Internal Revenue Notice 2004-50

Internal Revenue Notice 2004-50 — Health Savings Accounts

Part III – Administrative, Procedural, and Miscellaneous

PURPOSE

This notice provides guidance on Health Savings Accounts.

BACKGROUND

Section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, added section 223 to the Internal Revenue Code to permit eligible individuals to establish Health Savings Accounts (HSAs) for taxable years beginning after December 31, 2003. Notice 2004-2, 2004-2 I.R.B. 269, provides certain basic information on HSAs in question and answer format. This notice addresses additional questions relating to HSAs.1

OUTLINE TABLE OF CONTENTS

The following is an outline of the questions and answers covered in this notice:

I. Eligible Individuals

Q&A 1. Choice between low-deductible health plan and HDHP

Q&A 2. Eligible for Medicare and contributions to HSA

Q&A 3. Eligible for Medicare and catch- up contributions

Q&A 4. Government retiree and enrollment in Medicare Part B

Q&A 5. Eligible for medical benefits from VA

Q&A 6. Coverage under TRICARE

Q&A 7. HDHP and coverage for one or more specific diseases or illnesses

Q&A 8. Permitted insurance and insurance contracts

Q&A 9. HDHP and discount cards

Q&A 10. Employee Assistance Programs (EAPs), disease management programs and wellness programs

Q&A 11. Payroll period other than a calendar month

 

II. High Deductible Health Plans (HDHPs)

Q&A 12. Family HDHP coverage defined

Q&A 13. State high-risk pools and HDHPs

Q&A 14. Lifetime limit on benefits under HDHPs

Q&A 15. Annual and lifetime limit on specific benefits under HDHPs

Q&A 16. Payments in excess of usual, customary and reasonable (UCR) amounts

Q&A 17. HDHPs without express limit on out-of-pocket expenses

Q&A 18. HDHPs and pre-certification requirements

Q&A 19. HDHPs and increased coinsurance payments

Q&A 12. Family HDHP coverage defined

Q&A 13. State high-risk pools and HDHPs

Q&A 14. Lifetime limit on benefits under HDHPs

Q&A 15. Annual and lifetime limit on specific benefits under HDHPs

Q&A 16. Payments in excess of usual, customary and reasonable (UCR) amounts

Q&A 17. HDHPs without express limit on out-of-pocket expenses

Q&A 18. HDHPs and pre-certification requirements

Q&A 19. HDHPs and increased coinsurance payments

 

1 Specific issues on HSAs are also discussed in Rev. Rul. 2004-45, 2004-22 I.R.B. 971; Rev. Rul. 2004-38,

2004-15 I.R.B. 717; Rev. Proc. 2004-22, 2004-15 I.R.B. 727; Notice 2004-43, 2004-27 I.R.B. 10;

Notice 2004-25, 2004-15 I.R.B. 727; Notice 2004-22, 2004-15 I.R.B. 725.

 

Q&A 20. Cumulative embedded deductibles and out-of-pocket maximum

Q&A 21. Amounts incurred before satisfying deductible and out-of-pocket maximum

Q&A 22. Deductible credit for short year

Q&A 23. Deductible credit after changes in category of coverage

Q&A 24. HDHP deductible and coverage period longer than 12 months

Q&A 25. HDHPs and discounted prices

 

III. Preventive Care

Q&A 26. Preventive care and treatment of related conditions

Q&A 27. Drugs or medications as preventive care

 

IV. Contributions

Q&A 28. Contributions on behalf of eligible individuals

Q&A 29. State government contributions and high-risk pools

Q&A 30. Calculating maximum HSA contributions for family coverage

Q&A 31. Contribution rules for family HDHP coverage and ineligible individuals

Q&A 32. Dividing HSA contributions between spouses

Q&A 33. Contribution limit if covered by both HDHP and post-deductible HRA

Q&A 34. Computation of net income on HSA excess contributions

Q&A 35. Withdrawal of nonexcess HSA contributions

V. Distributions

Q&A 36. Distributions for spouse or dependents covered under non-HDHP

Q&A 37. Mistaken HSA distributions

Q&A 38. Use of distributions where both spouses have HSAs

Q&A 39. Deferred distributions for expenses incurred in prior years

Q&A 40. Distributions for qualified long-term care insurance premiums

Q&A 41. Deduction limits under section 213(d)(10)

Q&A 42. Distributions for long-term care services

Q&A 43. Distributions for retiree’s self- insured retiree coverage

Q&A 44. Distributions to pay health insurance premiums by

individuals with end stage renal disease (ESRD) or disability

Q&A 45. Distributions to pay Medicare premiums

 

VI. Comparability

Q&A 46. Matching employees’ HSA contributions

Q&A 47. Matching contributions under cafeteria plans

Q&A 48. Comparability and health assessments, disease management or wellness

programs

Q&A 49. Comparability and health assessments, disease management or wellness

programs under a cafeteria plan

Q&A 50. Comparability and catch-up contributions

Q&A 51. Comparability and full-time employees working less than 12 months

Q&A 52. Testing period for making comparable contributions

Q&A 53. Comparability and eligible individuals’ coverage under employer’s HDHP

Q&A 54. Comparability and after-tax employee contributions

 

VII. Rollovers

Q&A 55. Frequency of rollovers

Q&A 56. Trustee-to-trustee transfers

 

VIII. Cafeteria Plans and HSAs

Q&A 57. FSA requirements and HSAs

Q&A 58. Section 125 change in status rules

Q&A 59. HSA offered as new benefit under cafeteria plan

Q&A 60. Accelerated HSA contributions by employer

Q&A 61. Negative elections for HSAs

 

IX. Account Administration

Q&A 62. Model forms for HSAs

Q&A 63. No joint HSA for husband and wife

Q&A 64. Multiple HSAs

Q&A 65. Permissible investments for HSAs

Q&A 66. Commingling HSA funds

Q&A 67. Prohibited transactions and account beneficiaries

Q&A 68. Prohibited transactions and trustees or custodians

Q&A 69. Administration fees withdrawn from an HSA

Q&A 70. Administration fees and contribution limits

Q&A 71. Administration fees paid directly

 

X. Trustees and Custodians

Q&A 72. Insurance company qualifying as HSA trustee or custodian

Q&A 73. Limit on annual HSA contributions acceptable by trustee or custodian

Q&A 74. Tracking maximum annual contribution limit for a particular account

beneficiary

Q&A 75. Tracking account beneficiary’s age

Q&A 76. Return of mistaken distributions

Q&A 77. No restrictions on rollovers from HSA

Q&A 78. Acceptance of rollover contributions

Q&A 79. No restrictions on HSA distributions for qualified medical expenses

Q&A 80. Restrictions on frequency or amount of distributions

 

XI. Other Issues

Q&A 81. Determining eligibility and contribution limits by employer

Q&A 82. Recoupment of HSA contributions by employer

Q&A 83. HSAs and section 105(h)

Q&A 84. HSA contributions and SECA tax

Q&A 85. HSA contributions and the EIC

Q&A 86. HDHP and cost-of- living adjustments

Q&A 87. HSAs and bona- fide residents of Commonwealth of Puerto Rico, American Samoa,

the U.S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands

Q&A 88. C corporation contributions to HSAs of shareholders

See Also:

  • Internal Revenue Ruling 2004-2 — Health Savings Accounts
  • Internal Revenue Notice 2004-23 — Health Savings Accounts
  • Internal Revenue Notice 2004-25 — Health Savings Accounts
  • Internal Revenue Ruling 2004-38 — Health Savings Accounts
  • Internal Revenue Procedure 2004-22 — Health Savings Accounts
  • Internal Revenue Notice 2004-50 — Health Savings Accounts
  • Employer Comparable Contributions……..Section 4980G
  • Statute HR 6111 (Tax Relief And Health Care Act of 2006)

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