IRS releases 2009 inflation adjustment
figures for health savings accounts

A new revenue procedure provides the annual inflation-adjusted contribution, deductible, and out-of-pocket expense limits for 2009 for health savings accounts (HSAs).

HSA basics. Eligible individuals may, subject to statutory limits, make deductible contributions to an HSA. Employers as well as other persons (e.g., family members) also may contribute on behalf of an eligible individual. Employer contributions generally are treat­ed as employer-provided coverage for medical expens­es under an accident or health plan and are excludable from income. In general, a person is an "eligible indi­vidual" if he is covered under a high deductible health plan (HDHP) and is not covered under any other health plan that is not a high deductible plan, unless the other coverage is permitted insurance (e.g., for worker's compensation, a specified disease or illness, or provid­ing a fixed payment for hospitalization). General pur­pose health (flexible spending accounts (FSAs)) and health reimbursement arrangements (HRAs) constitute "other coverage" that will generally preclude HSA eli­gibility. However, exceptions apply for, among other things, limited purpose FSAs and HRAs (those provid­ing only certain benefits, e.g., dental and vision) and FSAs and HRAs imposing high annual deductibles.

HSA distributions not used to pay for qualifying medical expenses generally are included in income and subject to a 10% penalty tax.

Change to annual contribution limitation for 2009. For calendar year 2009, the limitation on deductions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,000 (up from $2,900 for 2008). For calendar year 2009, the limitation on deductions under Code Sec. 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $5,950 (up from $5,800 for 2008).

High deductible health plan for 2009.  For calendar year 2009, a "high deductible health plan" is defined under Code Sec. 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,150 for self­only coverage (up from $1,100 for 2008) or $2,300 for family coverage (up from $2,200 for 2008), and the annual out-of-pocket expenses (deductibles, co-pay­ments, and other amounts, but not premiums) do not exceed $5,800 for self-only coverage (up from $5,600 for 2008) or $11,600 for family coverage (up from $11,200 for 2008).