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

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

Have the same category of employment (either

the Archer MSA will be included on your final income tax

part-time or full-time).

return.

The amount taxable to a beneficiary other than

Excise tax. If you made contributions to your employees’

the estate is reduced by any qualified medical

Archer MSAs that were not comparable, you must pay an

TIP

expenses for the decedent that are paid by the

excise tax of 35% of the amount you contributed.

beneficiary within 1 year after the date of death.

Employment taxes. Amounts you contribute to your em-

ployees’ Archer MSAs are generally not subject to employ-

Filing Form 8853

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

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

You must file Form 8853 with your Form 1040 or Form

box 12.

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

return) had any activity in your Archer MSA during the

Medicare Advantage MSAs

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

your spouse’s employer made contributions to the Archer

A Medicare Advantage MSA is an Archer MSA designated

MSA.

by Medicare to be used solely to pay the qualified medical

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

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

more Archer MSAs or you are a beneficiary of an Archer

care Advantage MSA, you must be enrolled in Medicare

MSA and you have your own Archer MSA, you must

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

complete a separate Form 8853 for each MSA. Enter

the Medicare guidelines.

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

A Medicare Advantage MSA is a tax-exempt trust or

form as instructed. Next, complete a controlling Form 8853

custodial savings account that you set up with a financial

combining the amounts shown on each of the statement

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

Forms 8853. Attach the statements to your tax return after

which the Medicare program can deposit money for quali-

the controlling Form 8853.

fied medical expenses. The money in your account is not

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

Employer Participation

earn interest or dividends.

An HDHP is a special health insurance policy that has a

This section contains the rules that employers must follow

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

if they decide to make Archer MSAs available to their

part of your Medicare Advantage MSA plan. However, the

employees. Unlike the previous discussions, “you” refers

policy must be approved by the Medicare program.

to the employer and not to the employee.

Medicare Advantage MSAs are administered through

the federal Medicare program. You can get information by

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

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

have an Archer MSA, you must make an HDHP available

Internet at

to them. You can provide no additional coverage other

than those exceptions listed previously under

Other health

Note. You must file Form 8853, Archer MSAs and

coverage.

Long-Term Care Insurance Contracts, with your tax return

if you have a Medicare Advantage MSA.

Contributions. You can make contributions to your em-

ployees’ Archer MSAs. You deduct the contributions on the

“Employee benefit programs” line of your business income

Flexible Spending

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

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

Arrangements (FSAs)

14.

Comparable contributions. If you decide to make contri-

A health flexible spending arrangement (FSA) allows em-

butions, you must make comparable contributions to all

ployees to be reimbursed for medical expenses. FSAs are

comparable participating employees’ Archer MSAs. Your

usually funded through voluntary salary reduction agree-

contributions are comparable if they are either:

ments with your employer. No employment or federal in-

come taxes are deducted from your contribution. The

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The same amount, or

employer may also contribute.

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The same percentage of the annual deductible limit

under the HDHP covering the employees.

Note. Unlike HSAs or Archer MSAs which must be

reported on Form 1040 or Form 1040NR, there are no

Comparable participating employees. Comparable

reporting requirements for FSAs on your income tax return.

participating employees:

For information on the interaction between a health FSA

and an HSA, see

Other employee health plans

under

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Are covered by your HDHP and are eligible to estab-

Qualifying for an HSA, earlier.

lish an Archer MSA,

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What are the benefits of an FSA? You may enjoy sev-

Have the same category of coverage (either

eral benefits from having an FSA.

self-only or family coverage), and

Publication 969 (2011)

Page 15

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2011 Page 15

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