Medical Savings Accounts (MSAs) are special accounts authorized pursuant to the Health Insurance Portability & Accountability Act of 1996 and may be established after January 1, 1997. The Internal Revenue Service, on December 16, 1996, issued IRS Notice 96-53 that provided a series of questions and answers about MSAs.
Questions were raised regarding the ability of state-chartered banks to be an MSA trustee or custodian. Because of this, legislation (LB 753) was enacted by the Nebraska Legislature, effective April 3, 1997, to specifically authorize all state-chartered banks to offer MSAs.
The IRS Form 1099 series was expanded to include Form 1099-MSA – “Distributions From Medical Savings Accounts.” IRS Form 1099-MSA is used to report gross distributions from an MSA to an account holder. The payer is not required to compute the taxable amount of the distributions. IRS Form 5498-MSA – “Medical Savings Account Information,” is used to report individual arrangement information. Trustees are to file the form to report regular or rollover contributions made to an individual’s account, in addition to reporting the account’s value.