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

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Spouse is not the designated beneficiary. If your

The same percentage of the annual deductible limit

spouse is not the designated beneficiary of your Archer

under the HDHP covering the employees.

MSA:

Comparable participating employees. Comparable

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The account stops being an Archer MSA, and

participating employees:

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The fair market value of the Archer MSA becomes

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Are covered by your HDHP and are eligible to estab-

taxable to the beneficiary in the year in which you

lish an Archer MSA,

die.

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Have the same category of coverage (either

If your estate is the beneficiary, the fair market value of

self-only or family coverage), and

the Archer MSA will be included on your final income tax

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Have the same category of employment (either

return.

part-time or full-time).

The amount taxable to a beneficiary other than

the estate is reduced by any qualified medical

TIP

Excise tax. If you made contributions to your employees’

expenses for the decedent that are paid by the

Archer MSAs that were not comparable, you must pay an

beneficiary within 1 year after the date of death.

excise tax of 35% of the amount you contributed.

Filing Form 8853

Employment taxes. Amounts you contribute to your em-

ployees’ Archer MSAs are generally not subject to employ-

You must file Form 8853 with your Form 1040 or Form

1040NR if you (or your spouse, if married filing a joint

ment taxes. You must report the contributions in box 12 of

return) had any activity in your Archer MSA during the

the Form W-2 you file for each employee. Enter code “R” in

year. You must file the form even if only your employer or

box 12.

your spouse’s employer made contributions to the Archer

MSA.

Medicare Advantage MSAs

If, during the tax year, you are the beneficiary of two or

more Archer MSAs or you are a beneficiary of an Archer

A Medicare Advantage MSA is an Archer MSA designated

MSA and you have your own Archer MSA, you must

by Medicare to be used solely to pay the qualified medical

complete a separate Form 8853 for each MSA. Enter

expenses of the account holder. To be eligible for a Medi-

“statement” at the top of each Form 8853 and complete the

care Advantage MSA, you must be enrolled in Medicare

form as instructed. Next, complete a controlling Form 8853

and have a high deductible health plan (HDHP) that meets

combining the amounts shown on each of the statement

the Medicare guidelines.

Forms 8853. Attach the statements to your tax return after

A Medicare Advantage MSA is a tax-exempt trust or

the controlling Form 8853.

custodial savings account that you set up with a financial

Employer Participation

institution (such as a bank or an insurance company) in

which the Medicare program can deposit money for quali-

fied medical expenses. The money in your account is not

This section contains the rules that employers must follow

if they decide to make Archer MSAs available to their

taxed if it is used for qualified medical expenses, and it may

employees. Unlike the previous discussions, “you” refers

earn interest or dividends.

to the employer and not to the employee.

An HDHP is a special health insurance policy that has a

high deductible. You choose the policy you want to use as

Health plan. If you want your employees to be able to

part of your Medicare Advantage MSA plan. However, the

have an Archer MSA, you must make an HDHP available

policy must be approved by the Medicare program.

to them. You can provide no additional coverage other

Medicare Advantage MSAs are administered through

than those exceptions listed previously under

Other health

the federal Medicare program. You can get information by

coverage.

calling 1-800-Medicare (1-800-633-4227) or through the

Internet at

Contributions. You can make contributions to your em-

ployees’ Archer MSAs. You deduct the contributions on the

Note. You must file Form 8853, Archer MSAs and

“Employee benefit programs” line of your business income

Long-Term Care Insurance Contracts, with your tax return

tax return for the year in which you make the contributions.

if you have a Medicare Advantage MSA.

If you are filing Form 1040, Schedule C, this is Part II, line

14.

Flexible Spending

Comparable contributions. If you decide to make contri-

Arrangements (FSAs)

butions, you must make comparable contributions to all

comparable participating employees’ Archer MSAs. Your

contributions are comparable if they are either:

A health flexible spending arrangement (FSA) allows em-

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ployees to be reimbursed for medical expenses. FSAs are

The same amount, or

Publication 969 (2010)

Page 15

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 15

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