HSA 2010 IRS Tax Rules - Indexed Contribution Amounts

The Treasury Department and Internal Revenue Service today issued new guidance on the maximum contribution levels for Health Savings Accounts (HSAs) and out-of-pocket spending limits for High Deductible Health Plans (HDHPs) that must be used in conjunction with HSAs. These amounts have been indexed for cost-of-living adjustments for 2010 and are included in Revenue Procedure, which announces changes in several indexed amounts for purposes of the federal income tax.

The new levels are as follows:

• For 2010, the maximum annual HSA contribution for an eligible individual with self-only coverage is $3,050.
• For family coverage, the maximum annual HSA contribution is $6,150.
• Catch up contribution for individual who are 55 or older is increased by statute to $1,000 for 2010 and all years going forward.
• Individuals who are eligible individuals on the first day of the last month of the taxable year (December for most taxpayers) are allowed the full annual contribution (plus catch up contribution ($1000), if 55 or older by year end), regardless of the number of months the individual was an eligible individual in the year. For individuals who are no longer eligible individuals on that date, both the HSA contribution and catch up contribution apply pro rata based on the number of months of the year a taxpayer is an eligible individual.

New Amounts for Out-of-Pocket Spending on HSA-Compatible HDHPs:

• For 2010, the maximum annual out-of-pocket amounts for HDHP self-coverage increase to $5,950 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $11,900.

Minimum Deductible Amounts for HSA-Compatible HDHPs:

• For 2010, the minimum deductible for HDHPs increases to $1,200 for self-only coverage and $2,400 for family coverage.

In addition, a fiscal year plan that satisfies the requirements for an HDHP on the first day of the first month of its fiscal year may apply that deductible for the entire fiscal year.

In summary:

Eligible individuals with self-only coverage under a high-deductible health plan (HDHP) may contribute an annual maximum of $3,050 to their Health Savings Account (HSA) for 2009. Eligible individuals with family coverage (coverage for two or more individuals) under a HDHP may contribute up to $6,150 to their HSA. Individuals age 55 or older who are not enrolled in Medicare may contribute more to the account per year. In 2010, an additional $1,000 contribution will be allowed. In 2008, the catch-up contribution was $1000.
To be considered qualified for an HSA, the HDHP must meet certain IRS regulations. For 2009, to qualify as a HDHP:

• The minimum deductible amount must be $1,200 for self-only coverage and $2,300 for family coverage; increased from 2009 requirements.
• The out-of-pocket maximum must be no higher than $5,950 for individual or $11,600 for family coverage; increased from 2009 requirements.
• The HDHP must be set up with a combined medical/pharmacy deductible. This deductible must apply to the out-of-pocket maximum; no change from 2009 requirements.
• All medical and pharmacy services must be subject to deductible and out-of-pocket maximum except for preventive services.