Archer MSA Usage Lags Limit; Program Not Cut Off

September 30, 2002 ( - Because of the relatively low level of taxpayer usage of Archer Medical Savings Accounts (MSA), the government is not cutting off the program as of Tuesday.

According to Internal Revenue Service (IRS) announcement 2002-90, the service has determined that 21,079 tax returns with an MSA deduction were filed in 2001 and a projected 59,151 will be submitted for 2002. Since neither exceeds the statutorily set limit of 750,000, the IRS announced that the MSA deductions would still be available beyond October 1, 2002.

Congress had directed the IRS to cut off the deductions for personal medical expenses by Tuesday if more than 750,000 people took advantage of them.

By law, the usage figures do not include taxpayers who have been without health insurance. Also, two married individuals opening separate Archer MSAs are to be treated as having a single Archer MSA for purposes of determining the number of Archer MSAs, the IRS said.

The Health Insurance Portability and Accountability Act (HIPAA) of 1996 authorized eligible taxpayers to establish Archer MSAs under a pilot project effective January 1, 1997. The pilot project, as amended by The Job Creation and Worker Assistance Act of 2002 has a scheduled cut-off year of 2003, but may have an earlier cut off if usage exceeds the legal limit.

The IRS said questions about the Archer MSA program can be directed to Shoshanna Chaiton in the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) at (202) 622-6080.