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MEDICAL SAVINGS ACCOUNTS MSA’s CONTRIBUTION LIMITS Generally 65% of the annual deductible (where individual HD coverage) or 75% of the annual deductible (where family HD coverage). IRC § 220(b). Note: The limit is zero for a Medicare eligible individual (e.g., an individual who has attained age 65). IRC § 220(b)(7). The same annual contribution limit applies whether an employee, an employer, or a self-employed person makes the contributions. Comment: There is a potential for gap in coverage of out-of-pocket expenses. TAX TREATMENT OF CONTRIBUTIONS Employee Contributions: Contributions by an eligible individual to an Archer MSA are deductible in computing adjusted gross income. Accordingly, the contributions are deductible whether or not the eligible individual itemizes deductions. IRC § 220(a); Notice 96-53, Q & A 15, 1996-2 CB 219. Employer Contributions: Contributions by an employer to an eligible individual’s Archer MSA are excludable from gross income, are not subject to withholding for income tax, and are not subject to other employment taxes (i.e., Social Security and Medicare taxes (FICA), federal unemployment tax (FUTA) or railroad retirement tax). IRC § 220(A); Notice 96-53, Q & A 16, 1996-2 CB 219. CATCH UP CONTRIBUTIONS None. COORDINATION OF CONTRIBUTION LAW WITH RESPECT TO OTHER ACCOUNTS OR ARRANGEMENTS Maximum contributions allowed to an HSA for any given year are reduced by any contributions made to an Archer MSA in the same year. IRC § 223(b)(4)(A). NONDISCRIMINATION RULE An employer who makes contributions into an Archer MSA for any employee is required to make comparable Archer MSA contributions for all comparable participating employees. IRC § 4980E. | ||
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