withdraw the excess contribution and related earnings before your tax return filing deadline (April 15, 2021, for most people). You need to report the excess contribution and earnings as taxable income on your tax return.

How much money can be put into my health savings account if I enroll in Medicare mid-year and my Medicare coverage is retroactive? If you enroll in Medicare Part A mid-year, your Medicare coverage may be retroactive for up to six months before you enrolled. The maximum amount that can be contributed to your health savings account depends on the date your Medicare coverage is effective, even if the effective date of coverage is retroactive.

If you enroll in Medicare July 1, but have retroactive coverage for six months, your actual date of coverage is January 1. That means that the maximum amount that can be contributed to your health savings account is $0, so any contributions you made to your health savings account are considered excess contributions. The annual maximum amount is reduced by 1/12 for each month you’re covered by Medicare (including any months of retroactive coverage). Contact Fidelity at 800.544.3716 if you have questions.

What happens if too much is contributed to my health savings account because I’m covered by Medicare for all or a portion of the year? To avoid tax penalties, you need to withdraw any excess contributions and related earnings by your tax return filing deadline (April 15, 2021, for most people) and report them as taxable income on your tax return. This includes any contributions you receive from McKesson if you’re enrolled in the HSA Plus or Kaiser Plus plan.

If you fail to timely withdraw any excess contributions and related earnings by the deadline, you’ll be subject to a penalty tax equal to 6% for each taxable year that excess contributions remain in your health savings account. Penalty taxes may be cumulative and continue in future years if excess contributions aren’t withdrawn by the deadline. Contact Fidelity to withdraw excess contributions from your health savings account.

Example

Roberto enrolls in the HSA Plus plan with Employee + Family coverage effective January 1, 2020. He gets McKesson’s contribution of $1,500 for 2020 and contributes $450 a month from his paycheck.

Roberto then enrolls in Medicare Part A coverage effective July 1, 2020. By this time, his total health savings account contribution for 2020 is $4,200.

McKesson’s Contribution

Roberto’s Contribution

Total Contribution Amount

$1,500(for Employee + Family coverage)

$2,700 ($450 x 6 months)

$4,200 ($1,500 + $2,700)

Because Roberto is now enrolled in Medicare Part A coverage, the maximum amount he can contribute to his health savings account for 2020 is $3,550:

Roberto’s 2020 IRS contribution limit x 6 months not covered by Medicare ÷ 12 months in a year.

$7,100 x 6 ÷ 12 = $3,550

Roberto has $650 ($4,200 - $3,550) in excess contributions in his health savings account.

Roberto needs to withdraw the $650 from his health savings account before April 15, 2021, to avoid paying penalty taxes. He contacts Fidelity, moves the excess contribution to his checking account and plans to report the excess contribution and any earnings as taxable income on his 2020 tax return.

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Example

Tiffany enrolls in the HSA Plus plan with Employee + Family coverage effective January 1, 2020. She gets McKesson’s contribution of $1,500 and contributes $450 a month from her paycheck.

In November 2020, Tiffany enrolls in Medicare Part A with coverage retroactive to May 1, 2020. Tiffany stops making health savings account contributions as of November 1, 2020. By this time, Tiffany’s total health savings account contribution for 2020 is $6,000.

McKesson’s Contribution

Tiffany’s Contribution

Total Contribution Amount

$1,500(for Employee + Family coverage)

$4,500 ($450 x 10 months)

$6,000 ($1,500 + $4,500)

Because Tiffany’s Medicare coverage is retroactive, the maximum amount that can be contributed to Tiffany’s health savings account for 2020 is $2,366.66:

Tiffany’s 2020 IRS contribution limit x 4 months not covered by Medicare ÷ 12 months in a year.

$7,100 x 4 ÷ 12 = $2,366.66

Tiffany has $3,633.34 ($6,000 - $2,366.66) in excess contributions in her health savings account.

Tiffany needs to withdraw the $3,633.34 from her health savings account before April 15, 2021, to avoid paying penalty taxes. She contacts Fidelity, moves the excess contribution to her checking account and plans to report the excess contribution and any earnings as taxable income on her 2020 tax return.

Fidelity(Health Savings Account) www.netbenefits.com 800.544.37167:30 a.m. - 7 p.m. CT, M-F Manage and invest your health savings account funds.

UPointdigital.alight.com/mckessonEnroll in, review and manage your benefits. Download the UPoint Mobile HR® app to access your benefits anytime, anywhere.

Total Rewards Library www.mckesson.com/totalrewardslibrary Go to the Financial Health page to find information about health savings accounts, including eligible expenses, FAQs and short videos. The library is available 24/7 from any device connected to the internet.

WageWorks(Flexible Spending Accounts)www.wageworks.com877.924.3967 7 a.m. - 7 p.m. CT, M-F

HR Support Center855.GO.MCKHR (855.466.2547)Press 1 for the McKesson Benefits Center for Health and Vitality questions. Benefit experts are available 7 a.m. - 6 p.m. CT, M-F. Oprime 1 para asistencia en español a través del McKesson Benefits Center.

December 2019

Can I use money in my health savings account while enrolled in Medicare?Yes. You can keep using your health savings account money tax-free for eligible medical, prescription drug, dental and vision expenses. Eligible expenses include Medicare premiums, deductibles, copays and coinsurance under any part of Medicare, as well as any other retiree insurance premiums. (Premiums for a Medicare supplemental policy, such as Medigap, aren’t an eligible expense.) If you’re age 65 or older and spend money on ineligible expenses, you pay normal income tax but not the 20% penalty tax.

I’m enrolled in a medical plan with a health savings account and cover my spouse, but he/she is also covered by Medicare. Can I still contribute to my health savings account?Yes. As long as you’re not covered by any part of Medicare, you can contribute up to the IRS maximum for Family coverage.

Can I pay for my spouse’s eligible medical, prescription drug, dental and vision expenses from my health savings account if he/she is on Medicare?Yes. You can pay for his/her expenses, but your spouse can’t contribute to the account.