Health Savings Account Contributions

HSA Contributions for 2008

For 2008, the maximum you may contribute to a Health Savings Account (HSA) is $2900 for single coverage or $5800 for family coverage.

In previous years, your maximum contribution was limited by the amount of your health insurance deductible. This is no longer true.

Minimum Contributions

Your Health Savings Account (HSA) administrator is going to require a minimum initial payment to set up the HSA, and they will likely have a minimum balance requirement. These amounts will vary by HSA administrator.

There is no HSA minimum balance requirement imposed by the IRS or by the insurance company underwriting your HSA-compatible high deductible plan.

Catch-Up Contributions

The designers of HSA legislation were concerned these plans would favor younger people with more years to set aside savings. So a "catch up" provision was included.

For 2008, HSA holders age 55 and older may make additional annual contributions of $900, increasing by $100 each year to a maximum additional calendar year contribution of $1000 in 2009.

Employer Contributions

An employer may contribute to an employee's Health Savings Account (HSA), but the employer must make available comparable contributions on behalf of all "comparable participating employees." Contributions are considered comparable if they are the same amount or same percentage of the HSA-compatible high deductible health plan.

Employer contributions to HSAs are deductible Health and Welfare expenses and generate no taxable income to employees as long as the discrimination guidelines are not violated.

Partial Year Contributions

If you establish an HSA for a partial year, you can still make the maximum contribution for the tax year. For 2008, the maximum contributions are $2900 for an individual and $5800 for a family.

However, when you establish an HSA for a partial year and make significant HSA contributions for that tax year, there may be unfavorable tax consequences if you don't remain enrolled in an HSA-compatible health plan for at least 12 months following the last month of your first year of eligibility.

Contribution Frequency

How often you make HSA contributions is a matter between you and the financial institution administering your HSA. You can make a single lump sum contribution for the year, you can make regular monthly deposits, or you can make deposits randomly.

Some folks are under the mistaken impression that HSA contributions must follow the pattern of premium payments for HSA-compatible health insurance. Not so. They're separate products.

Contribution Deadlines

HSA contributions must be made for a specific year on or before the due date (without extensions) for filing tax returns for that year. So, for 2007, contributions must be made on or before the April 2008 filing deadline.

HSA Contributions must be Cash

Health Savings Account (HSA) contributions must be in cash. For example, contributions can' be made in stock or other property.

Rollovers from Other Accounts

Rollover contributions from Archer MSAs and other HSAs are permitted, and are not subject to the annual contribution limits.

Employers can also transfer funds from a Health Reimbursement Arrangement (HRA) or Flexible Spending Account (FSA) to an HSA for employees switching to coverage under an HSA-compatible plan. These rollover amounts are not subject to the annual contribution limits.

One-Time Transfer from IRAs

You can make a one-time contribution to an HSA of amounts distributed from an Individual Retirement Account (IRA). Generally, the IRA transfer is limited to once per lifetime, and the contribution must be made in a direct trustee-to-trustee transfer.

Treatment of Excess HSA Contributions

Contributions by an individual are not deductible to the extent they exceed the maximum annual limits ($2900 per individual and $5800 per family for 2008). Excess contributions from an employer will generate taxable income to the employee. In addition, a 6% excise tax is imposed on the excess funds.

The excise tax and any net income attributable to excess contributions are avoided if the excess contributions are paid to the HSA owner prior to federal income tax deadline for the year at issue.

	Individual & Family Health Insurance
	Small Business Health Insurance