2007 HSA Indexed Amounts
On November 9, 2006, the IRS issued Revenue Procedure 2006-53, which, among other things, provides the 2007 indexed amounts for the maximum contribution levels for Health Savings Accounts (HSAs), and the minimum deductibles and maximum out-of-pocket spending limits for high deductible Health Plans (HDHPs) that must be used in conjunction with HSAs. The information about HSAs is found on pages 16 and 17 of the revenue procedure.

The new levels are as follows:
New Annual Contribution Levels for HSAs:
- For 2007, the maximum annual HSA contribution for an eligible individual with self-only coverage is $2,850.
- For family coverage the maximum HSA contribution is $5,650.
- Under recent legislation, these amounts are the maximum HSA contribution amount regardless of the amount of the HDHP deductible.
- Catch up contributions for individuals who are 55 or older is increased by statute to $800 for 2007.
- Both the HSA contribution and catch up contribution apply pro rata based on the number of months of the year a taxpayer is an eligible individual.
- Under recently enacted legislation, if you have HDHP coverage as of December 1, 2007, you are allowed the full, non-pro rated contribution for the year. However, if you cease to remain an eligible individual throughout 2008, the extra amount contributed is included in income and subject to an additional 10 percent tax.

New Amounts for Out-of-Pocket Spending on HSA-Compatible HDHPs:
The maximum annual out-of-pocket amounts for HDHP self-coverage increase to $5,500 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $11,000.

Minimum Deductible Amounts for HSA-Compatible HDHPs:
For 2007, the minimum deductible for HDHPs increases to $1,100 for self-only coverage and $2,200 for family coverage.

Note that a fiscal year plan that satisfies the requirements for an HDHP on the first day of the first month of its fiscal year may apply that deductible for the entire fiscal year.*

Last Updated by the U.S. Treasury Department: January 4, 2007

What is a Health Savings Account (“HSA”)?
A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account. You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.*

What Is a “High Deductible Health Plan” (HDHP)?
You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that . Of course, your HSA is available to help you pay for the expenses your plan does not cover. For 2005, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,000 (self-only coverage) or $2,000 (family coverage). For 2006, the amounts increase to $1,050 and $2,100, respectively. The annual out-of-pocket (including deductibles and co-pays) for 2005 cannot exceed $5,100 (self-only coverage) or $10,200 (family coverage). For 2006, these amounts increase to $5,250 and $10,500, respectively. HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.*

How can I get a Health Savings Account?
Consumers can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. Your employer may also set up a plan for employees as well.*

How much does an HSA cost?
An HSA is not something you purchase; it’s a savings account into which you can deposit money on a tax-preferred basis. The only product you purchase with an HSA is a High Deductible Health Plan, an inexpensive plan that will cover you should your medical expenses exceed the funds you have in your HSA.*
 
* = courtesy of the U.S. Treasury Department website.

Click HERE to view the U.S. Treasury Department's website detailing the Health Savings Account.