HEALTH
SAVINGS ACCOUNTS SUMMARY
General
Creates new Health Savings Accounts (HSAs) to help individuals
save for qualified medical and retiree health expenses on a tax-free
basis. HSAs first became available as of January 1, 2004.
Eligibility
- Individuals
under the age of 65 are eligible to contribute to an HSA if they
have a qualified health plan.
- For self-only
policies, in 2007 a qualified plan must have a minimum deductible
of $1,100 with a $5,500 cap on out-of-pocket expenses (indexed
annually).
- For family
policies, in 2007 a qualified plan must have a minimum deductible
of $2,200 with a $11,000 cap on out-of-pocket expenses (indexed
annually).
- Preventive
care services are not subject to the deductible. In addition,
coverage for accidents, disability, dental care, vision care,
and long-term care is not subject to the deductible.
Contributions
- Contributions
are allowed up to 100% of the health plan deductible. The
maximum annual contribution in 2007 is $2,850 for self-only
policies and $5,650 for family policies (indexed annually).
- Individuals
age 55 – 65 may make additional “catch-up” contributions
of up to $800 in 2007, increasing to $1,000 annually in 2009
and thereafter. A married couple can make two catch-up
contributions as long as both spouses are at least 55. Catch-up
contributions will help individuals accumulate assets for retiree
health expenses.
- Contributions
may be made by individuals, family members and employers.
- o Contributions
made by individuals and family members are tax-deductible (for
the account beneficiary) even if the account beneficiary does
not itemize. Employer contributions are made on a pre-tax
basis and are not taxable to the employee. Employers
are allowed to offer HSAs through a cafeteria plan.
- Investment
earnings accrue tax-free.
Distributions
HSA distributions are tax-free if they are used to pay for qualified
medical expenses. Such as:
- Amounts
paid for the diagnosis, cure, mitigation, treatment or prevention
of disease,
- Prescription
drugs,
- Qualified
long-term care services and long-term care insurance,
- Continuation
coverage required by Federal law (i.e., COBRA),
- Health
insurance for the unemployed,
- Medicare
expenses (but not Medigap), and
- Retiree
health expenses for individuals age 65 and older (Note: retiree
health plans would not have to meet the $1,000/$2,000 minimum
deductible requirement.)
Distributions made for any other purpose are subject to income
tax and a 10% penalty. The 10% penalty is waived in the case
of death or disability. The 10% penalty is also waived for
distributions made by individuals ate 65 or older.
Treatment at Death
Upon death, HSA ownership may transfer to the spouse on a tax-free
basis.
HSA-HRA-FSA
Presentation
Presented by the National Association of Health Underwriters (NAHU),
February 2004
Health
Savings Accounts
Links, summaries and analyses of the health savings account (HSA)
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