The 2012 HSA Limit refers to the Annual Contribution Limit for Health Savings Accounts (HSA) which is set every year by the IRS.  The Internal Revenue Service has announced 2012 HSA Limits inflation adjusted deduction limitations for annual contributions made to a health savings account (HSA) under section 223.

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Health Savings Accounts are tax-favored accounts set up with banks and certain other qualified financial institutions. These accounts are designed to pay current medical expenses and to build savings to pay for future medical expenses.

Annual HSA Contributions, which can be made either by an individual or by that individual’s employer, are tax deductible. Distributions for qualified medical expenses are not included in individual taxable income, and the earnings of HSA assets are not taxed.

2012 HSA Limits for Contributions

2012 HSA Limit for Individual Coverage

The 2012 maximum annual amount that can be contributed to an HSA is $3,100 for an individual, up $50 from $3,050 in 2011.

2012 HSA Limits for Family Coverage

The 2012 maximum annual amount that can be contributed to an HSA is $6,250 for families,  up $100 from $6,150 in 2011.

2012 HSA Limits for Catch-Up Contributions

Persons over age 55 are entitled to an additional annual catch-up contribution of $1,000 in 2012—a number that unchanged from 2011.

To avoid taxation, any HSA distribution must be for qualified medical expenses, which include:

• amounts paid for medical care for the account holder or his or her spouse or dependent, who are not reimbursed by insurance;
• COBRA health insurance premiums; qualified long-term care insurance premiums;
• and other health insurance premiums, but only if the individual is receiving unemployment compensation.

Individuals can cash out their HSAs for purposes other than medical expenses, but these distributions are subject to both income tax and a 10 percent penalty tax if received before age 65 (except in cases of disability or death). Unused amounts in one year can be carried over to following years and added to subsequent contributions.

HSA Limit 2012 for High-Deductible Health Plans

HSAs are only available to individuals who are covered by a high-deductible health insurance plan, which means a plan that (in 2012)

• has an annual deductible of not less than $1,200 for individuals (or $2,400 for families); and
• has required out-of-pocket maximums of not more than $6,050 for individuals (or $12,100 for families).

These limits are unchanged from 2011. Persons who are covered by health care plans that do not have high deductibles, by Medicare, or by a Veterans Administration health plan are not eligible for an HSA.

HSA Limit 2012 Summary

The IRS has allowed a modest inflation adjustment for HSA Limit 2012.  Any contribution limit increase is welcomed by individuals and families with Health Savings Accounts. The idea behind HSAs and their predecessors, the Archer Medical Savings Accounts (MSAs), is that persons covered under these high-deductible plans shoulder more of their own medical costs but enjoy correspondingly lower medical insurance premiums. The savings in premium expense can be contributed to an HSA and applied to out-of-pocket medical expenses.

For more information about HSA Limit 2012 or to establish an HSA-qualified health insurance plan, please contact us.

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