Beyond Benefits - Health Savings Accounts 101

Consistent with applicable IRS guidelines, HSA deductions reported on your W-2 in Box 12 as Code W (employer contribution) include employer and employee contributions made through the section 125 cafeteria plan as a pre-tax salary deferral. This includes all contributions made via salary deferral whether the funds came out of your paycheck or from your employer. Because of the portability of this deduction, you are required to complete an additional tax form. Form 8889 and instructions are available at www.irs.gov.

8. When can HSA contributions be made? Is there a deadline for contributions to an HSA for a taxable year?

For an established HSA, contributions for the taxable year can be made in one or more payments at any time after the year has begun and prior to the individual's deadline (without extensions) for filing the eligible individual's federal income tax return for that year. For most taxpayers, this is April 15 of the year following the year for which contributions are made.

9. What happens when HSA contributions exceed the maximum amount that can be deducted or excluded from gross income in a taxable year?

Contributions by individuals to an HSA, or if made on behalf of an individual to an HSA, are not deductible when they exceed the limits. Contributions by an employer to an HSA for an employee are included in the gross income of the employee if they exceed the limits or if they are made on behalf of an employee who is not an eligible individual. In addition, if not withdrawn in a timely manner, an annually assessed excise tax of 6% is imposed on the accountholder for excess individual and employer contributions.

10. What are catch-up contributions for individuals age 55 or older?

For individuals between the ages of 55 and 65, the HSA contribution limit is increased by $1,000 in calendar year 2009 and after.

11. If my spouse is age 55 or older, am I eligible to make the catch-up contribution?

No. The primary accountholder must be age 55 or older in order to make the catch-up contribution.

12. What happens to my remaining account balance at the end of the year?

Any remaining balance will carry over to the next year (no use-it or lose-it requirement).

13. Can I contribute funds from my Individual Retirement Arrangement (IRA) to my HSA?

During your lifetime, you are allowed a one-time contribution from one of your IRA(s) to one of your HSA(s). The contribution must be made in a direct trustee-to-trustee transfer. The IRA transfer will not be included in income or subject to additional tax due to early withdrawal. The transfer is limited to the maximum HSA contribution for the year and the amount contributed is not allowed as a deduction. Penalties may apply if HDHP coverage does not continue for 12 months.

14. Are rollover contributions from Archer MSAs and other HSAs permitted?

Yes. Rollover contributions from Archer MSAs and other HSAs are permitted. Qualifying rollover contributions must be made in cash and are not subject to annual contribution limits.

15. Are rollover contributions from HRAs and health FSAs permitted?

Yes. Rollover contributions from HRAs and health FSAs are permitted. The amounts rolled over to HSAs from FSAs or HRAs are over and above the amounts allowed as annual contributions. The maximum contribution is the balance in the FSA or HRA as of September 21, 2006, or if less, the balance as of the date of the transfer. The provision is limited to one distribution with respect to each health FSA or HRA of the individual. Penalties may apply if HDHP coverage does not continue for 12 months.