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

increased by $1,000. For example, if you have self-only

Qualified HSA funding distribution. A qualified HSA

coverage, you can contribute up to $4,050 (the contribu-

funding distribution may be made from your traditional IRA

tion limit for self-only coverage ($3,050) plus the additional

or ROTH IRA to your HSA. This distribution cannot be

contribution of $1,000). However, see

Enrolled in Medi-

made from an ongoing SEP IRA or SIMPLE IRA. For this

care,

later.

purpose, a SEP IRA or SIMPLE IRA is ongoing if an

employer contribution is made for the plan year ending with

If you have more than one HSA in 2010, your total

or within your tax year in which the distribution would be

contributions to all the HSAs cannot be more than

made.

the limits discussed earlier.

CAUTION

The maximum qualified HSA funding distribution de-

pends on the HDHP coverage (self-only or family) you

Reduction of contribution limit. You must reduce the

have on the first day of the month in which the contribution

amount that can be contributed (including any additional

is made and your age as of the end of the tax year. The

contribution) to your HSA by the amount of any contribu-

distribution must be made directly by the trustee of the IRA

tion made to your Archer MSA (including employer contri-

to the trustee of the HSA. The distribution is not included in

butions) for the year. A special rule applies to married

your income, is not deductible, and reduces the amount

people, discussed next, if each spouse has family cover-

that can be contributed to your HSA. The qualified HSA

age under an HDHP.

funding distribution is shown on Form 8889, Part I, line 10

Rules for married people. If either spouse has family

for the year in which the distribution is made.

HDHP coverage, both spouses are treated as having fam-

You can make only one qualified HSA funding distribu-

ily HDHP coverage. If each spouse has family coverage

tion during your lifetime. However, if you make a distribu-

under a separate plan, the contribution limit for 2010 is

tion during a month when you have self-only HDHP

$6,150. You must reduce the limit on contributions, before

coverage, you can make another qualified HSA funding

taking into account any additional contributions, by the

distribution in a later month in that tax year if you change to

amount contributed to both spouse’s Archer MSAs. After

family HDHP coverage. The total qualified HSA funding

that reduction, the contribution limit is split equally between

distribution cannot be more than the contribution limit for

the spouses unless you agree on a different division.

family HDHP coverage plus any additional contribution to

The rules for married people apply only if both

which you are entitled.

spouses are eligible individuals.

CAUTION

Example. In 2010, you are an eligible individual, age

57, with self-only HDHP coverage. You can make a quali-

fied HSA funding distribution of $4,050 ($3,050 plus

If both spouses are 55 or older and not enrolled in

$1,000 additional contribution).

Medicare, each spouse’s contribution limit is increased by

the additional contribution. If both spouses meet the age

Funding distribution – testing period. You must re-

requirement, the total contributions under family coverage

main an eligible individual during the testing period. For a

cannot be more than $8,150. Each spouse must make the

qualified HSA funding distribution, the testing period be-

additional contribution to his or her own HSA.

gins with the month in which the qualified HSA funding

distribution is contributed and ends on the last day of the

Example. For 2010, Mr. Auburn and his wife are both

12th month following that month. For example, if a qualified

eligible individuals. They each have family coverage under

HSA funding distribution is contributed to your HSA on

separate HDHPs. Mr. Auburn is 58 years old and Mrs.

August 10, 2010, your testing period begins in August

Auburn is 53. Mr. and Mrs. Auburn can split the family

2010, and ends on August 31, 2011.

contribution limit ($6,150) equally or they can agree on a

different division. If they split it equally, Mr. Auburn can

If you fail to remain an eligible individual during the

contribute $4,075 to an HSA (one-half the maximum contri-

testing period, other than because of death or becoming

bution for family coverage ($3,075) + $1,000 additional

disabled, you will have to include in income the qualified

contribution) and Mrs. Auburn can contribute $3,075 to an

HSA funding distribution. You include this amount in in-

HSA.

come in the year in which you fail to be an eligible individ-

ual. This amount is also subject to a 10% additional tax.

Employer contributions. You must reduce the amount

The income and the additional tax are shown on Form

you, or any other person, can contribute to your HSA by the

8889, Part III.

amount of any contributions made by your employer that

are excludable from your income. This includes amounts

Each qualified HSA funding distribution allowed has its

contributed to your account by your employer through a

own testing period. For example, you are an eligible indi-

cafeteria plan.

vidual, age 45, with self-only HDHP coverage. On June 18,

2010, you make a qualified HSA funding distribution of

Enrolled in Medicare. Beginning with the first month

$3,050. On July 27, 2010, you enroll in family HDHP

you are enrolled in Medicare, your contribution limit is zero.

coverage and on August 17, 2010, you make a qualified

HSA funding distribution of $3,100. Your testing period for

Example. You turned age 65 in July 2010 and enrolled

the first distribution begins in June 2010 and ends on June

in Medicare. You had an HDHP with self-only coverage

30, 2011. Your testing period for the second distribution

and are eligible for an additional contribution of $1,000.

Your contribution limit is $2,025 ($4,050 × 6 ÷ 12).

begins in August 2010 and ends on August 31, 2011.

Page 6

Publication 969 (2010)

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 6

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