Can self employed individuals have an HSA Sole proprietors and

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Can self employed individuals have an HSA Sole proprietors and Powered By Docstoc
					Can self-employed individuals have                    Are cash contributions the only way
an HSA?
Sole proprietors and others who are self-
                                                      to fund an HSA?
                                                      There are a few additional options to fund an HSA.
employed can have an HSA and are, in fact,
often ideal candidates for an HSA. HSAs are
                                                      If you have money in an Archer medical savings
                                                      account, you can roll that money to an HSA.          Savings
often advantageous for self-employed
                                                      The Tax Relief and Health Care Act of 2006
individuals because:
                                                      allows certain individuals to move money from
    HDHPs generally have modest premium               health flexible spending accounts (FSAs) or
    costs, and may be an effective cost-              employer-sponsored health reimbursement              A Tax Advantage to Offset
    containment mechanism,                            arrangements (HRAs) to HSAs. Also, individuals
                                                                                                           Health Care Expenses
                                                      are allowed a one-time rollover of money from
    the employer is protected against potentially
                                                      an IRA to an HSA. This IRA rollover, however,
    catastrophic health care expenses, and
                                                      counts toward the HSA contribution limit. Since
   the HSA may serve the dual purpose of providing    certain restrictions apply to these options, you
   for both medical and retirement expenses.          should seek competent tax advice to help
                                                      analyze the options available to you.

How much can I contribute to an HSA?                  Do HSAs require reporting?
The total amount you or your employer may             HSAs require the following government reporting.
contribute to an HSA is dependent upon
whether you have individual or family coverage            HSA holders report contributions and
under an HDHP.                                            distributions on their income tax returns.
The Tax Relief and Health Care Act of 2006                An employer contribution is reported on a
provides that the contribution limit for 2007             business tax return, as well as on employees’
and beyond is no longer dependent on the                  Form W-2s.
HDHP’s deductible amount, but rather, only on
                                                          Contributions and distributions are also
the annual statutory limit.
                                                          reported to the IRS by the trustee or
              HSA Contribution Limits*                    custodian where the HSA is held.
 Year        Self-Only Coverage   Family Coverage
 2008             $2,900              $5,800          Contact Us!
 2007             $2,850              $5,650
                                                      For more information on HSAs and Diamond’s
*Subject to potential cost-of-living increases.       HSA options, contact a Financial Services
In addition to the standard HSA contribution limit,   Consultant at any of our member service centers
if you have attained age 55 before the close of a     by calling 800-593-1000 or online at
taxable year, you may also contribute an additional
amount known as a “catch-up” contribution, as
shown in the table below.
        HSA Catch-Up Contribution Limits                                                                                                 POTTSTOWN OFFICE
                                                                                                                         1600 Medical Dr., Pottstown, PA 19464
        Taxable Year        Maximum Catch-Up
                                                                                                                                              READING OFFICE
  2009 and thereafter              $1000
                                                                                                           Broadcasting & Paper Mill Rds., Wyomissing, PA 19610
         2008                      $900
         2007                      $800                                                                                           READING HOSPITAL OFFICE
                                                                                                                  6th Ave. & Spruce St., West Reading, PA 19611

                                                                                                             800-593-1000 •
Health savings accounts (HSAs) were               Who is eligible for an HSA?                            What is an HDHP?
created by Congress to combat rising              HSAs are available to individuals covered by a         An HDHP is an insurance policy that meets
medical costs by providing an incentive for       high deductible health plan (HDHP) regardless of       certain dollar limits as shown in the table below.
                                                  whether they are self-employed or employed by
more consumers to pay “first-dollar”              a small employer, and regardless of whether
                                                                                                                         2008 HDHP Limits*
medical expenses. HSAs, first available in        their employer maintains the HDHP.                                  Self-Only Coverage   Family Coverage
2004, are tax-favored accounts designed to                                                               Annual            $1,100             $2,200
                                                  You are an eligible individual for any month if you:
                                                                                                         deductible        or more            or more
help individuals who are covered by high              are covered under an HDHP on the first day
deductible health plans pay medical                   of such month,                                     Out-of-           $5,500             $11,000
expenses for themselves, their spouses, and                                                              Pocket            or less             or less
                                                      are not also covered by any other health
their dependents. Congress again                      plan that is not an HDHP (with limited
addressed the issue of health care costs in                                                              *If the plan does not meet both the deductible
2006 and simplified some of the HSA                   are not enrolled in Medicare, and                  and out-of-pocket expense restrictions, it is not
                                                                                                         considered an HDHP.
requirements through the                              are not eligible to be claimed as a dependent
                                                      on another person’s tax return.
Tax Relief and Health Care Act of 2006.
                                                  An employer may offer HSAs through a cafeteria         What are qualified medical expenses?
                                                  plan. Employer contributions to an HSA reduce
                                                  what an individual can contribute, but they do         For HSA assets to retain their tax-free status,
In order to continually provide new                                                                      they must be withdrawn and used for certain
                                                  not eliminate an individual’s ability to contribute.
services to our members, Diamond                                                                         qualified medical expenses. Qualified medical
Credit Union has added several HSA                                                                       expenses are generally expenses that qualify for
options. Read on to learn what accounts                                                                  the medical and dental income tax deductions
                                                  What are the benefits of an HSA?                       as defined in IRS Publication 502. Expenses paid
are available at Diamond and to find out
                                                  HSAs can provide significant tax benefits. Not         with HSA assets cannot also be claimed as a
if an HSA is right for you.                                                                              deduction on your income taxes. Here are some
                                                  only can they provide tax benefits related to
                                                  paying qualified medical expenses, they may            examples.
                                                  also serve as additional income for retirement.           Medical expenses, including doctor visits,
What HSA accounts are available at                                                                          prescriptions, transportation to get medical
                                                  Tax Benefits
Diamond Credit Union?                                                                                       care, and certain dental and vision care
                                                      HSA contributions made by employer or
As a Diamond Credit Union member, you have                                                                  Qualified long-term care insurance
                                                      employee are excluded from income.
several options available to you.
                                                      HSA earnings are tax-deferred.                        Health plan premiums when unemployed
    A Checking Account with debit card access
    and check writing privileges (minimum $100        If used for qualified medical expenses, HSA           Health plan premiums during COBRA
                                                      assets are never taxed.                               (continuation-of-benefit) coverage
    required to earn interest).
                                                      Unused HSA assets may be used for                     Certain health insurance after age 65
    A Money Market Account with a tiered rate
                                                      retirement. These distributed amounts,             Nonqualified uses of HSA assets are subject to
    structure (minimum $1000 to earn interest).
                                                      however, will be subject to income taxes.          taxation and a 10 percent penalty unless the
    Share Certificates of Deposit with 6 month,       They will also be subject to a 10 percent          HSA owner is age 65 or older, dies, or is
    1-, 3-, and 5-year terms and $1000 to open.       penalty until the HSA owner turns age 65.          disabled.
All accounts offer Netbranch Online Banking,          Upon death, HSA assets become the
Telebranch, and Bill Payer services.                  property of a named beneficiary or of the
                                                      HSA owner’s estate. A spouse beneficiary
                                                      may treat the HSA as his or her own, while
                                                      nonspouse beneficiaries must treat such
                                                      inherited assets as ordinary taxable income.