IRS Guidelines

The Internal Revenue Service set HSA guidelines.

Deductible Requirements

To qualify for an HSA, you need a High Deductible Health Plan. The minimum deductible requirements are determined by the IRS each year.

Minimum Deductible	2006	2007
Individual policies	$1,050.00	$1,100.00
Family policies	$2,100.00	$2,200.00

Maximum Out-of-Pockets

Many HMO, PPO, POS health insurance plans have no limit on out-of-pocket expenses. HDHPs have these limits. Once you meet the out-of-pocket limit, the insurance company covers 100% of your medical costs. In order to qualify for an HSA, your HDHP cannot exceed the following maximum out-of-pocket expenses:

Maximum Out-of-Pockets	2006	2007
Individual policies	$5,250.00	$5,500.00
Family policies	$10,500.00	$11,000.00

These are the limits determined by the IRS. Many HDHPs have lower out-of-pocket limits.

Out-of-pocket expenses include:

Insurance Deductible
Prescription co-pays
Doctor co-pays

Contribution Limits

On December 20, 2006, President George Bush signed the Health Opportunity Empowerment Act into law creating new contribution provisions for the HSA. Below you will find a table outlining the contribution limits and regulations for 2006 and the changes that take affect for 2007.

	2006	2007
What is the maximum contribution for individual health plans?	The lesser of your deductible or the contribution maximum of $2,700. If your deductible is less than the contribution maximum, you can contribute your deductible amount. If your deductible is greater than the contribution maximum, you can contribute the maximum contribution limit listed above.	$2,850, regardless of deductible. If an individual does not stay in the HSA-eligible plan 12 months following the last month of the year of the first year if eligibility, the amount which could not have been contributed will be included in income and subject to a 10 percent additional tax. Example: You established a qualified health plan in December 2007 and contributed the maximum allowed. Then in January 2008 you contributed the maximum contribution for that tax year. Scenario 1: You maintained coverage through December 31, 2008. You are eligible for the maximum contribution for both 2007 and 2008. Scenario 2: You ended coverage April 1, 2008. Eleven-twelfths of the December 2007 contribution must be treated as income, plus a 10% penalty on that amount must be paid. Nine-twelfths of the funds deposited in January must be taken out of the account as an excess contribution (and treated as income) but no 10% penalty is incurred.
What is the maximum contribution for family health plans?	The lesser of your deductible or the contribution maximum of $5,450. If your deductible is less than the contribution maximum, you can contribute your deductible amount. If your deductible is greater than the contribution maximum, you can contribute the maximum contribution limit listed above.	$5,650, regardless of deductible. See above for exceptions.
Are contributions prorated by the number of months the health plan is in place?	Yes To prorate contributions: Divide your deductible amount by 12. (Deductible / 12 = monthly contribution) Take the monthly contribution and multiple it by the number of months left in the year. (Monthly contribution * number of remaining months = contribution limit) This number is the maximum you can contribute for the calendar year.	Pro-rating of contributions occurs when the status of an HSA changes from family to single, or if the HSA qualified health plan is terminated. Examples: Coverage Beginning Mid-year If you have a new HDHP and coverage begins in July, 2007, you will be eligible to contribute the maximum amount as determined by the IRS ($2,850 for individual coverage and $5,650 for family coverage.) Health Plan Status Change If you have family coverage beginning January 1, 2007 and switch to single coverage July 1, 2007, you will be eligible to contribute 6/12 of $5,650 plus 6/12 of $2,850 or $4,250. HSA Qualified health plan terminated You have a qualified family health plan January 1, 2007 and terminate coverage April 1, 2007. You are eligible to contribute 3/12 of $5,650 or $1,412.50.
What is the catch-up contribution if I am 55 or older?	$700	$800
Can I roll over unused funds from an FSA or HRA?	No	Yes, regulations now allow you to roll over unused funds from an FSA or HRA on a one-time basis. Please talk to your employer or third-party administrator for specific details.
Can I transfer funds from an IRA to my HSA?	No	Yes, regulations allow a one-time rollover from an IRA to an HSA, up to the annual HSA contribution maximum. Prior to transferring funds, please consult your tax advisor to discuss the benefits and tax reporting requirements.