Can self-employed individuals have Are cash contributions the only way
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
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 diamondcu.org.
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
2009 and thereafter $1000
Broadcasting & Paper Mill Rds., Wyomissing, PA 19610
2007 $800 READING HOSPITAL OFFICE
6th Ave. & Spruce St., West Reading, PA 19611
800-593-1000 • www.diamondcu.org
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
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.