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

under a high deductible health plan (HDHP) of an

then grow beyond 50 employees. The employer will con-

tinue to meet the requirement for small employers if he or

Archer MSA participating employer.

she:

A Medicare Advantage MSA is an Archer MSA desig-

•

nated by Medicare to be used solely to pay the qualified

Had 50 or fewer employees when the Archer MSAs

medical expenses of the account holder who is eligible for

began,

Medicare.

•

Made a contribution that was excludable or deducti-

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

Archer MSAs

50 or fewer employees, and

•

Had an average of 200 or fewer employees each

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

year after 1996.

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

bank or an insurance company) in which you can save

money exclusively for future medical expenses.

Changing employers. If you change employers, your

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

additional contributions unless you are otherwise eligible.

What are the benefits of an Archer MSA? You may

enjoy several benefits from having an Archer MSA.

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

•

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

•

Form 1040 or Form 1040NR.

A higher annual deductible than typical health plans,

and

•

The interest or other earnings on the assets in your

•

Archer MSA are tax free.

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

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 2011.

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

$2,050

$4,100

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

Maximum annual

following.

deductible

$3,050

$6,150

•

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

Maximum annual

out-of-pocket

small employer (defined later) that maintains a

expenses

$4,100

$7,500

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 2011. The annual deductible for the family plan is

Small employer. A small employer is generally an em-

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

ployer who had an average of 50 or fewer employees

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

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

as an HDHP because the deductible for an individual

small employer is modified for new employers and growing

family member is below the minimum annual deductible

($4,100) 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 (2011)

Page 11

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2011 Page 11

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