Archer Medical Savings Accounts (MSAs)

An Archer Medical Savings Account (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. Here's more information about MSAs:

Tax advantages

Your MSA contributions that meet the applicable requirements are deductible from your gross income on your federal income tax return for the tax year for which the contributions are made. Many states also allow the deduction from state income taxes. Earnings grow on a tax-deferred basis. Contribution and earnings dollars may be withdrawn at any time tax free for qualified medical expenses. At age 65, or upon disability, you may make withdrawals from your MSA for any reason without a penalty, however, they will be taxed as ordinary income.

Eligibility requirements

Effective May 1, 2004 new Archer Medical Savings Accounts will no longer be available through State Farm Mutual Funds. All contribution information below is applicable to existing Archer Medical Savings Accounts only.

You were eligible to open an MSA if you were in one of the following categories and you did not have any other health plan than certain permitted insurance coverages:

• Self-employed (or the spouse of a self-employed person) and maintain a qualified high deductible health plan (HDHP) for yourself or your family.
• An employee (or the spouse of an employee) of a qualified small business that maintains a qualified HDHP.
• A qualified small-business owner with a qualified HDHP.

2008 HDHP/Contribution Rates

2007 HDHP/Contribution Rates

Contribution timing

You can make contributions to your MSA from January 1st through the tax-filing deadline (excluding extensions) for the year, generally April 15.

Contribution sources

You and your employer may contribute to your MSA, however, both generally cannot contribute to the account in the same tax year.

Distribution guidelines

You may take distributions from an MSA at any time. Distributions made for qualified medical expenses are tax-free. Distributions made for non-qualified medical expenses prior to age 65 are subject to income taxation and a 15% penalty tax. Non-qualified distributions made after the account holder turns age 65, becomes disabled or dies are not subject to the additional 15% penalty tax, but are taxed as ordinary income.

MSA Maximum Contribution Calculator

Please use the 2008 Contribution Calculator to determine your maximum contribution for tax year 2008, or use the 2007 Contribution Calculator to determine your maximum contribution for tax year 2007.

It is important to note that there is market risk involved when investing in mutual funds, including possible loss of principal.

State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 390 KB) .

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AP2007/12/9733