MSA - Medical Savings Accounts
MSAs or Medical Savings Accounts are the predecessors of HSAs (Health Savings Accounts). MSAs were first created in the early 1990s by several states and in 1996 they became a Federal pilot program within the Health Insurance Portability and Accountability Act (HIPAA). They are called Archer MSAs, named after Bill Archer, the congressman who sponsored the amendment creating them.
Following the passage of the Federal MSA legislation a total of 26 states passed similar MSA laws. They were Arizona, Arkansas, California, Colorado, Florida, Idaho, Illinois, Indiana, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Utah, Virginia, Washington, West Virginia and Wisconsin.
MSAs are very similar to HSAs — they both are tax deductible savings accounts that can be used for a wide range of health expenses without tax or penalty; they both require the coupling of a high deductible health insurance plan with the account; and, they both serve as retirement accounts that can be drawn from without penalty at age 65 and older. However, there are some key differences.
MSA versus HSA
- MSA qualified health insurance plans generally had to have a minimum deductible level of $1,700 for an individual and $3,450 for families.
- HSA qualified, High Deductible Health Plans (HDHP) have a minimum deductible requirement of $1,250 for individuals and $2,500 for families for 2014.
- MSAs limited annual contributions to no more than 65% of the health plans deductible for individuals and 75% for families.
- HSA contribution limits are set each year and eligible individuals and families can contribute up to 100% of the allowable contribution. For 2014, this is $3,300 for individuals and $6,550 for families. In addition, HSAs allow for catch-up contributions of $1,000 for eligible individuals between the age of 55 and 65 — more on HSA contribution limits.
- Medical Savings Accounts could be funded by the individual or by their employer; however, it could not be funded by both.
- Health Savings Account can be funded by individuals, their employers or both.
- MSAs were limited to self employed or employer groups with 50 or less employees who were enrolled in an HDHP and met the other eligibility requirements.
- HSA are available to any eligible individual with an HDHP regardless of whether they are currently working, self-employed or employed by a small or large company — more on HSA eligibility requirements.
- MSAs were a pilot program that had to be reauthorized by Congress annually. MSAs were discontinued on December 31, 2005.
- HSAs were established as a permanent feature of the tax code.