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Instructions for Form 8853 (Revised 2002) 2002 Tax Year

Medical Saving Accounts & Long-Term Care Insurance Contracts

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This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

General Instructions

Purpose of Form

Use Form 8853 to:

  • Report Archer MSA contributions (including employer contributions);
  • Figure your Archer MSA deduction;
  • Report distributions from Archer MSAs or Medicare+Choice MSAs;
  • Report taxable payments from long-term care (LTC) insurance contracts; or
  • Report taxable accelerated death benefits from a life insurance policy.

Additional information.   See Pub. 969, Medical Savings Accounts (MSAs), for more details on MSAs.

Who Must File

You must file Form 8853 if any of the following apply.

  • You (or your employer) made contributions for 2002 to your Archer MSA.
  • You are filing a joint return and your spouse (or his or her employer) made contributions for 2002 to your spouse's Archer MSA.
  • You (or your spouse, if filing jointly) received Archer MSA or Medicare+Choice MSA distributions in 2002.
  • You acquired an interest in an Archer MSA or a Medicare+Choice MSA because of the death of the account holder. See Death of Account Holder on this page.
  • You (or your spouse, if filing jointly) were a policyholder who received payments under an LTC insurance contract or received any accelerated death benefits from a life insurance policy on a per diem or other periodic basis in 2002. See the instructions for Section C, beginning on page 5.

Specific Instructions

Name and Social Security Number (SSN).   Enter your name(s) and SSN as shown on your tax return. If filing jointly and both you and your spouse each have an Archer MSA or each have a Medicare+Choice MSA, enter the SSN shown first on your tax return.

Section A - Archer MSAs

Eligible Individual

To be eligible for an Archer MSA, you must be an employee of a small employer or be self-employed. You also must have a high deductible health plan (HDHP) and have no other health insurance coverage except permitted coverage. You must be an eligible individual on the first day of a month to take an Archer MSA deduction for that month.

Small Employer

A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. See Pub. 969 for details.

Archer MSA

An Archer MSA is a medical savings account set up exclusively for paying the qualified medical expenses of the account holder or the account holder's spouse or dependent(s) in conjunction with an HDHP.

Qualified Medical Expenses

Generally, qualified medical expenses for Archer MSA purposes are unreimbursed medical expenses that could otherwise be deducted on Schedule A (Form 1040). See the Schedule A (Form 1040) instructions and Pub. 502, Medical and Dental Expenses. However, you may not treat insurance premiums as qualified medical expenses unless the premiums are for:

  • Long-term care (LTC) insurance,
  • Health care continuation coverage, or
  • Health care coverage while receiving unemployment compensation under Federal or state law.

High Deductible Health Plan

An HDHP is a health plan that meets the following requirements.

  Self-only coverage Family coverage
Minimum annual deductible $1,650 $3,300
Maximum annual deductible $2,500 $4,950
Maximum annual out-of-pocket expenses (other than for premiums) $3,300 $6,050

Other Health Insurance

If you have an Archer MSA, you (and your spouse, if you have family coverage) may not have any health insurance coverage other than an HDHP.

Exception.   You may have additional insurance that provides benefits only for:

  • Accidents,
  • Disability,
  • Dental care,
  • Vision care,
  • Long-term care,
  • Liabilities under workers' compensation laws, tort liabilities, or liabilities arising from the ownership or use of property,
  • A specific disease or illness, or
  • A fixed amount per day (or other period) of hospitalization.

Disabled

An individual generally is considered disabled if he or she is unable to engage in any substantial gainful activity due to a physical or mental impairment which can be expected to result in death or to continue indefinitely.

Death of Account Holder

If the account holder's surviving spouse is the designated beneficiary, the Archer MSA is treated as if the surviving spouse were the account holder. The surviving spouse completes Form 8853 as though the Archer MSA belonged to him or her. In all other cases, the account ceases to be an Archer MSA as of the date of death. If you are the beneficiary, complete Form 8853 as follows.

  • Write Death of Archer MSA account holder across the top of Form 8853.
  • Write the name(s) shown on your tax return and your SSN in the spaces provided at the top of the form and skip Part II.
  • On line 8a, enter the fair market value of the Archer MSA as of the date of death.
  • On line 9, enter qualified medical expenses incurred by the account holder before the date of death that you paid within 1 year after the date of death.
  • Complete the rest of Part III.

The distribution is not subject to the additional 15% tax. Report any earnings on the account after the date of death as income on your tax return.

Deemed Distributions From Archer MSAs

The following situations result in deemed distributions from your Archer MSA.

  • You or any of your beneficiaries engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs, at any time in 2002. Your account ceases to be an Archer MSA as of January 1, 2002, and you must include the fair market value of all assets in the account as of January 1, 2002, on line 8a.
  • You used any portion of any of your Archer MSAs as security for a loan at any time in 2002. You must include the fair market value of the assets used as security for the loan as income on Form 1040, line 21.

Part I - General Information

Complete this part if contributions were made for 2002 by:

  • You (or your employer) to your Archer MSA or
  • Your spouse (or his or her employer) to your spouse's Archer MSA (if you are filing a joint return).

Lines 1a and 2a

Check Yes on line 1a if you or your employer made contributions to your Archer MSA for 2002, including contributions for 2002 made from January 1, 2003, through April 15, 2003. Otherwise, check the No box on line 1a.

Check Yes on line 2a if you are filing a joint return and your spouse (or your spouse's employer) made contributions to your spouse's Archer MSA for 2002, including contributions for 2002 made from January 1, 2003, through April 15, 2003. Otherwise, check the No box on line 2a.

Lines 1b and 2b

Check Yes on line 1b or 2b only if the account holder is considered previously uninsured.

An account holder is considered previously uninsured if (a) the HDHP coverage began after June 30, 1996, and (b) the account holder has:

  • Self-only coverage under an HDHP and did not have any health plan coverage at any time during the 6-month period before coverage under the HDHP began.
  • Family coverage under an HDHP and neither the account holder nor the account holder's spouse had any health plan coverage at any time during the 6-month period before coverage under the HDHP began.

In determining whether an account holder is previously uninsured, disregard any health insurance that is permitted in addition to the HDHP. See Other Health Insurance on page 1.

Lines 1c and 2c

If covered by a self-only HDHP and a family HDHP, indicate which plan was in effect longer during the year.

Part II - Archer MSA Contributions and Deductions

Use Part II to figure:

  • Your Archer MSA deduction and, if applicable, any excess contributions you made and
  • Any excess contributions made by an employer (see Excess Employer Contributions on page 4).

Figuring Your Archer MSA Deduction

The amount you may deduct for Archer MSA contributions is limited by:

  • The applicable portion of the policy's annual deductible (line 5) and
  • Your compensation from the employer maintaining the HDHP (line 6).

Any employer contributions made to your Archer MSA prevent you from making deductible contributions. See Employer Contributions to an Archer MSA below. You may not deduct any contributions you made after you became eligible for Medicare benefits. Also, if you or your spouse made contributions in addition to any employer contributions, you may have to pay an additional tax. See Excess Contributions You Make beginning on page 3.

Employer Contributions to an Archer MSA

If an employer made contributions to your Archer MSA, you are not entitled to a deduction. If you and your spouse are covered under an HDHP with family coverage and an employer made contributions to either of your Archer MSAs, neither you nor your spouse are allowed to make deductible contributions to an Archer MSA. If you and your spouse each have an Archer MSA with self-only coverage and only one of you received employer contributions to an Archer MSA, the other spouse is allowed to make deductible contributions to an Archer MSA.

How To Complete Part II

Complete lines 3a through 7 as instructed on the form unless 1 or 2 below applies.

  1. If employer contributions to an Archer MSA prevent you from taking a deduction for amounts you contributed to your Archer MSA, complete Part II as follows.
    1. Complete lines 3a through 4.
    2. Skip lines 5 and 6.
    3. Enter -0- on line 7.
    4. If line 4 is more than zero, see Excess Contributions You Make beginning on page 3.
  2. If you and your spouse have more than one Archer MSA, complete Part II as follows.
    1. If either spouse has an HDHP with family coverage, you both are treated as having only the family coverage plan. Disregard any plans with self-only coverage.
    2. If both spouses have HDHPs with self-only coverage, complete a separate Form 8853, Section A, Part II, for each spouse. Write statement across the top of each Form 8853, fill in the name and SSN, and complete Part II. Next, add lines 3b, 4, and 7 from the two statement Forms 8853 and enter those totals on the respective lines of the controlling Form 8853 (the combined Form 8853 for both spouses). Do not complete lines 3a, 5, and 6 of the controlling Form 8853. Attach the two statement Forms 8853 to your tax return after the controlling Form 8853.

Lines 3a and 3b

Employer Contributions

Employer contributions include any amount an employer contributes to any Archer MSA for you or your spouse for 2002. These contributions should be shown in box 12 of Form W-2 with code R. If your employer made excess contributions, you may have to report the excess as income. See Excess Employer Contributions on page 4 for details.

Line 4

Do not include amounts rolled over from another Archer MSA. See Rollovers on page 4.

Line 5

Go through the chart at the top of the Line 5 Limitation Chart and Worksheet on this page for each month of 2002. Enter the result on the worksheet next to the corresponding month.

TAXTIP: If eligibility and coverage of both you and your spouse did not change from one month to the next, enter the same number you entered for the previous month. If eligibility and coverage did not change during the entire year, figure the number for January only, and enter this amount on line 5 of Form 8853.

More than one HDHP.   If you (and your spouse, if filing jointly) had more than one HDHP on the first of the month and one of the plans provides family coverage, use the Family coverage rules on the chart and disregard any plans with self-only coverage.

line 5 limitation chart and line 5 limitation worksheet

line 5 limitation chart and line 5 limitation worksheet

Married filing separately.   If you have an HDHP with family coverage and are married filing separately, enter only 37.5% (.375) (one-half of 75%) of the annual deductible on the worksheet; or, if you and your spouse agree to divide the 75% of the annual deductible in a different manner, enter your share.

Line 6

Compensation

Compensation includes wages, salaries, professional fees, and other pay you receive for services you perform. It also includes sales commissions, commissions on insurance premiums, pay based on a percentage of profits, tips, and bonuses. Generally, these amounts are included on the Form(s) W-2 you receive from your employer(s). Compensation also includes net earnings from self-employment, but only for a trade or business in which your personal services are a material income-producing factor. Generally, this amount is shown on the Schedule SE (Form 1040) you complete for your business or farm. Compensation does not include any amounts received as a pension or annuity and does not include any amount received as deferred compensation.

Line 7

If you (or your employer) contributed more to your Archer MSA than is allowable, you may have to pay a tax on the excess contributions. Figure the excess contributions using the instructions below. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the additional tax.

Excess Contributions You Make

To figure your excess contributions, subtract your deductible contributions (line 7) from your actual contributions (line 4). However, you may withdraw some or all of your excess contributions for 2002 and they will be treated as if they had not been contributed if:

  • You make the withdrawal by the due date, including extensions, of your 2002 tax return,
  • You do not claim a deduction for the amount of the withdrawn contributions, and
  • You also withdraw any income earned on the withdrawn contributions and include the earnings in other income on your tax return for the year you withdraw the contributions and earnings.

Excess Employer Contributions

Excess employer contributions are the excess, if any, of your employer's contributions over the smaller of (a) your limitation on line 5 or (b) your compensation from the employer(s) who maintained your HDHP (line 6). If the excess was not included in income on Form W-2, you must report it as other income on your tax return. However, you may withdraw some or all of the excess employer contributions for 2002 and they will be treated as if they had not been contributed if:

  • You make the withdrawal by the due date, including extensions, of your 2002 tax return,
  • You do not claim an exclusion from income for the amount of the withdrawn contributions, and
  • You also withdraw any income earned on the withdrawn contributions and include the earnings in other income on your tax return for the year you withdraw the contributions and earnings.

Note:   If you timely filed your return without withdrawing the excess contributions, you may still make the withdrawal no later than 6 months after the due date of your tax return, excluding extensions. If you do, file an amended return with Filed pursuant to section 301.9100-2 written at the top. Include an explanation of the withdrawal. Make all necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed).

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