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| Posted on: Wednesday, December 13, 2006 |
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Once it receives the President’s signature, the Tax Relief and Health Care Act of 2006 will improve some important features of Health Savings Accounts (HSAs). The most notable of these changes is:
Higher Annual Contribution Limits
Since the inception of HSAs, the maximum annual contribution was limited to the lesser of the deductible of the covered individual’s High Deductible Health Plan or the indexed statutory maximums (In 2006, $2,700 per individual coverage and $5,450 per family coverage).
Under the new legislation, a participant in a qualified High Deductible Health Plan could contribute up to the indexed statutory maximums, regardless of what their deductible is. In 2007, these maximums are $2,850 per individual coverage and $5,650 per family coverage.
Additional Changes
Other proposed changes would allow a participant who becomes covered by a qualified High Deductible Health Plan mid-year to still contribute up to the full annual statutory maximum to his/her HSA rather than limiting their contribution to a pro-rated amount as it is now. Additionally, participants would be allowed to make a one-time tax-free roll over from an Individual Retirement Account (IRA) to their HSA.
All enhancements proposed in this legislation are aimed at encouraging HSAs to be used as long term savings vehicles to help individuals pay for their healthcare needs post-retirement.
Again, the Tax Relief and Health Care Act of 2006 has not yet been signed into law. Once it is finalized and more details are available, it will be important to discuss the impact of the changes to existing High Deductible Health Plans and Health Savings Accounts. For those still considering High Deductible Health Plans with HSAs, either as a full replacement or additional plan choice, they will be more attractive than ever.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team. |
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