Question 72

An individual must be covered by a qualified High Deductible Health Plan to open a tax-exempt Health Savings Account under federal law.

To qualify for a tax-exempt Health Savings Account (HSA), an individual must be enrolled in a qualified High Deductible Health Plan (HDHP). This requirement ensures that the individual is eligible for the tax benefits associated with HSAs.

A) covered by a qualified High Deductible Health Plan

This option is correct because the federal law explicitly states that an individual must be covered by a qualified High Deductible Health Plan to open a tax-exempt Health Savings Account. The HDHP must meet specific criteria related to deductible amounts to qualify.

B) covered by Long Term Care Insurance

This option is incorrect as coverage under Long Term Care Insurance does not meet the requirements for opening a Health Savings Account. Long Term Care Insurance serves a different purpose and is not related to the necessary health plan coverage for HSAs.

C) entitled to Medicare benefits

This option is incorrect because individuals entitled to Medicare benefits cannot contribute to a Health Savings Account. Medicare beneficiaries are not eligible for HSAs since they do not meet the requirement of being covered by a qualified HDHP.

D) eligible to be claimed as a dependent on another person's tax return

This option is also incorrect. While being a dependent may affect tax filings, it does not satisfy the requirement for opening a Health Savings Account. The individual must have their own qualified HDHP, regardless of dependency status.

Conclusion

In summary, the essential requirement for opening a tax-exempt Health Savings Account under federal law is having coverage from a qualified High Deductible Health Plan. Other options, such as Long Term Care Insurance, Medicare eligibility, or dependency status, do not fulfill the necessary criteria, making option A the only correct choice.