What is an Archer Medical Savings Account (MSA)?
An Archer MSA is a tax-deferred investment account similar in many respects to an IRA used in conjunction with a qualified high deductible health plan (HDHP). It is a tax-advantaged arrangement that allows earnings and deductible contributions to grow tax-deferred. MSAs are primarily used to save for qualified medical expenses. Qualified MSA contributions are tax deductible, and funds can be withdrawn tax-free at any time for qualified medical expenses. Distributions made for non-qualified medical expenses prior to age 65 are subject to income taxes and a 15% penalty. Distributions made after the age of 65 for non-qualified expenses are taxed as ordinary income, but are not subject to penalty. Many employers and trustees are replacing MSA plans with HSA plans since HSAs offer greater flexibility.
