Merritt Personal Lines Manual: Medicare Advantage MSAs
A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and have a high deductible health plan (HDHP) that meets the Medicare guidelines.
A Medicare Advantage MSA is a tax-exempt trust or custodial savings account that you set up with a financial institution (such as a bank or an insurance company) in which the Medicare program can deposit money for qualified medical expenses. The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends.
An HDHP is a special health insurance policy that has a high deductible. You choose the policy you want to use as part of your Medicare Advantage MSA plan. However, the policy must be approved by the Medicare program.
At the time this publication went to print, no HDHP had been approved by Medicare. Therefore, no Medicare Advantage MSAs have been established to date.
Medicare Advantage MSAs are administered through the federal Medicare program. You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www.medicare.gov.
Flexible Spending Arrangements (FSAs)
A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution. The employer may also contribute.
For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier.
What are the benefits of an FSA? You may enjoy several benefits from having an FSA.
- Contributions made by your employer can be excluded from your gross income.
- No employment or federal income taxes are deducted from the contributions.
- Withdrawals may be tax free if you pay qualified medical expenses. See Qualified medical expenses, later.
- You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account.
