An Archer Medical Savings Account (MSA) is a tax-favored savings account that helps eligible individuals pay qualified medical expenses. To qualify for an Archer MSA, you must meet specific eligibility requirements set by the IRS.
Important: Archer MSAs are generally limited to individuals who were already participating in the program or who qualify through an Archer MSA-participating employer. New participation has been restricted for many years.
Who Is Eligible for an Archer MSA?
According to IRS Publication 969, you must be one of the following:
- An employee (or the spouse of an employee) of a small employer that provides a self-only or family High Deductible Health Plan (HDHP).
- A self-employed individual (or the spouse of a self-employed individual) who maintains a self-only or family HDHP.
Can I Have Other Health Coverage?
To remain eligible for an Archer MSA, you generally cannot have other health coverage that is not an HDHP. You also cannot be enrolled in Medicare.
You must be an eligible individual on the first day of each month to claim an Archer MSA deduction for that month.
Your spouse may have non-HDHP coverage as long as you are not covered under that plan.
Allowed additional coverage includes:
- Workers' compensation coverage
- Coverage for liabilities related to torts or property ownership/use
- Insurance for a specific disease or illness
- Hospital indemnity coverage that pays a fixed amount per day or other period of hospitalization
You may also have coverage for:
- Accidents
- Disability
- Dental care
- Vision care
- Long-term care
- Telehealth and other remote care services
What Is Considered a Small Employer?
A small employer is generally one that had an average of 50 or fewer employees during either of the two most recent calendar years. Special rules apply to new businesses and employers that later grow beyond this threshold.
What Is a Growing Employer?
An employer that started Archer MSA coverage while meeting the small-employer rules may continue to qualify after growing larger if all of the following apply:
- The employer had 50 or fewer employees when the Archer MSA program began.
- The employer made an Archer MSA contribution that was deductible or excluded from income for the last year it had 50 or fewer employees.
- The employer averaged 200 or fewer employees each year after 1996.
What Is a High Deductible Health Plan (HDHP)?
To be eligible for an Archer MSA, you must be covered by a High Deductible Health Plan (HDHP).
An HDHP generally has:
- A higher annual deductible than traditional health plans.
- A limit on the total out-of-pocket medical expenses you must pay each year for covered services.