OPM strengthens health savings accounts benefit

Federal employees now enrolled in high deductible health plans will be able to make pre-tax allotments to health savings accounts by the beginning of next year.

According to an April 6 benefits administration letter from the Office of Personnel Management, all eligible employees will be able to make the pre-tax deductions to their health savings accounts as early as April 27 and no later than Jan. 1, 2008, depending on their payroll provider.

High deductible health plans feature lower monthly premiums than traditional insurance plans, but in exchange have higher annual deductibles.

Health savings accounts are available to employees who are enrolled in a high deductible plan, not covered under someone else's plan, not enrolled in Medicare and not claimed as a dependent on someone else's tax return. Currently, employees with high deductible health plans make contributions to such accounts with after-tax earnings and then declare the contributions on their annual tax returns to receive the tax benefit.

But after the new agreement between OPM and payroll providers has been established, employees can establish pre-tax health savings allotments using the same method they would use to set aside money for other accounts. Defense Department employees, for example, use the MyPay service to manage pay and health benefit information, while many other agencies use the Employee Express service.

Unlike flexible spending plans, employees who elect deductions through health savings accounts are able to modify those deductions at any time as long as the change is in accordance with the administrative procedures established by the payroll provider.

The 2007 Internal Revenue Service limit on health savings account contributions is $2,850 for single coverage or $5,650 for family coverage. People who are 55 or older may make an additional contribution of $800 for the year. The maximum contribution includes the "premium pass-through" amounts that employees receive through their health plan.