• Eligible individuals can deduct their contributions
• Earnings grow tax-deferred
• Withdrawals to pay qualified medical expenses are tax-free

Eligible to Establish an HSA
Any Individual:

• Under age 65.

• Covered by an HDHP

• Not covered by other health insurance

• Not enrolled in Medicare

• Can't be claimed as a dependent on someone else's tax return

Eligible to Contribute
Contributions can be made by you, your employer, or both.

• If made by employer, it is not taxable to the employee

• If made by individual, it is an "above-the-line" deduction

• Can be made by others on behalf of individual and deducted by individual

Not Allowed
Joint HSA’s
HSAs for dependents.

Contributions
Must be in cash (except if rollover or trustee-to-trustee transfer.) 
Made by April 15 of each year.

Maximum Contribution for 2008

• $2,900 for individual policy

• $5,800 for family policy

Catch-up Contributions
Additional "catch-up" contributions allowed for individual age 55-64:

• 2008: $900

• 2009 and after:
  $1,000

Contributions must stop once an individual is enrolled in Medicare.

Tax Treatment

• “Above-the-line” deduction toward AGI

• Only owner can claim

• Not a medical expense deduction

Excess Contributions

• Excess not deductible

• 6% tax penalty

• Fix by withdrawing excess, and earnings on it, by tax return due date

Multiple HSAs

• Allowed, but contribution limits not increased

Rollovers

• Permitted from HSA or MSA

• No $ limit

• One allowed per 12 months

• 60-day window to put into HSA

• Not permitted from HRA or FSA

• One time transfer from IRA

• Trustee-to-trustee transfers unlimited

Qualified Medical
Expenses (“QME”)

• Medical or dental bill

• Medications

• Hospital costs

Distributions

• Not taxable if for QME of owner, spouse, dependents (even if they are not eligible to have or contribute to HSA)

• Taxable + 10% penalty if not for QME

Prohibited Transactions

• Owner may not lend to, borrow from, or pledge HSA

Carryovers

• Allowed

• No “use it or lose it" rule

After Age 65

• No contributions

• Distributions tax-free if pay QME, some health insurance premiums

• Distributions taxed as income for other uses

• No 10% penalty

Upon Death
If surviving spouse beneficiary
Becomes his/her HSA
If other beneficiary

• Ceases to be HSA

• Beneficiary takes into income

• May reduce by decedent’s QME paid within 1 year

Records, Reporting

Bank

• 5498-SA, contributions, balance

• 1099-SA, distributions
   

Owner

• Proof of used distributions for QME

Fees

• Trustee/custodian may charge

• Not counted as distributions