The Internal Revenue Service is giving residents of states with strict health insurance benefits mandates a temporary chance to set up health savings accounts.[@@]
For now, when the IRS decides whether a health insurance plan qualifies as an HSA-compatible “high-deductible” plan, it will ignore state-mandated health benefits, according to IRS Notice 2004-43.
Shoshanna Tanner, the IRS associate chief counsel who wrote the notice, says the transition relief period will end Jan. 1, 2006.
President Bush brought HSAs to life Dec. 8, 2003, when he signed the Medicare Prescription Drug, Improvement and Modernization Act. One MPDIMA section 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 minimum 2004 HSA deductible is $1,000 for individuals and $2,000 for families.