Legislation
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HSA Summary
Bush Signs HSA legislation into Law Dec. 20, 2006 The Tax Relief and Health Care Act of 2006 includes several enhancement to HSAs
One of the last acts of the 109th Congress was to adopt AHIA’s top legislative priority – to eliminate the monthly limitation on deductible contributions to HSAs. AHIA’s members found the limitation to be a huge hindrance in setting up HSAs and charged the AHIA lobbying team with correcting this obstacle.
At 1:30 in the morning Saturday, December 9, the Senate passed H.R.6111, the tax extenders package containing the expansion of tax incentives for health savings accounts (HSAs) by a vote of 79 to 9. The House had approved 367 to 45 the measure on December 8. On December 20, 2006, President Bush signed the legislation into law.
Effective for taxable years beginning after December 31, 2006, the expanded HSA provisions:
- Eliminate the monthly limitation on deductible contributions to HSAs—i.e., instead of the current law rule that limits an individual’s HSA deduction to 1/12 per month of the annual capped total, the provisions provide that an individual who starts his/her HSA mid-year is treated as having had it for it for the entire year. This allows beginning HSA owners to take the full annual deduction in their first year of HSA ownership.
- Decouple the cap on the deduction for a contribution to an HSA from the high deductible health plan (HDHP) deductible. The result is that even if the HDHP deductible is lower, the maximum deductible HSA contribution will be an indexed dollar amount: In 2007, the maximum deduction is $2,850 for individual HDHP/HSA coverage; $5,650 for family coverage; and $800 in catch-up contribution authority.
- Allow rollovers from flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and Individual Retirement Accounts (IRAs) into HSAs.
