Question 72

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

To establish a tax-exempt Health Savings Account (HSA) under federal law, it is essential for the individual to be enrolled in a qualified High Deductible Health Plan (HDHP). This requirement ensures that the individual meets the necessary criteria for HSA eligibility.

A) covered by a qualified High Deductible Health Plan

This option is correct because federal law explicitly states that an individual must be enrolled in a qualified High Deductible Health Plan to open a tax-exempt Health Savings Account. This coverage is a fundamental condition for eligibility.

B) covered by Long Term Care Insurance

This option is incorrect as being covered by Long Term Care Insurance does not meet the requirement for opening a Health Savings Account. Long Term Care Insurance is unrelated to the criteria set for HSAs, which focus specifically on High Deductible Health Plans.

C) entitled to Medicare benefits

This option is also incorrect. While individuals entitled to Medicare benefits may have other health-related accounts, they are not eligible to open a Health Savings Account. Enrollment in Medicare disqualifies individuals from contributing to an HSA.

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

This option is incorrect as well. Being eligible to be claimed as a dependent does not fulfill the requirement for opening a Health Savings Account. The individual must meet specific health insurance criteria rather than dependency status.

Conclusion

In summary, the only correct option is A, as it directly aligns with the federal requirements for establishing a Health Savings Account. All other options fail to meet the specified criteria, highlighting the importance of being covered by a qualified High Deductible Health Plan to ensure eligibility for tax-exempt HSAs.