BISYS says it can now offer custom documents to financial organizations serving as trustees for newly created Health Savings Accounts (HSAs), the tax-favored savings arrangements for individuals and families that are covered by high-deductible health insurance plans in the US. HSAs were created by the Medicare Prescription Drug and Modernization Act of 2003, which was signed into law December 8, 2003, and became available January 1, 2004.
HSAs, which are essentially based on the same concept as Archer Medical Savings Accounts (MSAs), allow tax-deductible contributions and tax-free distribution of basis and earnings if distributed amounts are used for qualified medical expenses. However, unlike the MSA program, which expired December 31, 2003, there is no limit on the number of HSAs that can be established, participants are not required to be self-employed or employed by small employers, and there is no termination date for the HSA program.
Generally, HSAs can be established by individuals that are covered exclusively by high-deductible health plans with annual deductibles of at least $1,000, and a combined deductible/out-of-pocket expense cap of $5,000. These accounts can be established by families with annual health plan deductibles of at least $2,000, and a combined deductible/out-of-pocket expense cap of $10,000. Annually, individuals can contribute up to $2,600 to HSAs and families can contribute up to $5,150, and catch-up contributions are available for participants 55 to 65 years old. Distributions for qualified medical expenses are exempt from federal income tax and penalties, while distributions for nonqualified medical expenses are taxable and potentially subject to a 10 percent early distribution penalty.
“Industry experts believe the new HSAs will have a much broader appeal than the MSA program since the new program offers consumers a permanent savings arrangement,” says Christopher Guarino, president of BISYS Retirement Services. “BISYS currently supports approximately 400,000 employers and four million IRA holders with our ERISA documents and related support services, and we welcome the opportunity to once again lead the industry with the introduction of the professional documents our clients need to capitalize on a new asset-generating market opportunity.”
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