One spouse's low deductible health plan doesn't
necessarily nix HSA eligibility for other spouse
A married individual contributing to a Health Savings
Account (HSA) can maintain eligibility even if a spouse has low-deductible
family health coverage, but only if the spouses' plan does not cover the
individual with the HSA.
The Treasury Department and the IRS released a ruling, Revenue
Ruling 2005-25, confirming that an individual can be eligible to contribute
to a HSA even if his or her spouse has non-qualifying family coverage, provided
the spouses' coverage does not cover the individual.
The press release from the Treasury Department provided the
following as an example of allowable coverage for married individuals. Steve and Mary Jones are married
with three children. Steve has a low deductible family health plan that
covers him and the Jones children. His plan does not qualify for
an HSA. The ruling clarifies that Mary, who is not covered under Steve's
family plan, may have her own separate high-deductible health plan that does
qualify for an HSA.
The ruling, released on April 13, 2005, clarified how much
the eligible spouse can contribute to an HSA in this type of situation. In addition, the ruling provides three
situations for review.
In an attempt to lower the cost of health care plans,
Congress created HSAs. The plans rely on encouraging participants to become
cost conscious consumers of health care benefits by converting insurance paid
first dollar benefits to visible charges paid from each participating
employee's HSA. Participants retain unused amounts in the HSA account, which
may be rolled forward without tax to meet the needs of payment for services in
later years. Participants control the use of their account and may even use it
for "non-qualified", non-medical expenses, in which case the
distribution is taxable.
The employer, the individual or both can make contributions
to an HSA. If the employer makes contributions, it is excluded from the
employee's income. When the employer makes contributions to an account,
requirements state they should be comparable for all employees eligible for the
HSA. The contributions are considered comparable if they are the same amount
for all employees or the same percentage of the annual deductible.
"Health Savings Accounts are designed to help
individuals take more control over how their health-care dollars are spent and
save for future medical and retiree health expenses on a tax-free basis,"
said Treasury Secretary John W. Snow. "At a time when health care costs
are rising rapidly and individuals, families and employers are struggling to
find lower-cost alternatives, HSAs are a terrific option that I think every American
ought to consider."
Infinisource Inc. offers an innovative HSA solution that
boasts market driven interest earnings on accounts and a high level of plan
design flexibility for employers. Visit our website www.benefitsolved.com for information
on how you deliver HSAs to your clients to set up an HSA or contact our office
at 800-779-6384.
###
In this Issue:
News Room sign-up
sheet | Archive |
