An HSA is a Health Savings Account.  An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary.  An HSA is designed to assist individuals that have High Deductible Health Plans (HDHP).  You are only eligible to establish an HSA if you have an HDHP.

For more complete information regarding an HSA you should go to the U.S. Treasury Department website at www.ustreas.gov or the IRS website at www.irs.gov and review publication 553.

Health Plans with the following characteristics could be a HDHP:
(You should consult your Health Plan provider to find out if your plan qualifies for an HDHP)

These limits do not apply to deductibles and expenses for out of network services if the plan uses a network of providers.  Instead, only deductible and out-of-pocket expenses for services within the network should be used to determine whether the limit applies.  *2007 amounts; adjusted annually for inflation.

• The contributions and earnings from an HSA can be used to pay qualified medical expenses that are not paid by your insurance provider.
• Your contributions can be deductible if made within the allowable limits.  Your distributions can be tax free if made for qualified medical expenses.
• You can never lose the amount you contributed based on not using the money within a specified time like in a Flexible Spending Account.
• Your account is established as an individual account; therefore the account is portable, regardless of employment status or state in which you live.  Even if you no longer have coverage under an HDHP you may still have the account.  You cannot make any more contributions but you can continue to pay medical expenses from the account.
  

Are you covered by a High Deductible Health Plan (HDHP)?
(Your insurance provider can tell you if your plan is a HDHP)

If you are not covered by an HDHP you are not eligible for an HSA.

1. Are you covered by another Health plan that is not an HDHP?
(Whether as an individual, spouse or dependent)

2. Are you enrolled in Medicare A or B?

3. Are you claimed as a dependent on another person's tax return?

If you answered "yes" to any of these three questions you are not eligible for an HSA.

An individual does not fail to be eligible for an HSA merely because, in addition to an HDHP, the individual has coverage for any benefit provided by "permitted insurance."  Permitted insurance is insurance under which substantially all of the coverage provided relates to liabilities incurred under workers' compensation laws, tort liabilities, liabilities relating to ownership or use of property (e.g. automobile insurance), insurance for a specified disease or illness, and insurance that pays a fixed amount per day (or other period) for hospitalization.

In addition to permitted insurance, an individual does not fail to be eligible for an HSA merely because, in addition to an HDHP, the individual has coverage (whether provided through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care. 

For 2009:

The maximum annual contribution to an HSA is the sum of the limits determined separately for each month, based on status, eligibility and health plan coverage as of the first day of the month.

The maximum monthly contribution for eligible individuals with self-only coverage under an HDHP is 1/12 of the lesser of 100% of the annual deductible under the HDHP (minimum $1,150) or $3,000. 

The maximum monthly contribution for eligible individual with family coverage under an HDHP is 1/12 of the lesser of 100% of the annual deductible under the HDHP (minimum $2,300) or $5,950.

Catch-up contributions can be made on behalf of individuals between the age of 55 and 65.  For 2007, the catch-up contribution is $800.

How to calculate your contribution?

a)  Amount of Annual deductible based on your coverage   $____________  
b)  Amount of Maximum contribution limit based on your  coverage  $____________ 
c)  The lesser of (a) or (b) is your annual allowable contribution.  $____________ 
d)  (c) divided by 12   $____________
e)  (d) times the number of months your H.S.A. will be in effect on the 1st day of the month.  This will be the amount you may contribute this year  $____________

Example:  You established your HSA on October 15, 2007.  Your HSA was in effect for the two 1st days of the month.  Your calculation will be your annual contribution allowed divided by 12 times two.  This will be the amount you may contribute for 2007.

If each spouse has family coverage under a separate health plan, and both plans qualify as an HDHP, then both spouses are treated as covered under the plan with the lowest deductible and the contributions should be calculated that way.  If both spouses covered under an HDHP have HSA plans, the maximum amount of contribution will be shared between the spouses.  Spouses cannot contribute the maximum contribution limit to each of their HSA's.  However, each spouse can contribute the catch-up amount, if eligible, to his or her individual accounts. 

The individual should determine if they are eligible for an HSA.  For more complete details on an HSA go the U.S. Department of Treasury's website at www.ustreas.gov.

To establish an SMA-HSA:

The individual must complete and sign:
1) Health Savings Account Custodial Agreement
2) HSA Beneficiary Form
3) Disclaimer Certification Form
4) Consent of Spouse for Community Property State if applicable)
5) Submit initial contribution of $100 (minimum)
6) Submit Enrollment Fee to SMA Services, Inc., P.O. Box 190088, Birmingham, AL 35219.  No account will be set up before the enrollment fee is received.

All administrative fees will be billed to accounts that have a balance on January 1st.

The SMA-HSA is invested with Prudential Financial.  The account will be invested in a money market account with a fluctuating daily interest rate.

Please remember SMA cannot make the determination of your eligibility to participate in an HSA.  We can only provide the guidelines.  As with all tax matters please consult your Tax Advisor or your Financial Consultant.