Health Insurance Daily

HSA 101: Rules And Regulations

Health Savings Accounts are a great tool for consumers in an unstable and unpredictable health insurance market. However they were created and are regulated by the Federal Government, which means that there are LOTS of rules and regulations regarding the contributions to an HSA.

It is important that you and your clients are aware of these rules and regulations before choosing an HSA for their insurance needs.

1. There is a maximum amount that can be contributed to the Health Savings Account each year. This amount is subject to change in the future but as of this year it is: Either the amount of the deductible for the HDHP or $2,650 for a single person and $5,250 for a family, whichever amount is less.

2. There is an addendum to the above statement. Individuals 55 and older who are covered by an HDHP can make additional "catch-up" contributions each year until they enroll in Medicare. The additional "catch-up" contributions to HSA allowed are as follows:
2004 - $500
2005 - $600
2006 - $700
2007 - $800
2008 - $900
2009 or after - $1,000

3. If the client starts their HDHP in the middle of the year they cannot make the full year's contribution. Eligibility to contribute to an HSA is determined by the effective date of the HDHP coverage. The annual contribution depends on the number of months of HDHP coverage the client has during the year (technically, the months where you have HDHP coverage on the first day of the month). The amount the client can contribute is not determined by the date the client establishes his/her account. However, medical expenses incurred before the date the HSA is established cannot be reimbursed from the account. The client can contribute 1/12th of their total annual maximum per month the HDHP coverage is in place.

4. The client's personal contributions offer them an "above-the-line" deduction. An "above-the-line" deduction allows them to reduce their taxable income by the amount they contribute to their HSA. They do not have to itemize their deductions to benefit. Contributions can be made to their HSA by others (e.g., relatives or an employer). However, the client receives the benefit of tax deduction.

These are only SOME of the tax regulations that are put in place for an HSA.

This article was provided by Business Distribution Solutions.

posted by Mike @ 10:15 AM