Tax News:

Congress Approves Expansion of the Archer Medical Savings Accounts (MSAs) (August 4th, 2001)

The Bipartisan Patient Protection Act has made it possible for the Archer MSAs to be available to all taxpayers. Under the present law, they are only available to self-employed individuals. A very successful pilot program, MSAs were created to offset the cost of overall medical coverage for the self employed but their overwhelming success has prompted this piece of legislature to make their availability wide spread to all Americans. Democrats were afraid that the overall cost of medical coverage would go up if a lot of Americans flocked to MSAs as a tax sheltered entity, not because they really needed them.

All contributions to MSAs are tax deductible and tax free withdrawals for medical expenses. The funds carry from year to year. They were first made available to individuals and small businesses with insurance policies with high deductibles. Contributions could be made by either the employer or the employee but not in the same year.

The new bill no longer requires the MSAs to be constituted in companies with higher deductibles than the others. The deductibles for single individuals have a minimum threshold of $1,600 and for family coverage $3,200. Under the new bill, minimum threshold for deductibles for single individuals will be $1,000 and $2,000 for family coverage. This would help more taxpayers lower the cost of their medical coverage. 100 percent of the deductible can be contributed to MSAs instead of 65 percent for single individuals and 75 percent for family coverage. Also, MSAs can now be offered under Cafeteria plans.

To find out more about MSAs, read this article, Medical Savings Accounts (provide a link here for the article from our website).