Health Savings Account Eligibility (2008)


Who is eligible to establish an HSA?

A Health Savings Account can be established by an "eligible individual"…someone who:
  • is covered under a qualified high-deductible health plan;
  • is not also covered by any other health plan that is not a high-deductible health plan;
  • is not entitled to benefits under Medicare (generally under age 65); and
  • may not be claimed as a dependent on another person's tax return.

What is a high-deductible health plan (HDHP)?

A high-deductible health plan, or HDHP, is a health plan that satisfies certain requirements with respect to deductibles and out-of-pocket expenses, which are adjusted annually for inflation:

2008
Type of
Coverage		Minimum Annual
Deductible		 Maximum Annual Out-of-
Pocket Expenses
Individual
$1,100
$5,600
Family
$2,200
$11,200

Except for preventative care, the high-deductible health plan may not provide benefits for any year until the deductible for that year is met.


What other health coverage can I have and still qualify for an HSA?

You can maintain certain types of "permitted insurance" in addition to the highdeductible health plan and still remain eligible for an HSA. Types of "permitted insurance" include workers' compensation, auto insurance, insurance for a specified disease or illness that pays a fixed amount per day (or other period) of hospitalization, accident and disability insurance, dental and vision care and longterm care insurance.

Health Savings Account Contributions


How much can I contribute to an HSA?

Contributions must be made in cash to an HSA that you establish with a qualified HSA trustee or custodian, such as an insurance company or bank, and cannot exceed a maximum annual limit, which is indexed annually for inflation:


Type of Coverage
2008
Maximum Annual HSA Contribution
Individual
$2,900
Family
$5800

You can contribute up to the maximum annual HSA contribution regardless of when during the year your HSA coverage begins. If, however, your coverage begins during the year, you must maintain the high-deductible health plan for a full 12 months or pay tax on your HSA contribution plus a 10% penalty.

In addition, individuals between ages 55 and 65 can make an additional "catch-up" contribution of up to $900 in 2008. The "catch-up" contribution will increase to $1,000 in 2009.


Who can make contributions to an HSA?

Contributions to an HSA can be made by an eligible individual, directly or through a cafeteria plan, by a family member on behalf of an eligible individual or by the eligible individual's employer. In addition, you may be able to roll over (transfer) unused funds from a flexible spending account (FSA) or health reimbursement account (HRA) or from an IRA to an HSA on a tax-free basis. Regardless of who makes the contributions, you own the HSA.


How am I taxed on HSA contributions?

You deduct your HSA contributions on an "above the line" basis, resulting in a dollarfor- dollar reduction in your adjusted gross income. Any contributions made by an employer to an HSA are not included in your gross income for tax purposes and are not subject to withholding.


When must HSA contributions be made?

Contributions may be made at any time of the year in one or more payments, but must be made no later than April 15 of the year following the year for which the deduction is taken.


Must I contribute the maximum to an HSA?

While there is no requirement that you contribute the maximum to your HSA each year, doing so will enable you to take full advantage of the powerful tax benefits provided by an HSA.

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VSA 2A3.12, 2A3.14, ed. 01-08
VSA, LP The information, general principles and conclusions presented in this report are subject to local, state and federal laws and regulations, court cases and any revisions of same. While every care has been taken in the preparation of this report, neither VSA, L.P. nor The National Underwriter Company is engaged in providing legal, accounting, financial or other professional services. This report should not be used as a substitute for the professional advice of an attorney, accountant, or other qualified professional.