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MEDICAL SAVINGS ACCOUNTS MSA’s ACCOUNT REQUIREMENTS A trust created or organized for the purpose of paying the qualified medical expenses of the account holder which meets certain special IRC requirements. IRC § 220(d)(1). The trustee must be a bank, life insurance company (as defined in IRC § 816), or approved non-bank custodian. (Where assets are held by a life insurance company, contributions are excluded from DAC tax under IRC § 848). The other special IRC requirements are: (1) except for rollover contributions from an Archer MSA, no contribution will be accepted unless it is in cash and does not exceed the applicable contribution limits; (2) no part of the trust assets are invested in life insurance contracts; (3) the assets of the trust are not commingled with other property in a common trust or investment fund; and (4) an individual’s possessory interest in an Archer MSA account is non-forfeitable. IRC § 220(d)(1). ACCOUNT STATUS/OWNERSHIP Tax-exempt funded trust or custodial account owned by the individual. IRC § 220(d). ACCOUNT FUNDING/USE OF A CAFETERIA PLAN An account holder (employee or spouse) may contribute to an MSA. Alternatively, the employee’s employer may contribute to the account holder’s MSA. However, if an employer makes a contribution to an MSA for a given year, the account holder of that MSA may not contribute to any MSA for that given year. IRC § 220(b)(5). An Archer MSA must be administered separate from an IRC § 125 cafeteria plan. Notice 96-53, Q & A 8, 1996-2 CB 219. An employer that makes a contribution to any eligible employee’s Archer MSA during a calendar year must make comparable contributions to the Archer MSAs of all comparable participating employees for the calendar year. IRC § 4980E. Note: No deduction is allowed for a contribution to an Archer MSA for any individual for whom a personal exemption can be claimed by another taxpayer for a tax year that begins in the calendar year in which the individual’s tax year begins. IRC § 220(b)(6). Contributions may be made for a year at any time prior to the time (without extensions) for filing the eligible individual’s income tax return for that year. IRC § 220(d)(4)(B). | ||
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