Francisco's employer establishes Health Savings Accounts (HSA's) for its employees. The plan provides for his employer to pay $1,000 into Francisco's HSA, and Francisco to also contribute $1,000 to his HSA. During the year, the plan pays for $1,500 of Francisco's medical expenses not covered by the employer's regular medical insurance plan.
I.Francisco must include the $1,000 contribution by his employer in his adjusted gross income.
II.The $500 still in the account at the end of the year carries forward to the following year.

Question

Francisco's employer establishes Health Savings Accounts (HSA's) for its employees. The plan provides for his employer to pay $1,000 into Francisco's HSA, and Francisco to also contribute $1,000 to his HSA. During the year, the plan pays for $1,500 of Francisco's medical expenses not covered by the employer's regular medical insurance plan.
I.Francisco must include the $1,000 contribution by his employer in his adjusted gross income.
II.The $500 still in the account at the end of the year carries forward to the following year.
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Quizplus · Accepted Answer

Explanation: Employer contributions to an employee's Health Savings Account (HSA) are not included in the employee's gross income, making statement I incorrect. The funds in an HSA, including any unused portion at the end of the year, roll over to the next year, making statement II correct.

Francisco's Employer Establishes Health Savings Accounts (HSA's) for Its Employees