High Deductible Health Plans (HDHPs)

You must have coverage under an HSA-qualified “high deductible health plan” (HDHP) to open and contribute to an HSA. Generally, this is health insurance that does not cover first dollar medical expenses. Federal law requires that the health insurance deductible be at least:

• $1,150* – Self-only coverage
• $2,300* – Family coverage

In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed:

• $5,800* – Self-only coverage
• $11,600* – Family coverage

In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan. However, plans can pay for “preventive care” services on a first-dollar basis (with or without a co-pay). “Preventive care” can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.

HSA Contributions

You can make a contribution to your HSA each year that you are eligible. You can contribute up to but no more than:

• $3,000* – Self-only coverage
• $5,950* – Family coverage

Individuals age 55 and older can also make additional “catch-up” contributions. The maximum annual “catch-up” contribution is as follows:

• 2008 – $900
• 2009 and thereafter – $1,000

Contributions can be made as late as April 15 of the following year.

Congress Changes HSA Contribution Rules

On December 20, 2006, President Bush signed the Tax Relief and Health Care Act of 2006. This bill includes some beneficial changes to health savings accounts (HSAs). In short, the new law changes the following HSA rules.

• HSA contributions are no longer limited by a health plan’s deductible amount, thus raising contribution amounts for most HSA holders. For 2009, an HSA owner with self-only HDHP coverage can contribute up to $3,000 and an HSA owner with a family-coverage HDHP can contribute up to $5,950.
• Many individuals who become HSA-eligible after the beginning of the year will now be allowed to make contributions up to the maximum statutory contribution limit.
• HSA cost-of-living adjustments will be published much earlier each year.
• HSA holders with health flexible spending accounts (FSAs) (sometimes called cafeteria plans) that allow for the 2-month grace period will not be automatically ineligible to contribute to an HSA for the first three months of the year.
• HSA holders may make a one-time health FSA or employer-sponsored health reimbursement arrangement (HRA) asset transfer to an HSA.
• IRA holders may make a one-time distribution election for the purpose of funding their HSA.
• “Comparable contribution” requirements are relaxed by allowing employers to exclude highly compensated employees (HCEs).

These changes are generally effective for individuals’ 2009 taxable years.

Find out more information:

• What is a Health Savings Account?
• Who is eligible for an HSA?
• What are the tax benefits and regulations?
• HSA Contributions
• Making Payments with your HSA
• Contribution Guidelines