• You must be covered by a qualified high deductible health plan on the first day of the month
• You cannot be covered by any other health plan that is not a qualified high deductible health plan, including spouse’s health insurance
• You cannot be covered by spouse’s Medical FSA
• You cannot be enrolled in Medicare Part A or Part B
• You cannot be covered by TriCare
• To make contributions you cannot have accessed your VA medical benefits in the past 90 days
• You may not be claimed as dependent on another person’s tax return

Please feel free to contact us if you have any questions about HSAs with Health Savings Administrators.

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.

Account holders age 55 or older may add $1,000 to the numbers above as their catch-up contribution.

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 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.

Therefore, the amount in Box 12 will include all of the employee payroll deductions and any employer money contributed. This is PRE-TAX money and gets reported on Form 8889 (required of all HSA account owners) as an EMPLOYER contribution (Line 9). Because there were no taxes deducted form this amount the employee/taxpayer cannot deduct it from gross income.

However, if the employee were to send money directly to the HSA, that amount would be reported on line 2 of Form 8889. The total of lines 2 and 9 cannot exceed the maximum annual contribution limits set by the IRS for the applicable tax year.

A friendly reminder to employees enrolled in the HSA informing them of the requirement to complete Form 8889, along with the explanation above, might reduce some of the questions directed to your HR department.

More info for the employees – Two tax forms will be sent to the employee/taxpayer, and to the IRS. The first is Form 1099-SA. This form is sent no later than January 31. Form 1099-SA tells you what distributions have been made from the health savings account during the calendar year. The amount in Box 1 of your 1099-SA will be reported on Form 8889.

The second form is Form 5498-SA. This form is sent out no later than May 15, but definitely after the tax filing deadline of April 15. Form 5498-SA cannot be sent any earlier because taxpayers have until April 15 to make contributions to the prior year’s HSA. This form included ALL contributions made between January 1 of the reportable tax year (e.g. 2008) and April 15 of the following tax year (e.g. 2009). Box 1 will be blank unless you have an MSA. Box 2 will have all the contributions to your HSA made in 2008, including any contributions made for 2007 in 2008. Do not report this on your Form 8889. Box 3 has the HSA contributions made in 2009 for 2008. Note that both boxes 2 and 3 may, or may not, match the amount reported on line 2 of Form 8889.

Two tax forms will be sent to you, and to the IRS. The first is Form 1099-SA. This form is sent no later than January 31. Form 1099-SA tells you what distributions have been made from your health savings account during the calendar year. The amount in Box 1 of your 1099-SA will be reported on Line 14a of Form 8889. (Form 8889 is required when filing your taxes if you have a health savings account).

The second form sent to you is Form 5498-SA. This form is sent out no later than May 15, but definitely after the tax filing deadline of April 15. Form 5498-SA cannot be sent any earlier because taxpayers have until April 15 to make contributions to the prior year’s HSA. This form included ALL contributions made between January 1 of the reportable tax year (e.g. 2008) and April 15 of the following tax year (e.g. 2009).

Here is what goes in each Box of the 5498-SA:

Box 1. Employee or Self-Employed Person’s Archer MSA Contributions Made in 2009 and 2010 for 2009
No HSA information is to be reported in box 1 Enter the employee’s or self-employed person’s regular contributions to the Archer MSA made in 2009 and through April 15, 2010, for 2009. Report gross contributions, including any excess contributions, even if the excess contributions were withdrawn.

Box 2. Total Contributions Made in 2009
Enter the total HSA or Archer MSA contributions made in 2009. Include any contribution made in 2009 for 2008. Also include qualified HSA funding distributions (trustee-to-trustee transfers from an IRA to an HSA under section 408(d)(9)) received by you during 2009. You may, but you are not required to, report the total MA MSA contributions the Secretary of Health and Human Services or his or her representative made in 2009. Do not include amounts reported in box 4.

Box 3. Total HSA or Archer MSA Contributions Made in 2010 for 2009
Enter the total HSA or Archer MSA contributions made in 2010 for 2009.

Box 4. Rollover Contributions
Enter rollover contributions to the HSA or Archer MSA received by you during 2009. Include qualified HSA distributions (direct transfers of contributions form employers FSAs and HRAs to an HSA under section 106(e). These amount s are not to be included in box 2.

Box 5. Fair Market Value of HSA, Archer MSA, or MA MSA
Enter the FMV of the account on December 31, 2009.

Box 6. Checkbox
Check the box to indicate if this account is an HSA, Archer MSA, or MA MSA.

What tax forms do I need to complete?

All taxpayers who have a health savings account must complete Form 8889 if:

• they, or someone on their behalf, made contributions to their HSA.
• they received any HSA distributions in the  just-past calendar year.
• they failed to be an eligible individual during the testing period.
• they acquired an interest in an HSA because of the death of the account beneficiary.

If you find that you have made an excess contribution to your HSA and failed to remove it prior to filing your taxes, including extensions, you may also be required to complete Form 5329.

Where can I find Tax forms?

• Visit www.irs.gov/formspubs/

The spouse is an “ineligible individual” in the eyes of the IRS. The IRS allows married couples to assign the tax deduction to each spouse in whatever proportions they deem appropriate. As long as the tax deductions are allocated to the eligible spouse (a paper assignment for those filing jointly) the fact that one one spouse is “ineligible’ has no impact on the HSA contribution limits in this case.    (IRS guidance 2004-50 Q&A 31, example 5 and Q&A 32)