The maximum contributions that can be made to health savings accounts in 2010 will increase as will the minimum deductible imposed by health insurance plans linked to HSAs and the maximum out-of-pocket expenses that employees can be required to pay.

The maximum contribution that can be made to an HSA in 2010 for employees with single coverage will be $3,050. The maximum HSA contribution for those with family coverage will rise to $6,150.

Additionally, the maximum out-of-pocket expense, including deductibles, that employees can be required to pay next year will rise to $5,950 for single coverage, and $11,900 for family coverage.

The minimum deductible of the high-deductible health insurance plan to which HSAs must be linked will increase next year to $1,200 for single coverage and $2,400 for family coverage.

The most common question about HSA contributions is “What should be reported in Box 12?”

The confusion stems from the label of “employer contributions.” Both the employee and employer contributions should be showing in box 12, code W.   IRS Publication 969, for tax year 2008 ( page 10)  indicates that contributions made by the employer via salary reduction are not included in the employee’s  income.  Contributions to an employee’s account by an employer using the amount of  an employee’s salary reduction through a cafeteria plan are treated as employer contributions.  Thus the total is displayed on the W2. Continue reading »

HSA contributions are based on your insurance coverage and age. For 2009 the limits are:

1. Single accounts (only one person covereed on the health insurance policy)—$3,000.00
2. Family accounts ( multiple people covereed on the health insurance policy)—$5,950.00
3. Additional contribution for account holders who attain age 55 by December 31, 2009—$1,000.00

Contribution tips:

It’s not too late to make 2008 contributions. You have until April 15 to finalize your prior year’s contribution.

You can make the full year’s contribution any time after January 1 of the tax year.

In Administrative, Procedural, and Miscellaneous Notice 2004-50, the IRS addresses this question. See Questions 2 and 4, excerpted below:

 Q-2. May an otherwise eligible individual who is eligible for Medicare, but not enrolled in Medicare Part A or Part B, contribute to an HSA?

 A-2. Yes. Section 223(b)(7) states that an individual ceases to be an eligible individual starting with the month he or she is entitled to benefits under Medicare. Under this provision, mere eligibility for Medicare does not make an individual ineligible to contribute to an HSA. Rather, the term “entitled to benefits under” Medicare means both eligibility and enrollment in Medicare.

Thus, an otherwise eligible individual under section 223(c)(1) who is not actually enrolled in Medicare Part A or Part B may contribute to an HSA until the month that individual is enrolled in Medicare.

Example (1). Y, age 66, is covered under her employer’s HDHP. Although Y is eligible for Medicare, Y is not ctually entitled to Medicare because she did not apply for benefits under Medicare (i.e., enroll in Medicare Part A or Part B). If Y is otherwise an eligible individual under section 223(c)(1), she may contribute to an HSA.  

Example (2). In August 2004, X attains age 65 and applies for and begins receiving Social Security benefits. X is automatically enrolled in Medicare. As of August 1, 2004, X is no longer an eligible individual and may not contribute to an HSA.  

Q-4. Is a government retiree who is enrolled in Medicare Part B (but not Part A) an eligible individual under section 223(c)(1)?

 A-4. No. Under section 223(b)(7), an individual who is enrolled in Medicare may not contribute to an HSA.

Yes. IRS regulations allow for the employer to advance the employer contribution to the HSA for a specific employee. However, the employer must treat all employees equally. Ideally, the employer would develop a policy for advancing (employer funded) HSA contributions. Any employee meeting those requirements, who requests an advance, would recieve the advance on the HSA.