• Eligible individuals: Anyone who is covered under a high deductible health plan (HDHP), not covered by other health insurance, not eligible for Medicare, and can't be claimed as a dependent on someone else's tax return.

  With self-only coverage the plan must have an annual deductible of at least $1,000.00 and annual out-of-pocket expenses not exceeding $5,000.00.

  Family coverage has an annual deductible of at least $2,000.00 and annual out-of-pocket expense not exceeding $10,000.00.

• Contribution limits for 2005:
  Single: $2,650.00 or the deductible minimum, whichever is less
  Family: $5,250.00 or the deductible minimum, whichever is less

  Individuals age 55 and older may make additional "catch-up" contributions. The additional amount of these deposits increases yearly from $600.00 in 2005 to a cap of $1,000.00 in 2009 and after.

• There are no restrictions on who may make a contribution to a HSA on behalf of the eligible individual.

• Deposits may be made in a lump sum or in installments.

• Tax treatment: Individual contributions are deductible by the eligible individual when determining their adjusted gross income.

  Employer contributions are deductible for the employer, but are not subject to FICA, FUTA, or RRTA.

• If all funds are not dispersed in one year, balances may accrue and be used when needed. Individuals may name a beneficiary.

  Spouse beneficiaries may treat the HSA as their own and have no tax liability if funds are used for qualified medical expenses.

  Nonspouse beneficiaries must include the fair market value of the HSA in his or her income for the year of the death.

*** Lauderdale County Bank does not present this information as tax advice. You should consult your own tax professional for this type of information. These talking points are meant to provide basic information in order to make a decision of whether a HSA would be beneficial to you. Please contact Shea Harris for further details.