IRS Releases More Guidance
On Health Savings Accounts
By
The Internal Revenue Service has made good on promises to rush out a second batch of guidance on health savings accounts.
One document in the new round of guidance, IRS Notice 2004-23, describes the kinds of services that sellers of HSA-compatible policies can treat as preventive care.
Other documents, Notice 2004-25, Revenue Ruling 2004-38 and Revenue Procedure 2004-22, create “transition relief” rules and procedures for taxpayers who have low-deductible prescription drug benefits or have a hard time finding custodians willing to take HSA assets.
U.S. Treasury Secretary John Snow says officials at the IRS and other Treasury divisions “are interested in making sure HSAs are as widely used and available as permitted by law.”
President Bush brought HSAs to life Dec. 8, 2003, when he signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003. One section of the law lets eligible taxpayers who buy high-deductible health insurance policies exclude HSA contributions from taxable income and spend HSA cash on qualified expenses without paying income taxes on the distributions.
The high-deductible health insurance policies can offer special low-deductible coverage for certain types of preventive care.