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Publication 969, Health Savings Accounts and Other Tax-Favored

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Publication 969, Health Savings Accounts and Other Tax-Favored Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 10 Draft Ok to Print AH XSL/XML Fileid: … tions/P969/2020/A/XML/Cycle04/source (Init. & Date) _______ Page 1 of 23 12:41 - 12-Feb-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Contents Internal Revenue Service What’s New .............................. 1 Publication 969 Reminders ............................... 2 Cat. No. 24216S Introduction .............................. 2 Health Savings Accounts (HSAs) .............. 3 Health Savings Medical Savings Accounts (MSAs) ........... 11 Archer MSAs .......................... 11 Accounts Medicare Advantage MSAs ................ 16 Flexible Spending Arrangements (FSAs) ....... 16 and Other Health Reimbursement Arrangements (HRAs) .............................. 18 Tax-Favored How To Get Tax Help ...................... 19 Health Plans Index .................................. 23 Future Developments For use in preparing For the latest information about developments related to Returns Pub. 969, such as legislation enacted after it was 2020 published, go to IRS.gov/Pub969. What’s New The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P. L. 116-136, March 27, 2020) made the following changes. HSA. • Telehealth and other remote care coverage with plan years beginning before 2022 is disregarded for deter- mining who is an eligible individual. • A high deductible health plan (HDHP) year beginning before 2022 may have a $0 deductible for telehealth and other remote care services. • Over-the-counter medicine (whether or not prescri- bed) and menstrual care products are treated as med- ical care for amounts paid after 2019. Archer MSA. • Over-the-counter medicine (whether or not prescri- bed) and menstrual care products are treated as med- ical care for amounts paid after 2019. Health FSA. • Over-the-counter medicine (whether or not prescri- bed) and menstrual care products are treated as med- ical care for amounts incurred after 2019. HRA. • Over-the-counter medicine (whether or not prescri- Get forms and other information faster and easier at: bed) and menstrual care products are treated as med- • IRS.gov (English) • IRS.gov/Korean (한국어) ical care for amounts incurred after 2019. • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt) Feb 11, 2021 Page 2 of 23 Fileid: … tions/P969/2020/A/XML/Cycle04/source 12:41 - 12-Feb-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. The IRS will provide any further updates as soon as they are available at IRS.gov/Coronavirus. Introduction The Consolidated Appropriations Act (P. L. 116-260, December 27, 2020) provides for the following optional Various programs are designed to give individuals tax ad- plan amendments. vantages to offset health care costs. This publication ex- • A health FSA may allow participants to carry over plains the following programs. unused benefits from a plan year ending in 2020 to a • Health Savings Accounts (HSAs). plan year ending in 2021 and from a plan year ending Medical Savings Accounts (Archer MSAs and Medi- in 2021 to a plan year ending in 2022. • care Advantage MSAs). • A health FSA may extend the grace period for using Health Flexible Spending Arrangements (FSAs). unused benefits for a plan year ending in 2020 or • 2021 to 12 months after the end of the plan year. • Health Reimbursement Arrangements (HRAs). • A health FSA may allow an individual who ceases An HSA may receive contributions from an eligible indi- participation in a health FSA during calendar year vidual or any other person, including an employer or a 2020 or 2021 to continue to receive reimbursements family member, on behalf of an eligible individual. Contri- from unused benefits through the end of the plan year butions, other than employer contributions, are deductible in which participation ceased and through any grace on the eligible individual’s return whether or not the indi- period. vidual itemizes deductions. Employer contributions aren’t included in income. Distributions from an HSA that are For plan years ending in 2021, a health FSA may • used to pay qualified medical expenses aren’t taxed. allow an employee to make an election to modify An Archer MSA may receive contributions from an eligi- prospectively the amount (but not in excess of any ble individual and his or her employer, but not both in the applicable dollar limitation) of the employee's same year. Contributions by the individual are deductible contributions to the health FSA (without regard to any whether or not the individual itemizes deductions. Em- change in status). ployer contributions aren’t included in income. Distribu- See also Notice 2020-29, 2020-22 I.R.B. 864, and tions from an Archer MSA that are used to pay qualified Notice 2020-33, 2020-22 I.R.B. 868, available at medical expenses aren’t taxed. IRS.gov/pub/irs-irbs/irb20-22.pdf for additional A Medicare Advantage MSA is an Archer MSA desig- information. nated by Medicare to be used solely to pay the qualified Health Flexible Spending Arrangements (FSAs) limi- medical expenses of the account holder who is enrolled in tation. Salary reduction contributions to your health FSA Medicare. Contributions can be made only by Medicare. for 2020 are limited to $2,750 a year. This inflation adjus- The contributions aren’t included in your income. Distribu- ted amount is listed in Revenue Procedure 2019-44, sec- tions from a Medicare Advantage MSA that are used to tion 3.17, available at IRS.gov/pub/irs-drop/rp-19-44. pay qualified medical expenses aren’t taxed. A health FSA may receive contributions from an eligible individual. Employers may also contribute. Contributions aren’t includible in income. Reimbursements from an FSA Reminders that are used to pay qualified medical expenses aren’t taxed. Affordable Care Act guidance. Notice 2013-54, An HRA must receive contributions from the employer 2013-40 I.R.B. 287, available at IRS.gov/irb/2013-40_IRB/ only. Employees may not contribute. Contributions aren’t ar11.html, provides guidance for employers on the appli- includible in income. Reimbursements from an HRA that cation of the Affordable Care Act (ACA) to FSAs and are used to pay qualified medical expenses aren’t taxed. Health Reimbursement Arrangements (HRAs). For more information on the ACA, go to IRS.gov/ Comments and suggestions. We welcome your com- Affordable-Care-Act. ments about this publication and suggestions for future Photographs of missing children. The Internal Reve- editions. nue Service is a proud partner with the National Center for You can send us comments through IRS.gov/ Missing & Exploited Children® (NCMEC). Photographs of FormComments. Or, you can write to the Internal Reve- missing children selected by the Center may appear in nue Service, Tax Forms and Publications, 1111 Constitu- this publication on pages that would otherwise be blank. tion Ave. NW, IR-6526, Washington, DC 20224. You can help bring these children home by looking at the Although we can’t respond individually to each com- photographs and calling 1-800-THE-LOST ment received, we do appreciate your feedback and will (1-800-843-5678) if you recognize a child. consider your comments and suggestions as we revise our tax forms, instructions, and publications. Do not send tax questions, tax returns, or payments to the above ad- dress. Getting answers to your tax questions. If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go Page 2 Publication 969 (2020) Page 3 of 23 Fileid: … tions/P969/2020/A/XML/Cycle04/source 12:41 - 12-Feb-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. to the IRS Interactive Tax Assistant page at IRS.gov/ Qualifying for an HSA Help/ITA where you can find topics by using the search feature or viewing the categories listed. To be an eligible individual and qualify for an HSA, you Getting tax forms, instructions, and publications. must meet the following requirements. Visit IRS.gov/Forms to download current and prior-year • You are covered under a high deductible health plan forms, instructions, and publications. (HDHP), described later, on the first day of the month. Ordering tax forms, instructions, and publications. • You have no other health coverage except what is Go to IRS.gov/OrderForms to order current forms, instruc- permitted under Other health coverage, later. tions, and publications; call 800-829-3676 to order You aren’t enrolled in Medicare. prior-year forms and instructions. The IRS will process • your order for forms and publications as soon as possible. • You can’t be claimed as a dependent on someone Do not resubmit requests you’ve already sent us. You can else’s 2020 tax return. get forms and publications faster online. Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last Health Savings Accounts month of your tax year (December 1 for most taxpayers). (HSAs) If you meet these requirements, you are an eligible indi- vidual even if your spouse has non-HDHP family cover- A Health Savings Account (HSA) is a tax-exempt trust or age, provided your spouse’s coverage doesn’t cover you. custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. Also, you may be an eligible individual even if you re- You must be an eligible individual to qualify for an HSA. ceive hospital care or medical services under any law ad- ministered by the Secretary of Veterans Affairs for a serv- No permission or authorization from the IRS is neces- ice-connected disability.
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