Government Information Regarding Health Savings Accounts


The Affordable Care Act

The Affordable Care Act (or Health Care Law) has been in effect since March 23, 2010. It introduces several new options for financial assistance for those with health insurance, such as the Premium Tax Credit for both individuals and families. For Employers and other organizations such as Insurers, Businesses and tax-exempt organizations, tax stipulations will be included in the law by the IRS accordingly. If you have any questions, please talk to your CPA or tax filer for more information.

The Affordable Care Act has several tax provisions currently in effect with more to be implemented over the next several years:

Tax Provisions for Individuals for 2013

  • As of March 1, 2013 there has been a Sequestration on Small Business Health Care Tax Credits. Under Internal Revenue Code section 45R, automatic cuts have been enacted for Small business Health Care Tax Credit refunds by 8.7 percent until the Fiscal year ends on September 30, 2013 -- or pursuant to any Congressional amendments made thereafter.
  • For employers during the 2012 tax year and beyond, many are eligible for transition relief-pursuant to any Congressional Amendments made thereafter.
  • Beginning in 2014, individuals and families will be able to take a taxpayer-refundable Premium Tax Credit to assist them with paying for health insurance coverage purchased through an Affordable Insurance Exchange. Taxpayers with little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. 
  • Individual Shared Responsibility provision-- Beginning in 2014,  individuals will be required to either have monthly minimum essential coverage, make payments when filing his or her federal income tax returns or qualify for an exemption. As of June 26, 2013, Notice 2013-42, will present employees and their families eligible to enroll in specific employer-sponsored health plans with transition relief from the shared responsibility provision. Health plans must be a non-calendar year beginning in 2013 and ending in 2014.
  • Health Flexible Spending Arrangements (FSAs) -- Beginning in 2013, new rules regarding the amount that can be contributed to an FSA go into effect. Notice 2013-54  explains how the Affordable Care Act affects HRAs, group health plans and certain health FSAs.
  • Changes to itemized Deduction for Medical Expenses-- As of January 1, 2013, individuals can deduct uncovered medical expenses by their health insurance in cases when it exceeds 10 percent of their income.  Deductions applied for taxes filed in 2014. Individuals 65 and over and their spouses are temporarily exempt from January 1, 2013 to December 31, 2016.  Further information can be found on irs.gov.
  • Medical Device Excise Tax update--Final regulations have been issued by the IRS on the 2-3 percent enacted in 2013 for sales of eligible medical devices by importers and manufacturers. More information can be found on the irs.gov page.

Affordable Care Act Tax Filing Requirements

  • Under Section 9002 of the Affordable Care Act, employers with employees under an employer-sponsored group health plan are required to report the cost of health coverage on their Form W-2 Wage and Tax Statement in Box 12 using Code DD. The cost includes the amount paid by the employer as well as the employee’s contributions.

    This reporting is effective with 2012 W-2s (the forms required for calendar year 2012 that employers generally are required to furnish to employees in January 2013 and then file with the Social Security Administration).

    See Notice 2010-69Notice 2011-28, and Notice 2012-9 issued by the IRS for more information.
  • Net Investment Income Tax--Enacted January 1, 2013, the 3.8 percent Net Investment Income Tax affects individuals, estates and trusts with investment income above specified threshold amounts. Proposed Net Income Investment Tax regulations have been issued by the IRS and the Treasury Department. 
  •  Additional Medicare Tax--Starting in 2013, Individual wage-earners, self-employment income exceeding a defined threshold and Railroad Retirement Tax Act recipients will be responsible for an additional 0.9 percent Medicare tax.
  • Minimal Value-- As of April 30, 2013 Notice 2012-31 has been issued by the IRS and the Treasury Department regulations concerning the minimum value of eligible plans sponsored by employers concerning the premium tax credit. In 2014, employer-sponsored plans providing minimum value may not be considered relevant to eligibility for a premium tax credit.

For more information on how the Affordable Care Act impacts you, your business, your family, or your health savings plan, contact your CPA or tax filer or visit the irs.gov page.

Listed below are links to websites and publications from the Congressional Record, the U.S. Department of Treasury, and the Internal Revenue Service, detailing all aspects of how Health Savings Accounts work and IRS rules governing them.  You may also be interested in viewing our information on state income tax treatment.

U.S. Congressional Record

  • Medicare Prescription Drug, Improvement, and Modernization Act of 2003 , Public Law 108-173 that established Health Savings Accounts.
  • The Tax Relief and Healthcare Act of 2006 HR6111 has many provisions that make it easier to open and fund an HSA, including a one-time transfer from an IRA, expanded contribution limits, and rollovers from HRAs and FSAs.
  • The Patient Protection and Affordable Care Act , Public Law 111-148, also known as the Health Care Reform law, makes numerous changes to how health care works in the United States. Of particular interest to HSA owners: 
    • New plans will be required to cover preventive services with no deductible or copay.  This does not affect grandfathered plans already in force.
    • Non-prescription medication is no longer considered a qualified medical expense after January 1, 2011.
    • The penalty for withdrawals from an HSA for non-medical expenses increases from 10% to 20% after January 1, 2011.
    • Starting in 2014, plans will have a minimum actuarial value requirement, which may make high deductible plans no longer available.

U.S. Department of the Treasury

Internal Revenue Service Publications

Qualified Medical Expenses

  • U.S. Internal Revenue Service publication 502  gives a fairly detailed list of qualified medical expenses.

IRS Updates

  • IRS Bulletin – August 13, 2012  – IRS Notice 2012-77-156 - Health Insurance Premium Tax Credit; Correction.
  • IRS Bulletin – July 12, 2012  – IRS Notice 2012-77-134 - Health Insurance Premium Tax Credit; Correction.
  • IRS Bulletin – July 13, 2012  – IRS Notice 2012-77-135 - Health Insurance Premium Tax Credit; Correction.
  • IRS Bulletin – May 23, 2012  – IRS Notice 2012-77-100 - Health Insurance Premium Tax Credit.
  • IRS Bulletin – June 24, 2011  – IRS Notice 2011-76-122 – Group Health Plans and Health Insurance Issuers: Rules Relating to Internal Claims and Appeals and External Review Processes.
  • IRS Bulletin – June 24, 2011  – IRS Notice 2011-76-122 – Requirements for Group Health Plans and Health Insurance Issuers Relating to Internal Claims and Appeals and External Review Processes Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – July 26, 2011  – IRS Notice 2011-76-143 – Group Health Plans and Health Insurance Issuers: Rules Relating to Internal Claims and Appeals and External Review Processes; Correction.
  • IRS Bulletin – August 3, 2011  – IRS Notice 2011-76-149 – Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – August 3, 2011  – IRS Notice 2011-76-149 – Requirements for Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – August 18, 2011  – IRS Notice 2011-76-160 – Branded Prescription Drug Fee.
  • IRS Bulletin – September 28, 2011  – IRS Notice 2011-76-188 – Branded Prescription Drug Fee; Correction.
  • IRS Bulletin – May 13, 2010  – IRS Notice 2010-75-92 – Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – May 13, 2010  – IRS Notice 2010-75-92 – Group Health Plans and Health Insurance Issuers Providing Dependent Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – June 17, 2010  – IRS Notice 2010-75-116 – Interim Final Rules for Group Health Plans and Health Insurance Coverage Relating to Status as Grandfathered Health Plan Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – June 17, 2010  – IRS Notice 2010-75-116 – Group Health Plans and Health Insurance Coverage Rules Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – June 28, 2010  – IRS Notice 2010-75-123 – Requirements for Group Health Plans and Health Insurance Issuers Under the Patient Protection and Affordable Care Act Relating to Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections.
  • IRS Bulletin – July 19, 2010  – IRS Notice 2010-75-137 – Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – July 19, 2010  – IRS Notice 2010-75-137 – Requirements for Group Health Plans and Health Insurance Issuers to Provide Coverage of Preventive Services Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – July 23, 2010  – IRS Notice 2010-75-141 – Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Internal Claims and Appeals and External Review Processes Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – July 23, 2010  – IRS Notice 2010-75-141 – Requirements for Group Health Plans and Health Insurance Issuers Relating to Internal Claims and Appeals and External Review Processes Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – November 17, 2010  – IRS Notice 2010-75-221 – Amendment to the Interim Final Rules for Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – November 17, 2010  – IRS Notice 2010-75-221 – Group Health Plans and Health Insurance Coverage Rules Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act.
  • IRS Bulletin – December 28, 2010  – IRS Notice 2010-75-248 – Request for Information Regarding Value-Based Insurance Design in Connection With Preventive Care Benefits.
  • IRS Bulletin – October 6, 2009  – IRS Notice 2009-74-192 – Employer Comparable Contributions to Health Savings Accounts Under Section 4980G, and Requirement of Return for Filing of the Excise Tax Under Section 4980B, 4980D, 4980E or 4980G; Correction.
  • IRS Bulletin – October 28, 2008 - IRS Notice 2008-73-209 - Employer Comparable Contributions to Health Savings Accounts Under Section 4980G, and Requirement of Return for Filing of the Excise Tax Under Section 4980B, 4980D, 4980E or 4980G; Hearing.
  • IRS Bulletin – June 9, 2008 - IRS Notice 2008-51 - Under these new rules, individuals covered by a HDHP that also own a traditional or Roth IRA can make a one-time IRA-to-HSA funding transfer without facing federal income taxes or penalties.  The transfer amount cannot exceed the individual's maximum HSA contribution limit.
  • Federal Register – April 17, 2008 - Employer Comparable Contributions to Health Savings Accounts Under Section 4980G.  These regulations concern how employers comply with comparable contribution requirements for Health Savings Accounts, employees that do not establish an HSA by the end of the year, or an employee who has neglected to tell the employer that he or she has established an HSA.  Also covered is instances when an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses.  These regulations went into effect April 17, 2008, and apply to employer contributions made for calendar years beginning on or after January 1, 2009.
  • Internal Revenue Bulletin – October 2, 2006 - Announcement 2006-72 provides final regulations to clarify employer comparable contributions to an HSA.  The new regulations give employers additional flexibility in their plan design for employees without failing the comparability rules.  The following points were included in the news release:
    • Employees covered by a collective bargaining agreement between the employee representatives and employer are excused from the comparable contribution rules.
    • Employers can make different contributions depending on the varying type of family coverage (self plus one, self plus two, self plus three or more).
    • Further clarification on cafeteria plan contributions.  Employees contributing through a salary reduction with a cafeteria plan will be excluded from the comparability rules.
  • IRS Update – July 7, 2006   - 26 CFR, Part 54 contains final regulations that provide guidance regarding employer comparable contributions to Health Savings Accounts.  In general, these final regulations affect employers that contribute to employees’ Health Savings Accounts.  The final regulations state that when an employer makes a contribution to an employee's health savings account, they must contribute a comparable amount to all employees who are eligible.
  • IRS Bulletin – January 17, 2006  - Announcement 2006-4 contains a notice of public hearing on proposed regulations providing guidance on employer comparable contributions to Health Savings Accounts under section 4980G.
  • IRS Bulletin – December 5, 2005  - Bulletin 2005-49 provides relief for certain health plans with non-calendar year renewal dates that otherwise qualify as high-deductible health plans (HDHPs), except that the plans provide state-mandated benefits without regard to a deductible or with a deductible below the minimum annual deductible.
  • IRS Update – November 24, 2005  - Notice 2005-86 provides guidance on how to coordinate Health Savings Accounts with FSAs with the 2½ month FSA account spending extension.
  • IRS Update – November 17, 2005  - Notice 2005-83 extends the transition relief for certain plans that have deductibles that are not timed to the calendar year with non-conforming state-mandated benefits.
  • RS Bulletin – October 11, 2005  - Bulletin 2005-41 provides guidance on employer comparable contributions to Health Savings Accounts under section 4980G.  In general, these proposed regulations would affect employers that contribute to employees’ Health Savings Accounts.
  • IRS Update – April 13, 2005  - Notice 2005-25 explains that an individual can set up a Health Savings Account even if his or her spouse has a non-qualifying health insurance plan, as long as the individual setting up the HSA is not covered by that plan.
  • IRS Update – January 14, 2005  - Notice 2005-8 explains how the Internal Revenue Service will be applying deductibility provisions for a partnership’s contributions to a partner’s Health Savings Account (HSA), and an S corporation’s contribution to a 2-percent shareholder-employee’s HSA.
  • IRS Update – July 23, 2004 Notice 2004-50 consists of 88 questions and answers, including rules for dealing with errors, and information on permissible investments for Health Savings Accounts.
  • IRS Update – May 11, 2004  - Notice 2004-45 clarifies how health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs) interact with Health Savings Accounts (HSAs).  In particular, this ruling states that eligible individuals (who of course must be covered by a high deductible health plan (HDHP)) may still contribute to an HSA while also covered by the following types of employer-provided plans that reimburse employee medical expenses: 
    • Limited purpose FSAs and HRAs that restrict reimbursements to certain permitted benefits such as vision, dental, or preventive care benefits.
    • Suspended HRAs where the employee has elected to forgo health reimbursements for the coverage period.
    • Post-deductible FSAs or HRAs that only provide reimbursements after the minimum annual deductible has been satisfied.
    • Retirement HRAs that only provide reimbursements after an employee retires.
  • IRS Update - April 12, 2004 - Notice 2004-23 allows preventive care benefits to be provided by a high deductible health plan (HDHP) without having to satisfy the minimum deductible.
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