November 4, 2005
Indexed Amounts for Health Savings Accounts
New Guidance relating to 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 was recently issued by the Treasury Department and IRS. These amounts have been indexed for cost-of-living adjustments for 2006 and are included in Revenue Procedure 200r-70, which announces changes in several indexed amounts for purposes of the federal income tax.
The new levels are as follows:
New Annual Contribution Levels for HSAs:
For 2006, the maximum annual HSA contribution for an eligible individual with self-only coverage is $2,700. (Note: for any individual, the maximum contribution is the lesser of the indexed amount or the deductible of the HDHP.)
For family coverage the maximum HSA contribution is $5,450.
Catch up contribution for individual who are 55 or older is increased by statute to $700 for 2006.
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 2006, the maximum annual out-of-pocket amounts for HDHP self-coverage is $5,250 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $10,500.
Minimum Deductible Amounts for HSA-Compatible HDHPs:
For 2006, the minimum deductible for HDHPs is $1,050 for self-only coverage and $2,100 for family coverage.
This Benefits Alert is a resource for informational purposes only and is not intended to serve as legal advice. HitesmanLaw, P.A. assumes no liability for the interpretation and/or use of the information contained in this memorandum.