Health Savings Accounts (HSAs) involve individuals and businesses buying less expensive health insurance policies with high deductibles, and contributions to the accounts are made on a pre-tax basis. The money can accumulate year after year tax free, and be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term-care insurance.

Participating Maine employers can also contribute to accounts, on behalf of their employees.

Here are the 2017 limits for individual and family coverage, which were announced by the IRS in Revenue Procedure 2016-28. They are determined after the IRS applies cost-of-living adjustment rules, and the changes in the Consumer Price Index for the relevant period.

• HSA Contribution Limits. The 2017 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,400 (up from $3,350 for 2016), and the limit for individuals with family HDHP coverage is $6,750 (unchanged from 2016).
• High-Deductible Health Plan (HDHP) Minimum Required Deductibles.The 2017 minimum annual deductible for self-only HDHP coverage is $1,300 (unchanged from 2016) and the minimum annual deductible for family HDHP coverage is $2,600 (unchanged from 2016).
• HDHP Out-of-Pocket Maximums.The 2017 maximum limit on out-of-pocket expenses (including items such as deductibles, copayments, and coinsurance, but not premiums) for self-only HDHP coverage is $6,550 (unchanged from 2016), and the limit for family HDHP coverage is $13,100 (unchanged from 2016).

The Benefits of an HSA

• Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
• You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don’t itemize your deductions on Form 1040.
• The interest or other earnings on the assets in the account are tax free.
• Distributions may be tax free if you pay qualified medical expenses.
• The contributions remain in your account until you use them.
• An HSA is “portable.” It stays with you if you change employers or leave the work force.

Qualifying for an HSA

You must meet the following requirements to be an eligible individual and qualify for an HSA:

• You generally have no other health coverage except what is permitted under regulations. (Exceptions include dental, vision, long-term care, accident and specific disease insurance.)
• You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You cannot be claimed as a dependent on someone else’s tax return.
• You aren’t enrolled in Medicare.

Contact your employee benefits and tax adviser for more information about HSAs.