Individual/Family Health Insurance Article

2009 HSA Contribution Limits

Do you know what the guidelines are for your 2009 HSA contribution? If you use an HSA to pay for medical costs, you need to keep up with the changes made each calendar year. Just like any tax shelter, the guidelines change a bit each year. Here we will look at the guidelines for 2009.

A quick overview of the HSA

An HSA (Health Savings Account) is a savings account that is designated to use for medical costs. Funds are contributed on a pre-tax basis like an IRA or other retirement plan. These funds can be withdrawn for the purpose of medical expenses with no tax penalty.

Funds that remain in the account at the end of the calendar year are retained and accrue tax free interest, so it doubles as a sort of retirement plan alternative. At the age of 65, any funds that are in the account may be withdrawn for any reason, without tax considerations.

High-Deductible Health Plan

To be eligible for an HSA, the participant must be enrolled in an HDHP (High Deductible Health Plan) with no other insurance in effect at the same time.  Notable is the fact that you may have specific types of insurance such as coverage for specific accidents or injuries, dental, vision or long term disability insurance.

A high deductible health plan is one which has a deductible of $1150 for self only coverage or $2300 for a family plan. In addition, there is an annual “out of pocket” expense of $5800 for self only or $11,600 for a family.   

Health savings plans were enacted into law in 2003 and are overseen by the IRS very closely.

What about 2010 HSA limits?

The maximum contribution that can be made to an HSA in 2010 for employees with single coverage will be $3,050, up from $3,000 in 2009. The maximum HSA contribution for those with family coverage will rise to $6,150, up from $5,950.
Additionally, the maximum out-of-pocket expense, including deductibles, that employees can be required to pay 2010 will rise to $5,950 for single coverage, up from $5,800 this year, and $11,900 for family coverage, up from $11,600.
The minimum deductible of the high-deductible health insurance plan to which HSAs must be linked will increase next year to $1,200 for single coverage and $2,400 for family coverage. The current minimum deductibles are $1,150 for single coverage and $2,300 for family coverage.

2008 HSA contributions and limits

In the calendar year 2008, contributions were as follows:
For self only coverage plans, a contribution limit of $2900 within the calendar year. The minimum annual deductible was $1100 with a max out of pocket of $5600.
For family coverage plans, that limit was $5800 within the calendar year. The minimum annual deductible was $2200 with a max out of pocket of $11,200.

As you can see, the deductible limits are steadily increasing as are the out of pocket expense limits. However, so are the contributions, so it is somewhat of an offsetting figure. Also, remember that all contributions are tax-free and can be withdrawn at any time for medical expenses without penalty. Funds that remain in the account simply roll over to the next year and accrue tax free interest.

At the age of 65, the funds may be withdrawn for any reason without penalty. This makes the HSA a viable option for many people looking for a way to pay medical expenses and save for retirement at the same time.

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