Congress makes health savings accounts more attractive to employers, employees

Journal of Taxation

Volumn 106, Issue 3, 2007, Pages 159-166

  Baum, Stanley D ^a  

^a Dechert LLP   (United States)

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EID: 34147093209     PISSN: 00224863     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (28)

1. For a detailed discussion of HSAs as originally enacted, see Baum, "The Advantages of Health Savings Accounts - the Code's Newest Healthcare Arrangement," 100 JTAX 101 (February 2004).
2. Section 223(e)(1).
3. Section 223(f)(1). This tax-free treatment for distributions obtains even if the account holder is no longer an eligible individual, as defined below. Qualified medical expenses are generally defined as "medical care expenses" within the meaning of Section 213(d), and include expenses for the diagnosis, cure, mitigation, treatment, or prevention of disease. Qualified medical expenses do not include premiums (or other expenses) for insurance, other than premiums for (1) long-term care insurance, (2) healthcare coverage during any period of continuation coverage required by federal law (i.e., COBRA coverage), (3) healthcare coverage while an individual is receiving unemployment compensation under federal or state law, or (4) Medicare, such as Medicare Part A and Part B premiums and Medicare HMO premiums, but excluding premiums for Medigap policies. See the Joint Committee on Taxation Technical Explanation (JCX-50-06, 12/7/06). Under Sections 223(f)(2) and (4), distributions from an HSA that are not used to pay qualified medical expenses are includable in the account holder's gross income, and are also subject to an additional 10% tax unless made after the account holder's death, disability, or attainment of the age of Medicare eligibility (i.e., age 65).
4. Section 223(c)(1)(A).
5. Sections 223(c)(1)(B) and (c)(3).
6. Section 223(c)(2)(A). Under Section 223(g), these dollar amounts will be increased for inflation after 2007
7. Sections 223(c)(2)(B) and (C); Section 223(c)(4); Notice 2004-50, 2004-2 CB 196, Q&A-12.
8. See Rev. Rul. 2004-45, 2004-1 CB 971.
9. After 2007 the $2,850 and $5,650 amounts are increased for inflation, under Section 223(g).
10. Sections 223(b)(1) and (2).
11. Sections 223(b)(3) and (4)(B); Notice 2004-2, 2004-1 CB 269, Q&A-14.
12. Sections 223(f)(3) and 4973.
13. Section 223(f)(5).
14. Section 4980G; Regs. 54.4980G-4, Q&A-1, and 54.4980G-5.
15. See Section 125(d)(2) and Prop. Reg. 1.125-2, Q&A-5.
16. Notice 2005-86, 2005-2 CB 1075.
17. See Prop. Reg. 1.125-2, Q&A-7.
18. The rules governing HRAs are contained in Notice 2002-45, 2002-2 CB 93.
19. Section 106(e), as added by TRHCA section 302(a); see also the Joint Committee explanation, supra note 3.
20. Section 223(c)(1)(B)(iii), as added by TRHCA section 302(b). Again, the amount that can be contributed to the HSA is limited to the balance in the FSA as of 9/21/06.
21. See the Joint Committee explanation, supra note 3.
22. Sections 223(b)(4)(C) and 408(d)(9), as added by TRHCA sections 307(a) and (b). See also the Joint Committee explanation, supra note 3.
23. Section 223(b)(2), as revised by TRHCA section 303(a). After 2007, as noted above, the $2,850 and $5,650 amounts are subject to increases for inflation.
24. Section 223(b)(8), as added by TRHCA section 305(a).
25. This amount is indexed for inflation after 2007
26. Section 4980G(d), as added by TRHCA section 306(a).
27. Section 223(g)(1), as revised by TRHCA section 304; see also the Joint Committee explanation, supra note 3.
28. TRHCA sections 302(c), 303(c), 304, 305(b), 306(b), and 307(c).