The Internal Revenue Service (IRS) has released revised Health Savings Account (HSA) model documents (5305-B and 5305-C) to be used in establishing these accounts. The new documents include 2011/2012 cost of living adjustments and penalty increases for non-qualified distributions.
Recently, the Internal Revenue Service (IRS) posted to its website the revised versions of health saving account (HSA) model Form 5305-B, Health Savings Trust Account, and Form 5305-C Health Savings Custodial Account with a revision date of December 2011. These new model agreements will replace the November 2007 version of each document. These model documents are used to establish HSAs and are the basis for CSi’s HSA applications and disclosures.
A number of changes have been included in the new IRS model agreements. These changes include:
- Updated cost-of-living adjustments to reflect the 2011 and 2012 annual HSA contribution limits
- Penalty increase from 10 percent to 20 percent for distributions not used for qualified medical expenses.
- Addition of the 2011 and 2012 minimum deductible and out of pocket expense requirements for a health plan to be considered an HDHP and elimination of references to the 2007 and 2008 requirements in the General Instructions.
Although the IRS did make some updates to the documents as it pertains to 2011 and 2012, it failed to remove the qualified HSA funding distribution language from the forms, even though provisions allowing rollovers from health flexible spending accounts (FSAs) and health reimbursement accounts (HRAs) to HSAs expired December 31, 2011.
The IRS has not announced when HSA trustees and custodians must begin using the new model agreements or if existing HSA agreements must be amended for these changes. Because it is in the best interest of account owners to use the most current documents available, CSi is in the process of updating our HSA Agreements and disclosures to incorporate the new model language. These updated forms will be available soon.
CSi has contacted the Internal Revenue Service, and continues to monitor notices and other communication from the IRS, seeking clarification regarding whether these model document changes will require an amendment to existing HSA owners. We want to reassure you that CSi continues to closely monitor regulations and IRS guidance related to our HSA and IRA documents and will notify you of any changes that would impact your account owners.