What Is an Archer MSA? Eligibility, Contribution Limits, and Form 8853

An Archer MSA is a tax-exempt trust or custodial account, authorized under Internal Revenue Code Section 220, that pairs with a high deductible health plan to pay medical expenses with pre-tax dollars. No new Archer MSAs have been established since 2007, but if you already have one, you can keep contributing and withdrawing tax-free for qualified healthcare costs. Annual contributions are capped at 65 percent of your plan’s deductible for self-only coverage and 75 percent for family coverage, and any withdrawal that isn’t for a qualified medical expense is taxed as income plus a 20 percent penalty.

Who Can Still Contribute

Only people who were active Archer MSA participants on or before the 2007 cut-off, or who later joined through an MSA-participating employer, can still put money in.¹ Beyond that history requirement, you have to satisfy three conditions in any month you want to contribute:

You are covered by a high deductible health plan that meets the current IRS limits.
You are not covered by any other health plan that duplicates a benefit your HDHP already covers. Separate policies for accidents, disability, dental, vision, or long-term care are allowed.¹
Your HDHP comes through a small employer (50 or fewer employees on average during either of the two preceding calendar years) or you are self-employed.¹

If you leave a qualifying employer for a larger company that doesn’t meet the small-employer test, you can’t make new contributions, but the funds already in the account remain available for qualified medical expenses without penalty.

HDHP Limits for 2026

Your health plan has to fall inside specific deductible and out-of-pocket ranges to count as an Archer MSA HDHP, and those ranges are not the same as the ones for Health Savings Accounts. For 2026:²

Self-only coverage: annual deductible between $2,900 and $4,400, with out-of-pocket expenses (excluding premiums) capped at $5,850.
Family coverage: annual deductible between $5,850 and $8,750, with out-of-pocket expenses (excluding premiums) capped at $10,700.

If your plan’s deductible falls outside those ranges by even a dollar, you are not an eligible individual for any month you hold that coverage, and any contributions attributed to those months become excess contributions.

How Much You Can Contribute

Contributions must be in cash, and the annual ceiling is tied to your plan’s deductible: 65 percent of the deductible for self-only coverage, 75 percent for family coverage.¹ If you are eligible for only part of the year, your limit is prorated one-twelfth for each qualifying month.

If your employer contributes to your Archer MSA during a tax year, you cannot deduct any of your own contributions for that same year.³ Your deductible contributions also cannot exceed the wages or self-employment income tied to the business that provides the HDHP. Contributions have to reach the account by the tax filing deadline (typically April 15 of the following year) to count for the prior year.

One difference from Health Savings Accounts worth flagging: Archer MSAs have no catch-up contribution for people age 55 and older.⁴

Excess contributions carry a 6 percent excise tax for each year the excess stays in the account, reported on Form 5329.⁵ To stop the tax from compounding, withdraw the excess and any earnings on it before the filing deadline for that year.

What You Can Spend the Money on Tax-Free

Tax-free distributions are limited to qualified medical expenses as defined in Internal Revenue Code Section 213(d): doctor visits, hospital care, prescription drugs, dental treatment, and vision exams, among others.⁶ Over-the-counter medications and menstrual care products also qualify.⁷

Health insurance premiums generally do not qualify. There are three exceptions:¹

Premiums for COBRA or other federally required continuation coverage.
Premiums for a qualified long-term care insurance contract.
Premiums for any health coverage you carry while receiving unemployment compensation.

Withdraw money for anything else and the full distribution is added to your taxable income and hit with an additional 20 percent tax.¹ The 20 percent add-on does not apply after disability, after the account holder’s death, or after you reach Medicare eligibility age (generally 65). In those situations, non-medical withdrawals are still taxable as ordinary income, just without the penalty.

Medicare, Rollovers, and Death of the Account Holder

Once you become entitled to Medicare, your Archer MSA contribution limit drops to zero for that month and every month after.¹ The account itself doesn’t disappear. Existing funds can still be spent tax-free on qualified medical expenses, and non-medical withdrawals are now taxable without the 20 percent penalty.

You can move funds out of an Archer MSA into another Archer MSA or into a Health Savings Account. A rollover means you take a distribution and redeposit it within 60 days; it is tax-free but limited to one rollover in any 12-month period.¹ A trustee-to-trustee transfer, where your custodian sends the money directly to another custodian, is not treated as a rollover and has no frequency limit.³ A rollover into an HSA is not deductible and does not reduce your HSA contribution limit for the year.

What happens at death depends on who inherits. If your spouse is the designated beneficiary, the account becomes your spouse’s Archer MSA and continues under the same tax rules.¹ If anyone else inherits, the account stops being tax-exempt on the date of death and the fair market value on that date is included in the beneficiary’s gross income for the year. When the estate is the beneficiary, that amount goes on the account holder’s final return instead. Either way, the taxable amount can be reduced by qualified medical expenses the account holder incurred before death that the beneficiary pays within one year of the date of death.

Reporting on Form 8853

Archer MSA activity is reported on IRS Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, attached to Form 1040, 1040-SR, or 1040-NR.⁸ If you took any distribution during the year, you have to file Form 8853 even if you otherwise wouldn’t need to file a return.³

To complete the form you’ll need your HDHP’s annual deductible, your total contributions, your total distributions, and two statements from your custodian: Form 1099-SA reporting distributions⁹ and Form 5498-SA reporting contributions, including any made by the April 15 deadline for the prior tax year.¹⁰

A few filing mistakes come up often. If your employer contributed during the year, enter zero on the deduction line and skip the deduction calculation. Any distribution you exclude from income as a qualified medical expense cannot also appear as an itemized medical deduction on Schedule A. When only part of a non-medical distribution qualifies for a penalty exception, apply the 20 percent tax only to the portion that doesn’t qualify. And if both spouses have HDHPs with self-only coverage, each spouse fills out a separate Form 8853 and then combines the results on a single controlling form.³

1
Office of the Law Revision Counsel. 26 USC 220 Archer MSAs
2
Internal Revenue Service. Rev. Proc. 2025-32
3
Internal Revenue Service. Instructions for Form 8853
4
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
5
Office of the Law Revision Counsel. 26 USC 4973 Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
6
Office of the Law Revision Counsel. 26 USC 213 Medical, Dental, Etc., Expenses
7
Internal Revenue Service. Frequently Asked Questions About Medical Expenses Related to Nutrition, Wellness and General Health
8
Internal Revenue Service. About Form 8853, Archer MSAs and Long-Term Care Insurance Contracts
9
Internal Revenue Service. About Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
10
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA