§138 Medicare Advantage Msa

Summary

Payments from the Department of Health and Human Services into a Medicare Advantage MSA do not count as the account holder’s gross income. A Medicare Advantage MSA is a special kind of Archer MSA set up for a Medicare Advantage MSA plan. It only accepts contributions from HHS or trustee-to-trustee transfers, its paperwork allows those transfers, and it is tied to the Medicare Advantage MSA plan named in the Social Security Act. Only the account holder’s medical costs count as qualified expenses. If money is taken out and not used only for the account holder’s qualified medical care, the tax bill goes up. The extra tax equals 50% of how much the distribution exceeds (the account’s fair market value at the end of the prior year minus 60% of the plan deductible as of January 1), if that result is positive. The extra tax does not apply if the account holder becomes disabled (under section 72(m)(7)) or dies. All of a person’s Medicare Advantage MSAs are treated as one account, all nonqualified distributions in a year are combined, and property distributions use fair market value on the date given. Returns of mistaken contributions to HHS and trustee-to-trustee transfers between a person’s Medicare Advantage MSAs are not taxed under this rule. Each year the account must report its year-end fair market value to the account holder by January 31 in the form the Secretary requires. Section 220(i) does not apply, and these MSAs do not count toward the numerical limits in section 220(j).