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FAQs
- How does an eligible individual establish an HSA?
- Are employer contributions comparable if the employer contributes the same amount of dollars per payroll to each employee whereby employees employed for a longer length of time will have more contributions at the end of the year?
- What other kinds of health coverage may an individual maintain without losing eligibility for an HSA?
- When is an individual permitted to receive distributions from an HSA?
- An individual is covered by a qualified HDHP with a $5,000 deductible with family coverage. The dependents under the plan are not allowable dependents for tax purposes (i.e. domestic partner's children who are claimed on ex-spouses tax return.) What is the maximum contribution for the accountholder?
- When may HSA contributions be made?
- How much may be contributed to an HSA?
1. How does an eligible individual establish an HSA?
An eligible individual can establish an HSA with a qualified HSA trustee or custodian. No permission or authorization from the IRS is nessecary to establish an HSA. (Notice 2004-2, Q-Q #8)
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2. Are employer contributions comparable if the employer contributes the same amount of dollars per payroll to each employee whereby employees employed for a longer length of time will have more contributions at the end of the year?
Calculation comparibility monthly is acceptable. (IRS Response 4-7-04)
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3. What other kinds of health coverage may an individual maintain without losing eligibility for an HSA?
An individual does not fail to be eligible for an HSA merely because, in addition to an HDHP, the individual has coverage for any benefit provided by "permitted insurance". Permitted insurance is insurance under which substaintially all of the coverage provided relates to liabilities incurred under workers' compensation laws, tort liabilities, liabilities relating to ownership or use of property, insurance for a specified disease or illness and insurance that pays a fixed amount per day of hospitalization. Also, an individual does not fail to be eligable for an HSA merely because they have coverage for accidents, disability, dental care, vision care, or long-term care. (Notice 2004-2, Q-A #24)
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4. When is an individual permitted to receive distributions from an HSA?
An individual is permitted to receive distributions from an HSA at any time after the HSA has been established. (Notice 2004-2, Q-A #24)
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5. An individual is covered by a qualified HDHP with a $5,000 deductible with family coverage. The dependents under the plan are not allowable dependents for tax purposes (i.e. domestic partner's children who are claimed on ex-spouses tax return.) What is the maximum contribution for the accountholder?
The maximum contribution for the accountholder in this scenario is based on the family maximum. Contribution limits are determined by the plan, not the tax status of dependents. A plan is considered family coverage if at least one eligible individual and another individual are covered by the plan. (notice 2004-50, Q:a-31)
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6. When may HSA contributions be made?
Contributions for the taxable year can be made in one or more payments at the convenience of the individual or the employer, at any time prior to the time perscribed by law, typically April 15, (without extensions) for filing the eligible individual's federal income tax return for that year, but not before the beginning of that year. (Notice 2004-2, Q-A #21)
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7. How much may be contributed to an HSA?
For the 2007 tax year, the maximum contribution is set to the statutory maximum of #2,850 for single coverage and $5,650 for family coverage and does not need to be prorated as long as you meet the appropriate testing period. A tax penalty applies if you do not meet the appropriate testing period requirements. In addition to the maximum contribution amount, catch-up contributions of $800 may be made by or on behalf of individuals age 55+ and younger than 65. In 2008, the statutory maximum is $2,900 for single coverage and $5,800 for family coverage. The catch-up contribution amount is $900. (Based on legislative text: Tax Relief and Health Care Act of 2006, Section 303 & 305.)
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