Who is eligible to participate?
HSAs are available to individuals covered by a high deductible health plan (HDHP) regardless of whether the person is self-employed or employed by a small employer and regardless of whether their employer maintains the HDHP. You are eligible for any month if you meet the following:
- You are covered under an HDHP on the first day of such month;
- You are not covered by any other health plan that is not an HDHP (with limited exceptions);
- You are not enrolled for benefits under Medicare (generally not yet age 65); and
- You are not able to be claimed as a dependent on another person's tax return.
What is an HDHP?
An HDHP (high deductible health plan) is an insurance policy that meets certain dollar limits as shown in the table below.
2007 HDHP Limits* | | Plan Coverage | Self Only | Family | | Annual Deductible | $1,100 or more | $2,200 or more | | Annual Deductible plus out-of-pocket expenses cannot exceed... | $5,500 | $11,000 |
What are qualified medical expenses?
In order for HSA assets to retain their tax-free status, they may only be withdrawn and used for certain expenses, including:
- Actual medical expenses, including doctor visits, prescriptions, transportation to get medical care, and dental care
- Long-term care insurance
- Healthcare coverage when unemployed
- Certain continuation-of-benefit healthcare coverage
- Certain health insurance after age 65
Nonqualified uses of HSA assets are subject to taxation and a 10% penalty unless the HSA account beneficiary is aged 65 or older, dies, or is disabled.
Visit the IRS online for more information about qualified medical expenses.
What are the HSA contribution rules?
The total amount you may contribute to an HSA for any taxable year is dependent upon whether you have individual or family coverage under a high deductible health plan (HDHP) as shown in the table below.
| 2007 HSA Contribution Limits* | | Plan Coverage | Self Only | Family | | Annual Contribution Limit | $2,850 | $5,650 |
In addition to the standard HSA contribution limits shown in the table, if you have attained age 55 before the close of a taxable year, you may also contribute an additional amount known as a "catch-up" contribution. The catch-up contribution limit is $700 for 2006, and is scheduled to increase through 2009.
* HDHP and contribution limitations are revised each year to reflect cost-of-living increases.
The information on this page is provided by BISYS Retirement Services and the IRS, and is not intended as tax advice. Please consult a tax professional.
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