Annual Contribution Limits: The 2010 annual limitation on tax deductions is $3050 for self-only coverage and $6,150 for family coverage.
Minimum Deductible: The 2010 minimum annual deductible under a high deductible health insurance plan (HDHP) is $1,200 for self-only coverage or $2,400 for family coverage.
Out-of-Pocket expenses: The 2010 annual out-of-pocket expenses (deductibles, co-payments, and other amounts) for a high deductible health insurance plan (HDHP) cannot exceed $5,950 for self-only coverage or $11,900 for family coverage.
What is an HSA?
A Health Savings Account (HSA) is a tax-favored saving account that is used in conjunction with a high-deductible HSA eligible health insurance plan to make healthcare more affordable and to save for retirement.
HSAs are similar to IRAs, but even better:
Pre-tax money is deposited each year into an HSA and can be easily withdrawn at any time with no penalty or taxes to pay for qualified medical expenses. Withdrawals can also be made for non-medical purposes, but will be taxed as normal income and are subject to a 10 percent penalty if done prior to age 65.
Any HSA funds not used each year remain in the account, and earn interest tax-free to supplement medical expenses at any time in the future.
Like an IRA, the account belongs to you, not your employer. But unlike an IRA, your employer CAN contribute to your HSA.
What insurance plans are HSA-eligible?
In order to have a Health Savings Account, you must get an HSA-eligible health insurance plan. This type of insurance plan is often referred to as a High Deductible Health Plan, and is typically less expensive than plans with lower deductibles.
A health insurance plan must meet the following criteria to be considered HSA-eligible:
The health insurance plan must have an annual deductible of at least $1,000 for individuals and at least $2,000 for families.
The sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than premiums) does not exceed $5,000 for individuals and $10,000 for families.
How much can I contribute to my HSA?
Maximum yearly contributions (and associated tax deduction) are determined as follows:
For individuals, it is the lesser of: a) $2,600 b) Your health plan's annual deductible*
For families, it is the lesser of: a) $5,150 b) Your health plan's annual deductible*
You do not have to contribute the maximum each year, although some HSAs require a small minimum monthly contribution.
Note: If you are between the ages of 55 and 65, you can make an additional annual "catch up" contribution (of up to $500 in 2004.)
*If you enroll in an HSA-eligible health plan in the middle of the calendar year, your maximum contribution for the first year will be prorated based on the number of months you have the HSA-eligible health plan. For example, if your individual health plan's annual deductible is $3600, and you enroll in the HSA-eligible plan on June 1st, then your maximum contribution for the first year can be up to $2100 (i.e. 7/12 of $3600). If you are enrolled for all twelve calendar months, then you can contribute the amount of the deductible up to the annual maximum allowed ($2600 in Year 2004).
How can I get an HSA?
HSAs are available to any person in the U.S. under the age of 65 who has an HSA eligible insurance plan.
So, to get an HSA, you need to do the following:
Use our site to shop for an HSA-eligible health insurance plan.
Start the online health insurance application process by clicking the "Quote" button for the insurance plan you select.
After completing the health insurance application process, fill out the HSA enrollment form that we will present to you.
HSA Contribution Limit Stays Same for 2011
The maximum contributions that can be made to health savings accounts in 2011 will be the same as this year due to the cost of living remaining flat.
Under Internal Revenue Service Revenue Procedure 2010-22, which was issued Monday, May 24, the maximum HSA contribution that can be made next year is $3,050 for employee-only coverage and $6,150 for family coverage—the same as this year.
In addition, the minimum deductible will stay at $1,200 for single coverage and $2,400 for family coverage.
The maximum out-of-pocket employee expense, including deductibles, will stay at $5,950 for single coverage and $11,900 for family coverage.
The HSA limits are tied to change in the cost of living, which essentially was flat.
As of January 1, about 10 million people were enrolled in high-deductible health insurance plans to which HSAs must be linked, a 25 percent increase over the last year, according to a survey released last week by America’s Health Insurance Plans, a Washington-based trade group.
More about the Health Savings Account New Rules
Below is an overview, followed by a more detailed summary, of the new HSA rules.
Major features of the new rules include:
A one time transfer from an Individual Retirement Account (IRA) to an HSA is permitted.
A one time rollover from a Flexible Spending Account (FSA) and/or Health Reimbursement Arrangement (HRA) to an HSA is permitted.
The Health FSA grace period no longer impacts HSA eligibility, based on certain conditions.
The maximum annual contribution limitations are no longer based on the lesser of the HDHP deductible or IRS limit.
Contributions are no longer required to be pro-rated when an individual enrolls in an HDHP mid year under certain conditions.
Cost of living adjustments will be based on the consumer price index and published by June 1 of the prior year the adjustments are effective.
For HSA accountholders on a group plan, when employers contribute to an employee’s HSA (via the employee benefits program), they may make greater contributions outside of a Section 125 cafeteria plan for non-highly compensated employees without violating the HSA comparability rule.
Ament Benefits, Inc. 2006 All rights reserved. Ament Benefits, Inc. 5229 W. 161st Street, Overland Park, KS 66085