Individuals and small businesses can participate in a health savings account (HSA), created by the Medicare Act of
2003, which was signed into law Dec. 8, 2003. Contributions to HAS’s are tax deductible by the eligible entity in
whose name the account is established. Contributions made by an employer are treated as tax-free employer-
provided coverage for medical expenses under an accident or health plan. Distributions from these accounts used to
pay for qualified medical expenses (including over-the-counter medicines) for an individual and his family members
are not taxed.

Contributions may be made to an HAS for any month an individual (1) is covered under a high-deductible health plan
(HDHP) on the first of the month; (2) is not also covered by any other non-HDHP health plan; (3) is not entitled to
benefits under Medicare (generally are under the age of 65); and (4) may not be claimed as a dependent on another
person's tax return. An individual does not fail to qualify for an HSA if while covered by an HDHP, he has other types
of coverage or permissible insurance (i.e.,worker's compensation benefits, dental care, vision care).

If the HDHP for self-coverage has an annual deductible of at least $1,000 and annual out-of-pocket expenses
required to be paid not exceeding $5,000; for family coverage, the minimum annual deductible is at least $2,000, and
the annual out-of-pocket expenses required to be
paid can't exceed $10,000. A plan does not fail to qualify as an HDHP merely because it does not have a deductible
for preventive care.

Beginning this year, individuals can establish an HSA with a qualified trustee or custodian, such as an insurance
company or bank. The maximum deductible contribution to an HSA is the sum of limits determined separately for
each month, based on an individual's status, eligibility
and health plan coverage. For 2004, the maximum monthly contribution for eligible individuals with self-only coverage
under the HDHP is 1/12 of the lesser of (1) the annual deductible under the HDHP or (2) $2,600. For eligible
individuals with family coverage under an HDHP, the maximum monthly contribution is 1/12 of the lesser of (1) the
annual deductible under the HDHP, or (2) $5,150.