Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans

2. You became an active participant for a tax year end-

then grow beyond 50 employees. The employer will con-

ing after December 31, 2007, by reason of coverage

tinue to meet the requirement for small employers if he or

under a high deductible health plan (HDHP) of an

she:

Archer MSA participating employer.

•

Had 50 or fewer employees when the Archer MSAs

A Medicare Advantage MSA is an Archer MSA desig-

began,

nated by Medicare to be used solely to pay the qualified

•

Made a contribution that was excludable or deducti-

medical expenses of the account holder who is eligible for

ble as an Archer MSA for the last year he or she had

Medicare.

50 or fewer employees, and

Archer MSAs

•

Had an average of 200 or fewer employees each

year after 1996.

An Archer MSA is a tax-exempt trust or custodial account

that you set up with a U.S. financial institution (such as a

Changing employers. If you change employers, your

bank or an insurance company) in which you can save

Archer MSA moves with you. However, you may not make

money exclusively for future medical expenses.

additional contributions unless you are otherwise eligible.

What are the benefits of an Archer MSA? You may

High deductible health plan (HDHP). To be eligible for

enjoy several benefits from having an Archer MSA.

an Archer MSA, you must be covered under an HDHP. An

•

You can claim a tax deduction for contributions you

HDHP has:

make even if you do not itemize your deductions on

•

A higher annual deductible than typical health plans,

Form 1040 or Form 1040NR.

and

•

The interest or other earnings on the assets in your

•

A maximum limit on the annual out-of-pocket medi-

Archer MSA are tax free.

cal expenses that you must pay for covered ex-

•

Distributions may be tax free if you pay qualified

penses.

medical expenses. See

Qualified medical expenses,

later.

Limits. The following table shows the limits for annual

deductibles and the maximum out-of-pocket expenses for

•

The contributions remain in your Archer MSA from

HDHPs for 2010.

year to year until you use them.

•

An Archer MSA is “portable” so it stays with you if

Self-only

Family coverage

you change employers or leave the work force.

coverage

Minimum annual

Qualifying for an Archer MSA

deductible

$2,000

$4,050

Maximum annual

To qualify for an Archer MSA, you must be either of the

deductible

$3,000

$6,050

following.

•

Maximum annual

An employee (or the spouse of an employee) of a

out-of-pocket

small employer (defined later) that maintains a

expenses

$4,050

$7,400

self-only or family HDHP for you (or your spouse).

•

A self-employed person (or the spouse of a

Family plans that do not meet the high deductible

self-employed person) who maintains a self-only or

rules. There are some family plans that have deductibles

family HDHP.

for both the family as a whole and for individual family

members. Under these plans, if you meet the individual

You can have no other health or Medicare coverage ex-

deductible for one family member, you do not have to meet

cept what is permitted under

Other health

coverage, later.

the higher annual deductible amount for the family. If either

You must be an eligible individual on the first day of a given

the deductible for the family as a whole or the deductible

month to get an Archer MSA deduction for that month.

for an individual family member is below the minimum

annual deductible for family coverage, the plan does not

If another taxpayer is entitled to claim an exemp-

qualify as an HDHP.

tion for you, you cannot claim a deduction for an

Archer MSA contribution. This is true even if the

CAUTION

Example. You have family health insurance coverage

other person does not actually claim your exemption.

in 2010. The annual deductible for the family plan is

$5,500. This plan also has an individual deductible of

Small employer. A small employer is generally an em-

$2,000 for each family member. The plan does not qualify

ployer who had an average of 50 or fewer employees

as an HDHP because the deductible for an individual

during either of the last 2 calendar years. The definition of

family member is below the minimum annual deductible

small employer is modified for new employers and growing

($4,050) for family coverage.

employers.

Growing employer. A small employer may begin

Other health coverage. You (and your spouse, if you

HDHPs and Archer MSAs for his or her employees and

have family coverage) generally cannot have any other

Publication 969 (2010)

Page 11

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 11

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