26 U.S.C. § 220: Archer MSAs

In the case of an individual who is an eligible individual for any month during the taxable year, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by such individual to an Archer MSA of such individual. The amount allowable as a deduction under subsection (a) to an individual for the taxable year shall not exceed the sum of the monthly limitations for months during such taxable year that the individual is an eligible individual. in the case of an individual who has self-only coverage under the high deductible health plan as of the first day of such month, 65 percent of the annual deductible under such coverage, and in the case of an individual who has family coverage under the high deductible health plan as of the first day of such month, 75 percent of the annual deductible under such coverage. both spouses shall be treated as having only such family coverage (and if such spouses each have family coverage under different plans, as having the family coverage with the lowest annual deductible), and the limitation under paragraph (1) (after the application of subparagraph (A) of this paragraph) shall be divided equally between them unless they agree on a different division. The deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (I) of subsection (c)(1)(A)(iii) shall not exceed such individual’s wages, salaries, tips, and other employee compensation which are attributable to such individual’s employment by the employer referred to in such subclause. The deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (II) of subsection (c)(1)(A)(iii) shall not exceed such individual’s earned income (as defined in section 401(c)(1)) derived by the taxpayer from the trade or business with respect to which the high deductible health plan is established. The limitations under this paragraph shall be determined without regard to community property laws. any amount is contributed to any Archer MSA of such individual for such year which is excludable from gross income under section 106(b), or if such individual’s spouse is covered under the high deductible health plan covering such individual, any amount is contributed for such year to any Archer MSA of such spouse which is so excludable. No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins. The limitation under this subsection for any month with respect to an individual shall be zero for the first month such individual is entitled to benefits under title XVIII of the Social Security Act and for each month thereafter. such individual is covered under a high deductible health plan as of the 1st day of such month, which is not a high deductible health plan, and which provides coverage for any benefit which is covered under the high deductible health plan, and the high deductible health plan covering such individual is established and maintained by the employer of such individual or of the spouse of such individual and such employer is a small employer, or such individual is an employee (within the meaning of section 401(c)(1)) or the spouse of such an employee and the high deductible health plan covering such individual is not established or maintained by any employer of such individual or spouse. coverage for any benefit provided by permitted insurance, and coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care. any amount is contributed to an Archer MSA of an individual who is an employee of such employer or the spouse of such an employee, and such amount is excludable from gross income under section 106(b) or allowable as a deduction under this section, For limitations on number of taxpayers who are eligible to have Archer MSAs, see subsection (i). in the case of self-only coverage, which has an annual deductible which is not less than $1,500 and not more than $2,250, in the case of family coverage, which has an annual deductible which is not less than $3,000 and not more than $4,500, and $3,000 for self-only coverage, and $5,500 for family coverage. Such term does not include a health plan if substantially all of its coverage is coverage described in paragraph (1)(B). A plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for preventive care if the absence of a deductible for such care is required by State law. liabilities incurred under workers’ compensation laws, tort liabilities, liabilities relating to ownership or use of property, or such other similar liabilities as the Secretary may specify by regulations, insurance for a specified disease or illness, and insurance paying a fixed amount per day (or other period) of hospitalization. The term “small employer” means, with respect to any calendar year, any employer if such employer employed an average of 50 or fewer employees on business days during either of the 2 preceding calendar years. For purposes of the preceding sentence, a preceding calendar year may be taken into account only if the employer was in existence throughout such year. In the case of an employer which was not in existence throughout the 1st preceding calendar year, the determination under subparagraph (A) shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year. such employer met the requirement of subparagraph (A) (determined without regard to subparagraph (B)) for any preceding calendar year after 1996, any amount was contributed to the Archer MSA of any employee of such employer with respect to coverage of such employee under a high deductible health plan of such employer during such preceding calendar year and such amount was excludable from gross income under section 106(b) or allowable as a deduction under this section, and such employer employed an average of 200 or fewer employees on business days during each preceding calendar year after 1996. For purposes of this paragraph, all persons treated as a single employer under subsection (b), (c), (m), or ( o ) of section 414 shall be treated as 1 employer. Any reference in this paragraph to an employer shall include a reference to any predecessor of such employer. The term “family coverage” means any coverage other than self-only coverage. unless it is in cash, or to the extent such contribution, when added to previous contributions to the trust for the calendar year, exceeds 75 percent of the highest annual limit deductible permitted under subsection (c)(2)(A)(ii) for such calendar year. The trustee is a bank (as defined in section 408(n)), an insurance company (as defined in section 816), or another person who demonstrates to the satisfaction of the Secretary that the manner in which such person will administer the trust will be consistent with the requirements of this section. No part of the trust assets will be invested in life insurance contracts. The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund. The interest of an individual in the balance in his account is nonforfeitable. The term “qualified medical expenses” means, with respect to an account holder, amounts paid by such holder for medical care (as defined in section 213(d)) for such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise. For purposes of this subparagraph, amounts paid for menstrual care products (as defined in section 223(d)(2)(D)) shall be treated as paid for medical care. Subparagraph (A) shall not apply to any payment for insurance. a health plan during any period of continuation coverage required under any Federal law, a qualified long-term care insurance contract (as defined in section 7702B(b)), or a health plan during a period in which the individual is receiving unemployment compensation under any Federal or State law. Subparagraph (A) shall apply to an amount paid by an account holder for medical care of an individual who is not described in clauses (i) and (ii) of subsection (c)(1)(A) for the month in which the expense for such care is incurred only if no amount is contributed (other than a rollover contribution) to any Archer MSA of such account holder for the taxable year which includes such month. This subparagraph shall not apply to any expense for coverage described in subclause (I) or (III) of subparagraph (B)(ii). The term “account holder” means the individual on whose behalf the Archer MSA was established. Section 219(d)(2) (relating to no deduction for rollovers). Section 219(f)(3) (relating to time when contributions deemed made). Except as provided in section 106(b), section 219(f)(5) (relating to employer payments). Section 408(g) (relating to community property laws). Section 408(h) (relating to custodial accounts). An Archer MSA is exempt from taxation under this subtitle unless such account has ceased to be an Archer MSA. Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations). Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to Archer MSAs, and any amount treated as distributed under such rules shall be treated as not used to pay qualified medical expenses. Any amount paid or distributed out of an Archer MSA which is used exclusively to pay qualified medical expenses of any account holder shall not be includible in gross income. Any amount paid or distributed out of an Archer MSA which is not used exclusively to pay the qualified medical expenses of the account holder shall be included in the gross income of such holder. such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual’s return for such taxable year, and such distribution is accompanied by the amount of net income attributable to such excess contribution. For purposes of subparagraph (A), the term “excess contribution” means any contribution (other than a rollover contribution) which is neither excludable from gross income under section 106(b) nor deductible under this section. The tax imposed by this chapter on the account holder for any taxable year in which there is a payment or distribution from an Archer MSA of such holder which is includible in gross income under paragraph (2) shall be increased by 20 percent of the amount which is so includible. Subparagraph (A) shall not apply if the payment or distribution is made after the account holder becomes disabled within the meaning of section 72(m)(7) or dies. Subparagraph (A) shall not apply to any payment or distribution after the date on which the account holder attains the age specified in section 1811 of the Social Security Act. Paragraph (2) shall not apply to any amount paid or distributed from an Archer MSA to the account holder to the extent the amount received is paid into an Archer MSA or a health savings account (as defined in section 223(d)) for the benefit of such holder not later than the 60th day after the day on which the holder receives the payment or distribution. This paragraph shall not apply to any amount described in subparagraph (A) received by an individual from an Archer MSA if, at any time during the 1-year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from an Archer MSA which was not includible in the individual’s gross income because of the application of this paragraph. For purposes of determining the amount of the deduction under section 213, any payment or distribution out of an Archer MSA for qualified medical expenses shall not be treated as an expense paid for medical care. The transfer of an individual’s interest in an Archer MSA to an individual’s spouse or former spouse under a divorce or separation instrument described in clause (i) of section 121(d)(3)(C) shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest shall, after such transfer, be treated as an Archer MSA with respect to which such spouse is the account holder. If the account holder’s surviving spouse acquires such holder’s interest in an Archer MSA by reason of being the designated beneficiary of such account at the death of the account holder, such Archer MSA shall be treated as if the spouse were the account holder. such account shall cease to be an Archer MSA as of the date of death, and an amount equal to the fair market value of the assets in such account on such date shall be includible if such person is not the estate of such holder, in such person’s gross income for the taxable year which includes such date, or if such person is the estate of such holder, in such holder’s gross income for the last taxable year of such holder. The amount includible in gross income under clause (i) by any person (other than the estate) shall be reduced by the amount of qualified medical expenses which were incurred by the decedent before the date of the decedent’s death and paid by such person within 1 year after such date. An appropriate deduction shall be allowed under section 691(c) to any person (other than the decedent or the decedent’s spouse) with respect to amounts included in gross income under clause (i) by such person. such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting “calendar year 1997” for “calendar year 2016” in subparagraph (A)(ii) thereof. The Secretary may require the trustee of an Archer MSA to make such reports regarding such account to the Secretary and to the account holder with respect to contributions, distributions, and such other matters as the Secretary determines appropriate. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary. such individual was an active MSA participant for any taxable year ending on or before the close of the cut-off year, or such individual first became an active MSA participant for a taxable year ending after the cut-off year by reason of coverage under a high deductible health plan of an MSA-participating employer. calendar year 2007, or the first calendar year before 2007 for which the Secretary determines under subsection (j) that the numerical limitation for such year has been exceeded. The term “active MSA participant” means, with respect to any taxable year, any individual who is the account holder of any Archer MSA into which any contribution was made which was excludable from gross income under section 106(b), or allowable as a deduction under this section, for such taxable year. an individual shall not be treated as an eligible individual for any month of such year or an active MSA participant under paragraph (1)(A) unless such individual is, on or before the cut-off date, covered under a high deductible health plan, and an employer shall not be treated as an MSA-participating employer unless the employer, on or before the cut-off date, offered coverage under a high deductible health plan to any employee. Except as otherwise provided in this subparagraph, the cut-off date is October 1 of the cut-off year. In the case of an individual described in subclause (I) of subsection (c)(1)(A)(iii), if the regularly scheduled enrollment period for health plans of the individual’s employer occurs during the last 3 months of the cut-off year, the cut-off date is December 31 of the cut-off year. In the case of an individual described in subclause (II) of subsection (c)(1)(A)(iii), the cut-off date is November 1 of the cut-off year. each of the cut-off dates under clauses (i) and (iii) shall be 1 month earlier than the date determined without regard to this clause, and clause (ii) shall be applied by substituting “4 months” for “3 months”. such employer made any contribution to the Archer MSA of any employee during the cut-off year or any preceding calendar year which was excludable from gross income under section 106(b), or at least 20 percent of the employees of such employer who are eligible individuals for any month of the cut-off year by reason of coverage under a high deductible health plan of such employer each made a contribution of at least $100 to their Archer MSAs for any taxable year ending with or within the cut-off year which was allowable as a deduction under this section. this subsection shall not apply to any otherwise eligible individual who is covered under a high deductible health plan during the first 6 months of the second calendar year following the cut-off year (and such individual shall be treated as an active MSA participant for purposes of this subsection if a contribution is made to any Archer MSA with respect to such coverage), and any employer who offers coverage under a high deductible health plan to any employee during such 6-month period shall be treated as an MSA-participating employer for purposes of this subsection if the requirements of paragraph (4) are met with respect to such coverage. April 30, 1997 , exceeds 375,000, or June 30, 1997 , exceeds 525,000. the number of MSA returns filed on or before April 15 of such calendar year for taxable years ending with or within the preceding calendar year, plus the Secretary’s estimate (determined on the basis of the returns described in clause (i)) of the number of MSA returns for such taxable years which will be filed after such date, 90 percent of the sum determined under subparagraph (A) for such calendar year, plus the product of 2.5 and the number of Archer MSAs established during the portion of such year preceding July 1 (based on the reports required under paragraph (4)) for taxable years beginning in such year, The numerical limitation shall not apply for 2000 or 2003. The determination of whether any calendar year is a cut-off year shall be made by not counting the Archer MSA of any previously uninsured individual. For purposes of this subsection, the term “previously uninsured individual” means, with respect to any Archer MSA, any individual who had no health plan coverage (other than coverage referred to in subsection (c)(1)(B)) at any time during the 6-month period before the date such individual’s coverage under the high deductible health plan commences. the number of Archer MSAs established before such July 1 (for taxable years beginning in such calendar year) of which such person is the trustee, the name and TIN of the account holder of each such account, and the number of such accounts which are accounts of previously uninsured individuals. Not later than June 1, 1997 , each person who is the trustee of an Archer MSA established before May 1, 1997 , shall make an additional report described in subparagraph (A) but only with respect to accounts established before May 1, 1997 . such section shall be applied by substituting “$25” for “$50”, and the maximum penalty imposed on any trustee shall not exceed $5,000. To the extent practicable, in determining the number of Archer MSAs on the basis of the reports under this paragraph, all Archer MSAs of an individual shall be treated as 1 account and all accounts of individuals who are married to each other shall be treated as 1 account. Any determination under this subsection that a calendar year is a cut-off year shall be made by the Secretary and shall be published not later than October 1 of such year. The report required by section 220(j)(4) of the Internal Revenue Code of 1986 to be made on August 1, 2005 , or August 1, 2006 , as the case may be, shall be treated as timely if made before the close of the 90-day period beginning on the date of the enactment of this Act [ Dec. 20, 2006 ]. The determination and publication required by section 220(j)(5) of such Code with respect to calendar year 2005 or calendar year 2006, as the case may be, shall be treated as timely if made before the close of the 120-day period beginning on the date of the enactment of this Act. If the determination under the preceding sentence is that 2005 or 2006 is a cut-off year under section 220(i) of such Code, the cut-off date under such section 220(i) shall be the last day of such 120-day period.” The report required by section 220(j)(4) of the Internal Revenue Code of 1986 to be made on August 1, 2004 , shall be treated as timely if made before the close of the 90-day period beginning on the date of the enactment of this Act [ Oct. 4, 2004 ]. The determination and publication required by section 220(j)(5) of such Code with respect to calendar year 2004 shall be treated as timely if made before the close of the 120-day period beginning on the date of the enactment of this Act. If the determination under the preceding sentence is that 2004 is a cut-off year under section 220(i) of such Code, the cut-off date under such section 220(i) shall be the last day of such 120-day period.” during 1997, 1998, 1999, and 2000, regularly evaluate the number of individuals who are maintaining medical savings accounts and the reduction in revenues to the United States by reason of such accounts, and provide such reports of such evaluations to Congress as such Secretary determines appropriate.”