Health Savings Accounts—Additional Qs&As
Internal Revenue Bulletin: 2004-33 August 16, 2004 Notice 2004-50
Table of Contents
- OUTLINE TABLE OF CONTENTS
- QUESTIONS AND ANSWERS
- EFFECT ON OTHER DOCUMENTS
- TRANSITION RELIEF
- DRAFTING INFORMATION
December 23, 2010, the IRS issued Notice 2011-5 , which amended the previous guidance on this provision. Section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, added section 223 to the Internal Revenue Code to permit eligible individuals to establish Health Savings Accounts (HSA’s) for taxable years beginning after December 31, 2003. Notice 2004-2, 2004-2 I.R.B. 269, provides certain basic information on HSA’s in question and answer format. T
Definition of Dependent IRC 152a) ”dependent” means any of the following individuals over half of whose support, for the calendar year in which the taxable year of the taxpayer begins, was received from the taxpayer (or is treated under subsection (c) or (e) as received from the taxpayer): IRS Publication 501
Can an HSA account be seized by creditors?
I don’t have a conclusive answer, but here’s the research:
(6) the interest of an individual in the balance of his account is nonforfeitable.
IRC Sec. 223(d)(1). e
Deemed distributions from HSA’s. The following situations result in deemed taxable distributions from your HSA.
You used any portion of any of your HSA’s as security for a loan at any time in 2005. You must include the fair market value of the assets used as security for the loan as income on Form 1040, line 21. Page 7 IRS Publication 969
Q 195. What is a Health Savings Account (HSA) and how can one be established? You can use your credit card and get this answer from Tax Facts on Life & Health Insurance
This bill’s health savings account (HSA) provisions make several important improvements to help the growing number of Americans enrolling in HSA High Deductible Health Plans (HDHP) and to increase the number of people who will find these plans attractive.
A summary of the changes follows. (consult your tax advisor for complete Federal and state tax details.)
$2,850 for individuals and $5,650 for families
No contribution reduction for persons who join the HDHP mid-year.
Consolidation of existing HRA and FSA funds into HSA. The one-time, tax-free rollover of existing Health Reimbursement Arrangement (HRA) or Flexible Spending Arrangement (FSA) funds will assist employers wanting to transition employees to HDHP coverage. The one-time rollover will help ensure that employees have HSA funds available to them from the start of their coverage.
Elimination of FSA 2 1/2 month rule. Employers that had considered eliminating the 2 1/2 month grace period from their FSAs because of the negative interaction with HSA rules now may be more inclined to continue the feature. An employee who elects HDHP coverage for January 2007 and who is a participant in a calendar-year FSA that utilizes the grace period would need to spend down the FSA by December 31, 2006 or the employer would need to make the one-time rollover of the FSA dollars to the HSA as previously discussed. Effective 2007.
Earlier Notification of Cost of Living adjustments. HSA contribution and out-of-pocket limits have been historically released by the Treasury late in the year, because the Cost of Living indexing period ends in August of each year. This change adjusts the indexing period to end in March, thereby facilitating the release of contribution limits by June 1 each year. This change will provide employers and others impacted by the release of the information with sufficient time to produce materials using the correct information that takes effect in the next calendar. (Effective 2008).
Rollovers of existing IRA funds into HSA’s. Historically, rollovers were not permitted into an HSA from a qualified retirement plan, including an IRA. This changes enables individuals to access IRA funds for HSA contributions by allowing a one-time, tax-free irrevocable rollover from an IRA into an HSA. However, the rollover cannot exceed the HSA contribution limit for the year. Effective 2007.
Higher contribution limits for lower-paid employees. Historically, employers were able to contribute to an HSA on a “comparable” basis for all HSA participants. Contributions could not differ based on compensation or job status. The new provision allows employers to provide higher HSA contributions (up to the statutory maximums) to non-highly compensated employees. Effective 2007.
Other pages in this section on HSA’s – Health Savings Accounts
- Broker ONLY – HSA
- FAQ’s – Calculators – HSA
- FSA Flexible Spending Accounts
- Historical HSA
- HSA Banks & Institutions
- IRS Tax Forms & Publications – HSA
- Section §105 Medical Expense Reimbursement