IRS: Archer MSA Usage Well Below Program Cutoff Limits

January 26, 2005 (PLANSPONSOR.com) - Because use of the Archer Medical Savings Account (MSA) has turned out to be far below the statutory ceiling set by federal law, the federal government is not cutting off the Archer MSA pilot project as of February 1, 2005.

The Internal Revenue Service revealed in announcement 2005-12 that the applicable number of Archer MSA returns filed for 2003 is 60,832 and that the applicable number of Archer MSA returns projected to be filed for 2004 is 56,492 – well below the 750,000 annual returns set in order to trigger a legislatively mandated cutoff of Archer MSA availability.

Sections 220(i) and (j) of the Internal Revenue Code provide that if the number of Archer Medical Savings Account (Archer MSA) returns filed for 2003 or a statutorily specified projection of the number of Archer MSA returns that will be filed for 2004 exceeds 750,000, then February 1, 2005, is a “cutoff” date for the Archer MSA pilot project.

In determining whether any calendar year is a cutoff year, the Archer MSA of any previously uninsured individual is not taken into account. In addition, to the extent practical, all Archer MSAs established by an individual are aggregated and 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, officials said.

The Archer MSA project came from the Health Insurance Portability and Accountability Act of 1996 (HIPAA). As amended by The Working Families Tax Relief Act of 2004 (WFTRA) , Archer MSAs had a scheduled cutoff year of 2005, but could be stopped earlier if usage washigher than numerical limitations.

Questions regarding this announcement may be directed to Elizabeth Purcell in the Office of Division Counsel/Associate Chief Counsel at (202) 622-6080.

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