4. Who Is Eligible for an HSA?
For the purposes of an HSA, an eligible person is one who, for any month, is covered under an HDHP as of the first day of that month and is not also covered under a non-high-deductible health plan providing coverage for any benefit covered under the high-deductible health plan. A person enrolled in Medicare Part A or Part B may not contribute to an HSA. Mere eligibility for Medicare does not preclude HSA contributions.
A person may not contribute to an HSA for a given month if they have received medical benefits through the Department of Veterans Affairs in the previous three months. A person shall not fail to be eligible because of receiving hospital care or medical services under a law administered by the secretary of veterans affairs for a service-connected disability.
A separate prescription drug plan that provides any benefits before a required deductible is satisfied will normally prevent a beneficiary from being eligible for an HSA. The IRS has ruled that if an individual’s separate prescription drug plan does not provide benefits until an HDHP’s minimum annual deductible has been met, then the individual will be eligible under Section 223(c)(1)(A).
5. What Is a High-Deductible Health Plan?
For the purposes of an HSA, the requirements for a high-deductible health plan (HDHP) differ depending on the coverage. For 2020-2022, an HDHP is a plan with an annual deductible of not less than $1,400 for self-only coverage. The family coverage deductible limit is $2,800 in 2020-2022. Annual out-of-pocket expenses for an HDHP cannot exceed $7,050 in 2022 ($7,000 in 2021) for self-only coverage. For family coverage, the annual out-of-pocket expense limitation is increased to $14,100 in 2022 ($14,000 in 2021). These annual deductible amounts and out-of-pocket expense amounts are adjusted for cost of living. Increases are made in multiples of $50.
In response to the evolving COVID-19 pandemic, the CARES Act permits HDHPs to cover the cost of telehealth services without cost to participants before the HDHP deductible has been satisfied. HDHPs providing telehealth coverage do not jeopardize their status as HDHPs. Plan members similarly retain the right to fund HSAs after taking advantage of cost-free telehealth services. Remote health services can be provided under a safe harbor rule through Dec. 31, 2021.
6. What Are the Limits on Amounts Contributed to an HSA?
An eligible individual may deduct the aggregate amount paid in cash into an HSA during the taxable year, up to $3,650 for 2022 ($3,600 for 2021) for self-only coverage and $7,300 for 2022 ($7,200 for 2021) for family coverage.
For 2006 and prior years, the contribution and deduction were limited to the lesser of the deductible under the applicable HDHP or the indexed annual limits for self-only coverage or family coverage.
The determination between self-only and family coverage is made as of the first day of the month. The limit is calculated monthly, and the allowable deduction for a taxable year cannot exceed the sum of the monthly limitations.
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