HEALTH SAVINGS ACCOUNTS (HSAs)
What is a Health Savings Account?
An HSA is a savings account for setting aside tax-free funds to be used for non-covered medical expenses. With an HSA you may choose individual coverage or family coverage.
How do I establish an HSA?
Any insurance company or bank* can be an HSA trustee or custodian. Also, any other person approved to be a trustee or custodian of IRAs or Archer MSAs is automatically approved to be the trustee or custodian of an HSA.
Who qualifies to contribute to an HSA?
An individual is eligible to establish an HSA as long as the following 3 conditions are met:
1. the individual is covered under a high-deductible health plan and
2. the individual is not covered by any other health plan that is not a high-deductible health plan and
3. the individual is not eligible to receive Medicare (usually has not reached age 65).
The employee or the employer may make the contributions to an HSA.
What qualifies as a high-deductible health plan?
For 2008 a high-deductible health plan would be a plan with an annual deductible of at least $1,100 for individual coverage, but not more than $5,600. For family coverage a high deductible health plan would be a plan with an annual deductible of at least $2,200 and not more than $11,200.
What are the contribution limits?
For
2008 the maximum contribution for individual coverage would be the lesser of
$2,900 or
the amount of the annual deductible. For family cover the maximum would be the
lesser of $5,800 or the amount of the annual deductible. In addition, for those
ages 55 to 65 there is a catch-up contribution. See chart below.
Year Add’l Catch-up Contribution
|
2004 |
$ 500 |
|
2005 |
$ 600 |
|
2006 |
$ 700 |
|
2007 |
$ 800 |
|
2008 |
$ 900 |
|
2009 |
$1,000 |
What about tax treatment?
For dual-status ministers any individual contributions would be taxable for Self-employment purposes but not taxable for federal income tax. Employer contributions would eliminate the Self-employment tax but are subject to discrimination rules. Employer contributions would need to be alike for all comparable employees.
What are the advantages and/or disadvantages?
As far as we can see the only real advantage of the HSA is that it is portable from church to church because it is managed by a third party other than the church. However, the cost of administering it with a third party plus the complexity of the rules make it prohibitive for most churches.
Additional Information: