Common use of Qualified HSA Funding Distribution Clause in Contracts

Qualified HSA Funding Distribution. Beginning for contributions made for 2007 and thereafter, a special one-time, tax-free transfer from an IRA to an HSA is permitted. This one-time transfer counts toward the eligible individual’s HSA contribution limit for the year of the transfer. Prior to 2007, if an IRA owner wanted to use the money in an IRA to make an annual HSA contribution, the distribution from the IRA was taxable and subject to the 10% additional tax if the individual was under the age of 59½. Prior law did not provide for a tax-free transfer from an IRA to an HSA. Beginning for annual HSA contributions made for 2007 or thereafter, an HSA-eligible individual may make an irrevocable once-in-a-lifetime, tax-free “Qualified HSA Funding Distribution” from an IRA to an HSA, subject however to strict requirements. The amount of the HSA funding distribution must be made in the form of a trustee-to-trustee transfer from the IRA to the HSA. The amount of the transfer cannot exceed the maximum HSA contribution limit for the year that the amount is transferred. Consequently, this one-time transfer from an IRA to an HSA counts toward the individual’s total HSA contribution limit for the year depending upon the type of coverage under the HDHP (self-only or family). However, a special rule applies in the year of the initial transfer. If the individual has self-only coverage under the HDHP and makes a transfer under this rule from an IRA to an HSA, and then changes to family coverage under the HDHP in that same year, an additional transfer can be made to bring the individual up to the amount of the family coverage contribution limit, but must do so in the same year. Also, the IRA cannot be a SEP or SIMPLE. This one-time transfer is different from the one-time transfer from an FSA or HRA discussed later. Whereas the FSA or HRA transfer does not count against the individual’s HSA contribution limit for the year, a transfer from the individual’s IRA does count toward the HSA contribution limit. Also, the amount transferred cannot be deducted as an HSA contribution because the amount transferred is not a taxable distribution from the IRA. Moreover, unlike the FSA or HRA transfers, there is no deadline to make this one-time transfer from an IRA to an HSA. The amount transferred from the IRA to the HSA will be treated as coming first from the taxable portion of the IRA. Thus, this will be an exception to the normal pro-rata taxation rules applicable to traditional IRAs. However, if the individual ceases to be an HSA-eligible individual during the “testing period”, the amount transferred is taxable and subject to the 10% additional tax if the individual is under the age of 59½ unless the individual dies or becomes disabled. For this purpose, the testing period begins with the month in which the qualified HSA funding distribution is contributed to an HSA and ends on the last day of the 12th month following such month. Other General Rules HSA contributions may be made regardless of whether the eligible individual has compensation. The HSA contribution limit is reduced by any contributions for the year to an Xxxxxx MSA. If the Account Beneficiary has more than one HSA, the aggregate of all contributions are subject to the contribution limit. The taxpayer reports all contributions and distributions by submitting Form 8889 with his or her income tax return. If a penalty is due because of an excess contribution, Form 5329 must be completed in addition to Form 8889. Married Individuals Jointly-owned HSAs are not permitted. An HSA is established by or on behalf of an eligible individual. In the case of eligible individuals who are married to each other, if either spouse has family coverage, both are treated as having family coverage. If each spouse has family coverage under a separate health plan, both spouses are treated as covered under the plan with the lowest deductible. The total contribution limit for the spouses is divided equally between the spouses, unless they agree on a different division. The family coverage limit is reduced by any contribution to an Xxxxxx MSA. However, both spouses may make the catch-up contributions for individuals age 55 or over without exceeding the family coverage limit. There is no formal method specified how a married couple agrees on a different division of the total contribution amount. If only one spouse is an eligible individual, only that spouse may contribute to an HSA. Timing of HSA Contributions HSA contributions must be made for a calendar year no later than the due date for filing the taxpayer's Federal income tax return for such calendar year, not including extensions. Contributions for the taxable year can be made in one or more payments. The maximum contribution may be made on the first day of the year. Deduction Permitted If Contribution made by Eligible Individual or Another Individual If an eligible individual makes a contribution to an HSA, or another individual makes a contribution on behalf of an eligible individual, an “above-the-line” deduction is permitted by the eligible individual for the taxable year equal to an amount which is the aggregate amount paid in cash during such taxable year to an HSA, subject to the contribution limit. However, if the HSA eligible individual makes the one-time, tax-free transfer from an IRA to fund the HSA for the year, no deduction is permitted with respect to the amount transferred. Contributions made by an employer within the contribution limits of the HSA are not deductible by the eligible individual, but rather treated as employer-provided coverage for medical expenses and are excluded from income. HSA contributions are deductible whether or not the eligible individual itemized deductions. An individual who may be claimed as a dependent on another person’s tax return is not an eligible individual and may not deduct contributions to an HSA. HSA rules are applied without regard to community property laws. Employer Contributions to HSA Employer contributions to an HSA are not included in the compensation of the employee. The employer treats the HSA contributions as employer- provided coverage for medical expenses under an accident or health plan. The employer must report the amount of the HSA contribution on the employee's W-2 Form in accordance with IRS instructions for that form. Employer contributions to an HSA are not subject to withholding from wages for income tax purposes or subject to FICA, FUTA or the Railroad Retirement Tax Act. Contributions to an employee’s HSA through a cafeteria plan are treated as employer contributions. In this case, the employee cannot deduct employer HSA contributions on his or her Federal income tax return as HSA contributions or as medical expense deductions under section 213. If the employer chooses to make HSA contributions, then the employer is required to make comparable HSA contributions for all participating employees (i.e., eligible employees with comparable coverage) during the same period. A comparable HSA employer contribution is (1) the same dollar amount or

Qualified HSA Funding Distribution. Annual HSA contributions must be made in cash (except as noted below) and may be made by an eligible individual, any other person on behalf of an eligible individual, or the employer of an eligible individual during any given year. Rollover and/or transfer contributions may be made in cash. Beginning for with contributions made for 2007 and thereafter, a special one-time, tax-free transfer from an IRA to an HSA is permitted. This one-time transfer counts toward the eligible individual’s HSA contribution limit for the year of the transfer. Prior to 2007, if an IRA owner wanted to use the money in an IRA to make an annual HSA contribution, the distribution from the IRA was taxable and subject to the 10% additional tax if the individual was under the age of 59½. Prior law did not provide for a tax-free transfer from an IRA to an HSA. Beginning for with annual HSA contributions made for 2007 or thereafter, an HSA-eligible individual may make an irrevocable once-in-a-lifetime, tax-free “Qualified HSA Funding Distribution” from an IRA to an HSA, subject however subject, however, to strict requirements. The amount of the HSA funding distribution must be made in the form of a trustee-to-trustee transfer from the IRA to the HSA. The amount of the transfer cannot exceed the maximum HSA contribution limit for the year that the amount is transferred. Consequently, this one-time transfer from an IRA to an HSA counts toward the individual’s total HSA contribution limit for the year depending upon the type of coverage under the HDHP (self-only or family). However, a special rule applies in the year of the initial transfer. If the individual has self-only coverage under the HDHP and makes a transfer under this rule from an IRA to an HSA, and then changes to family coverage under the HDHP in that same year, an additional transfer can be made to bring the individual up to the amount of the family coverage contribution limit, but the individual must do so in the same year. Also, the IRA from which the transfer is made cannot be a SEP or SIMPLE. This one-time transfer is different from the one-time transfer from an FSA or HRA discussed later. Whereas the FSA or HRA transfer does not count against the individual’s HSA contribution limit for the year, a transfer from the individual’s IRA does count toward the HSA contribution limit. Also, the amount transferred cannot be deducted as an HSA contribution because the amount transferred is not a taxable distribution from the IRA. Moreover, unlike the FSA or HRA transfers, there There is no deadline to make this one-time transfer from an and IRA to an HSA. The amount transferred from the IRA to the HSA will be treated as coming first from the taxable portion of the IRA. Thus, this will be an exception to the normal pro-rata taxation rules applicable to traditional IRAs. However, if the individual ceases to be an HSA-eligible individual during the “testing period”, ,” the amount transferred is taxable and subject to the 10% additional tax if the individual is under the age of 59½ 59 ½ unless the individual dies or becomes disabled. For this purpose, the testing period begins with the month in which the qualified HSA funding distribution is contributed to an HSA and ends on the last day of the 12th month following such month. Other General Rules HSA contributions may be made regardless of whether the eligible individual has compensation. The HSA contribution limit is reduced by any contributions for the year to an Xxxxxx MSA. If the Account Beneficiary account beneficiary has more than one HSA, the aggregate of all contributions are subject to the contribution limit. The taxpayer reports all contributions and distributions by submitting Form 8889 with his or her income tax return. If a penalty is due because of an excess contribution, Form 5329 must be completed in addition to Form 8889. Married Individuals Jointly-owned HSAs are not permitted. An ; an HSA is established by or on behalf of an eligible individual. In the case of eligible individuals who are married to each other, if either spouse has family coverage, both are treated as having family coverage. If each spouse has family coverage under a separate health plan, both spouses are treated as covered under the plan with the lowest deductible. The total contribution limit for the spouses is divided equally between the spouses, unless they agree on a different division. The family coverage limit is reduced by any contribution to an Xxxxxx MSA. However, both spouses may make the catch-up contributions for individuals age 55 or over without exceeding the family coverage limit. There is no formal method specified for how a married couple agrees on a different division of the total contribution amount. If only one spouse is an eligible individual, only that spouse may contribute to an HSA. Timing of HSA Contributions HSA contributions must be made for a calendar year no later than the due date for filing the taxpayer's ’s Federal income tax return for such calendar yearreturn, not including extensions. Contributions for the taxable year can be made in one or more payments. The Although the annual contribution limit is determined monthly, the maximum contribution contributions may be made on the first day of the year. Deduction Permitted If Contribution made Made by Eligible Individual or Another Individual Family Member If an eligible individual makes a contribution to an HSA, or another individual makes a contribution on behalf of an eligible individual, an “above-the-above - the - line” deduction is permitted by the eligible individual for the taxable year equal to an amount which is the aggregate amount paid in cash during such taxable year to an HSA, subject to the contribution limit. However, if the HSA eligible individual makes the one-one- time, tax-free transfer from an IRA to fund the HSA for the year, no deduction is permitted with respect to the amount transferred. Contributions made by an employer within the contribution limits of the HSA are not deductible by the eligible individual, but rather treated as employer-provided coverage for medical expenses and are excluded from income. HSA contributions are deductible whether or not the eligible individual itemized deductions. An individual who may be claimed as a dependent on another person’s tax return is not an eligible individual and may not deduct contributions to an HSA. HSA rules are applied without regard to community property laws. Employer Contributions to HSA Employer contributions to an HSA are not included in the compensation of the employee. The employer treats the HSA contributions as employer- an employer-provided coverage for medical expenses under an accident or health plan. The employer must report the amount of the HSA contribution on the employee's ’s W-2 Form in accordance with IRS instructions for that form. Employer contributions to an HSA are not subject to withholding from wages for income tax purposes or subject to FICA, FUTA or the Railroad Retirement Tax Act. Contributions to an employee’s HSA through a cafeteria plan are treated as employer contributions. In this case, the The employee cannot deduct employer HSA contributions on his or her Federal income tax return as HSA contributions or as medical expense deductions under section 213Section 213 of the Code. If the employer chooses to make HSA contributions, then the employer is required to make comparable HSA contributions for all participating employees (i.e., eligible employees with comparable coverage) during the same period. A comparable HSA employer contribution is (1) the same dollar amount oror (2) the same percentage of the annual deductible under the high deductible health plan covering the employees divided into groups of “comparable coverage.” Comparable coverage can vary between self-only coverage, family coverage and part-time employees. A part-time employee means an employee who customarily works less than 30 hours per week. The comparability rule does not apply to amounts rolled over from an employee’s HSA or Xxxxxx MSA, or to contributions made through a cafeteria plan. If employer contributions do not comply with the comparability rule during a period, then the employer is subject to an excise tax equal to 35% of the aggregate amount contributed by the employer to HSAs for that period.

Qualified HSA Funding Distribution. Beginning for contributions made for 2007 and thereafter, a special one-time, tax-free transfer from an IRA XXX to an HSA is permitted. This one-time transfer counts toward the eligible individual’s HSA contribution limit for the year of the transfer. Prior to 2007, if an IRA XXX owner wanted to use the money in an IRA XXX to make an annual HSA contribution, the distribution from the IRA XXX was taxable and subject to the 10% additional tax if the individual was under the age of 59½. Prior law did not provide for a tax-free transfer from an IRA XXX to an HSA. Beginning for annual HSA contributions made for 2007 or thereafter, an HSA-eligible individual may make an irrevocable once-in-a-lifetime, tax-free “Qualified HSA Funding Distribution” from an IRA XXX to an HSA, subject however to strict requirements. The amount of the HSA funding distribution must be made in the form of a trustee-to-trustee transfer from the IRA XXX to the HSA. The amount of the transfer cannot exceed the maximum HSA contribution limit for the year that the amount is transferred. Consequently, this one-time transfer from an IRA XXX to an HSA counts toward the individual’s total HSA contribution limit for the year depending upon the type of coverage under the HDHP (self-only or family). However, a special rule applies in the year of the initial transfer. If the individual has self-only coverage under the HDHP and makes a transfer under this rule from an IRA XXX to an HSA, and then changes to family coverage under the HDHP in that same year, an additional transfer can be made to bring the individual up to the amount of the family coverage contribution limit, but must do so in the same year. Also, the IRA XXX cannot be a SEP or SIMPLE. This one-time transfer is different from the one-time transfer from an FSA or HRA discussed later. Whereas the FSA or HRA transfer does not count against the individual’s HSA contribution limit for the year, a transfer from the individual’s IRA XXX does count toward the HSA contribution limit. Also, the amount transferred cannot be deducted as an HSA contribution because the amount transferred is not a taxable distribution from the IRAXXX. Moreover, unlike the FSA or HRA transfers, there is no deadline to make this one-time transfer from an IRA XXX to an HSA. The amount transferred from the IRA XXX to the HSA will be treated as coming first from the taxable portion of the IRAXXX. Thus, this will be an exception to the normal pro-rata taxation rules applicable to traditional IRAs. However, if the individual ceases to be an HSA-eligible individual during the “testing period”, the amount transferred is taxable and subject to the 10% additional tax if the individual is under the age of 59½ unless the individual dies or becomes disabled. For this purpose, the testing period begins with the month in which the qualified HSA funding distribution is contributed to an HSA and ends on the last day of the 12th month following such month. Other General Rules HSA contributions may be made regardless of whether the eligible individual has compensation. The HSA contribution limit is reduced by any contributions for the year to an Xxxxxx MSA. If the Account Beneficiary has more than one HSA, the aggregate of all contributions are subject to the contribution limit. The taxpayer reports all contributions and distributions by submitting Form 8889 with his or her income tax return. If a penalty is due because of an excess contribution, Form 5329 must be completed in addition to Form 8889. Married Individuals Jointly-owned HSAs are not permitted. An HSA is established by or on behalf of an eligible individual. In the case of eligible individuals who are married to each other, if either spouse has family coverage, both are treated as having family coverage. If each spouse has family coverage under a separate health plan, both spouses are treated as covered under the plan with the lowest deductible. The total contribution limit for the spouses is divided equally between the spouses, unless they agree on a different division. The family coverage limit is reduced by any contribution to an Xxxxxx MSA. However, both spouses may make the catch-up contributions for individuals age 55 or over without exceeding the family coverage limit. There is no formal method specified how a married couple agrees on a different division of the total contribution amount. If only one spouse is an eligible individual, only that spouse may contribute to an HSA. Timing of HSA Contributions HSA contributions must be made for a calendar year no later than the due date for filing the taxpayer's Federal income tax return for such calendar year, not including extensions. Contributions for the taxable year can be made in one or more payments. The maximum contribution may be made on the first day of the year. Deduction Permitted If Contribution made by Eligible Individual or Another Individual If an eligible individual makes a contribution to an HSA, or another individual makes a contribution on behalf of an eligible individual, an “above-the-line” deduction is permitted by the eligible individual for the taxable year equal to an amount which is the aggregate amount paid in cash during such taxable year to an HSA, subject to the contribution limit. However, if the HSA eligible individual makes the one-time, tax-free transfer from an IRA XXX to fund the HSA for the year, no deduction is permitted with respect to the amount transferred. Contributions made by an employer within the contribution limits of the HSA are not deductible by the eligible individual, but rather treated as employer-provided coverage for medical expenses and are excluded from income. HSA contributions are deductible whether or not the eligible individual itemized deductions. An individual who may be claimed as a dependent on another person’s tax return is not an eligible individual and may not deduct contributions to an HSA. HSA rules are applied without regard to community property laws. Employer Contributions to HSA Employer contributions to an HSA are not included in the compensation of the employee. The employer treats the HSA contributions as employer- provided coverage for medical expenses under an accident or health plan. The employer must report the amount of the HSA contribution on the employee's W-2 Form in accordance with IRS instructions for that form. Employer contributions to an HSA are not subject to withholding from wages for income tax purposes or subject to FICA, FUTA or the Railroad Retirement Tax Act. Contributions to an employee’s HSA through a cafeteria plan are treated as employer contributions. In this case, the employee cannot deduct employer HSA contributions on his or her Federal income tax return as HSA contributions or as medical expense deductions under section 213. If the employer chooses to make HSA contributions, then the employer is required to make comparable HSA contributions for all participating employees (i.e., eligible employees with comparable coverage) during the same period. A comparable HSA employer contribution is (1) the same dollar amount or