The Basics of HSA's

Who is eligible for HSAs? 

  • Any individual who
    • is not covered by a High Deductible Health Plan (HDHP)
    • is not covered by other health insurance
      (exceptions: specific injury insurance and accident, disability, dental, vision, long-term care)
    • is not enrolled in Medicare
    • can't be claimed as a dependent on someone else's tax return

HSA Contribution Rules

  • Maximum amount that can be contributed to an HSA (and deducted) = lesser if:
    • amount of HDHP health insurance deductible or
    • maximum specified in law (indexed annually by M-CPI)
      • $2,700 - 2006 (self-only coverage)
      • $5,450 - 2006 (family coverage)
    • Individuals age 55 and older, additional "catch-up" contributions to HSA allowed:
      • 2006 - $700
      • 2007 - $800
      • 2008 - $900
      • 2009 and after - $1,000
    • Contributions must stop once an individual is enrolled in Medicare

HSA Distributions

  • Distribution is tax-free if taken for "qualified medical expenses"
    • Now includes some over-the-counter drugs
  • Cannot be used to pay for other health insurance except:
    • COBRA continuation coverage
    • Health plan coverage while recieving unemployment compensation
    • Medicare premiums and out-of-pocket expenses
      (Part A, Part B, Medicare HMO's, new prescription drug coverage)
    • Cannot pay Medigap premiums
    • Qualified long-term care insurance


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