41.13 Archer MSAs

Archer MSAs (medical savings accounts) have largely been replaced by health savings accounts (HSAs) (12.9). The law authorizing the establishment of new Archer MSAs has expired. However, taxpayers who set up Archer MSAs before 2008 can continue to fund them.

An Archer MSA can be rolled over to an HSA. Contributions may not be made to an Archer MSA or to an HSA after you become entitled to Medicare benefits.

For 2012, a high-deductible health plan for self-only coverage must have a deductible of at least $2,100 and no more than $3,150. For family coverage, the deductible must be at least $4,200 and no more than $6,300. The high-deductible plan must limit out-of-pocket costs (other than premiums) for 2012 to $4,200 for self-only coverage and $7,650 for family coverage. You generally may not have any other coverage in addition to the high-deductible plan, but separate policies are allowed for disability, vision or dental care, long-term care, accidental injuries, specific diseases or illnesses, fixed payments during hospitalization, workers’ compensation liability, tort liability, and liabilities arising from the ownership or use of property.

Caution

Employer Contribution to Spouse’s MSA

If you and your spouse are covered under a high-deductible health plan with family coverage, employer contributions to either of your Archer MSAs bar both of you from making Archer MSA contributions for that year. If you each have self-only coverage under a high-deductible health plan, employer contributions to one of your Archer MSAs do not prevent the other from making MSA contributions.

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Deductible contribution limit.

If you are self-employed, the maximum deductible contribution for 2012 is 65% of the annual policy deductible if you have self-only coverage under a high-deductible plan, and 75% of the annual policy deductible if you have family coverage. To deduct the maximum amount, you must have the policy for the entire year. Otherwise one-twelfth of the limit may be deducted for each full month of coverage. The deduction may not exceed your self-employment income from the business through which you have the high-deductible insurance.

If you are an employee of an MSA-participating employer and your employer makes any contributions to your Archer MSA, you are barred from making a deductible contribution; also see the Caution on employer contributions to a spouse’s Archer MSA. Your employer’s contribution to your Archer MSA is not taxable to you if it is within the 65%/75% limit discussed above (3.2).

Report contributions to your Archer MSA on Form 8853, which must be attached to your Form 1040. The deductible contribution shown on Form 8853 is entered on Line 36 of Form 1040; write “MSA” next to the entry.

Distributions from Archer MSA.

You can take a distribution from your Archer MSA to pay for medical expenses that are not reimbursable under your high-deductible plan. For distribution rules, see 41.12.

Planning Reminder

MSA Contribution Deadline

You have until April 15, 2013, to make a deductible contribution to an Archer MSA for 2012.

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