Tax Facts

422 / What is an Archer Medical Savings Account (“MSA”) and how is it taxed?

An Archer Medical Savings Account (“MSA”) is a trust created exclusively for the purpose of paying qualified medical expenses of an account holder,1 who is the individual for whom the Archer MSA was established.2

Archer MSAs were available through the cutoff date discussed below to small business employees and self-employed individuals with high deductible health insurance coverage.

Any insurance company or bank can act as a trustee of an Archer MSA. Additionally, any person already approved by the IRS to act as an individual retirement arrangement (“IRA”) trustee or custodian automatically is approved to act in the same capacity for Archer MSAs.3

Contributions

Contributions to an Archer MSA may be made either by an individual or by his or her small employer, but not by both.4 If made by an individual taxpayer, Archer MSA contributions are deductible from income.5 If made by a small employer, Archer MSA contributions are excluded from employee income.6 An Archer MSA itself is exempt from income tax.7

Distributions

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