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Eligible Health Insurance Policy
Contributions and Limits
Disbursements

Eligible Health Insurance Policy

An eligible health insurance policy is an insurance plan with an annual deductible of at least $1,550 and not more than $2,350 for individuals and an annual deductible of at least $3,100 and not more than $4,650 for families. In addition, the maximum out-of-pocket expenses must be no more than $3,100, including the deductible for individual coverage and $5,700 for family coverage. These threshold amounts are subject to increases based on the CPI annually.

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Contributions and Limits

There are no minimum contribution requirements for an MSA. However, the maximum annual contribution for individual coverage is 65% of the deductible amount and 75% of the deductible for family coverage. The maximum MSA contribution for 2000 assuming the maximum individual deductible limit of $2,350 is $1,527.50 (65% of $2,350) and the maximum MSA contribution for family coverage is $3,487.50 (75% of $4,650).

The annual contribution limit is the sum of the limits determined separately for each month, based on the individual’s status and health plan coverage as of the first day of the month.

Contributions can be made to an MSA either by the individual or by the individual’s employer. Contributions cannot be made by both the employer and the employee in the same year. Additionally, individuals cannot contribute to an MSA if their spouse is covered by the same high deductible insurance plan and the spouse’s employer contributes to an MSA of the spouse.

No after-tax contributions can be made and excess contributions are subject to taxation.

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Disbursements

Distribution from an MSA for the medical expenses of an individual (for a single coverage MSA) and his spouse or dependents (for a family coverage MSA) generally are excludable from income. Medical expenses are defined under Internal Revenue Code Section 213(d).

Individuals can also withdraw money from an MSA without penalty to pay for long term care insurance, to continue coverage under COBRA and/or to pay for health plan insurance premiums when collecting unemployment compensation.

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