MEDICAL SAVINGS ACCOUNTS

MSA’s

 

OVERVIEW

 

A tax-exempt trust or custodial account established for the purpose of paying qualified medical expenses in conjunction with a high-deductible (“HD”) health plan sponsored by a small employer, or self-employed individual.

 

Comment:  In brief: A portable personal trust account for medical expenses, but with limited availability and funding, and more restricted contribution limits.

 

ELIGIBILITY

 

An employee (or spouse of an employee) of a “small employer” that maintains an individual or family qualifying HD health plan covering that individual (employee or spouse), or a self-employed person (or the spouse of a self-employed person) maintaining an individual or family HD plan covering that individual (self-employed person or spouse).  IRC § 220(c)(1).

 

Such individual may not be covered under any other non-HD health plan which provides coverage for any benefit otherwise covered under the HD plan, except for certain exempted coverage and other statutorily “permitted insurance”.  IRC § 220(c)(1).

 

Exempted coverage: Same as under an HSA.  IRC § 220(c)(1)(B).

 

“Permitted insurance”: Same as under an HSA.   IRC § 220(c)(3); Notice 96-53, Q & A 7, 1996-2 CB 219.

 

ELIGIBILITY

 

High Deductible Plan Requirements.

 

Must be covered by a qualifying HD health plan (generally, with no other health coverage).

 

A qualifying HD health plan is a health plan which has an annual deductible between $1,700 and $2,600 for self-only coverage (or $3,450 and $5,150 for family coverage) and which has an out-of-pocket limit (other than for premiums) equal to $3,450 for self-only coverage (or $6,300 for family coverage).  IRC § 220(c)(2).

 

Preventive Care: A plan will still qualify as a HD health plan even if it has no deductible for preventive care.  IRC § 220(C)(2)(b)(ii).

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