What Is an Archer MSA?

An Archer MSA is a medical savings account (MSA) introduced in 1996 and named for Texas congressman Bill Archer, who sponsored an amendment that led to its establishment. As with the more recent health savings account (HSA), an Archer MSA offered the account holder a tax-deferred way to save for medical expenses. Congress opted to discontinue the MSA pilot program in 2007 instead of reauthorizing it, although some MSA accounts remain active to this day.

Key Takeaways

  • An Archer MSA was a medical savings account available to the self-employed and businesses with 50 or fewer employees.
  • It served as a model for the more recent health savings account (HSA).
  • Congress declined to reauthorize the Archer MSA in 2007, though some accounts still exist.

Understanding the Archer MSA

Congress created the MSA specifically for self-employed individuals and small businesses looking for new ways to provide health insurance. The account owner made regular payments to the MSA on a tax-free basis for fund withdrawal on qualifying medical expenses. All of the monies put into the MSA came either from the employee or the employer—but not from both. Account holders would incur penalties if they withdrew funds for nonmedical uses.

The MSA account had to be accompanied by a high-deductible health plan (HDHP) and was essentially an account to use for covering catastrophic medical expenses. Because the MSA was limited to small businesses and the self-employed, its impact on lowering overall healthcare-expense increases in the US was limited.

As with an HSA, an Archer MSA was required to be accompanied by a high-deductible health care plan.

History of the Archer MSA

The Archer MSA was a pilot program created in part to help limit the overuse of healthcare services. The goal was to bring awareness among employees of the actual costs of healthcare services through higher-deductible plans and the use of their own medical savings accounts to pay for healthcare. The more flexible health savings account (HSA) was introduced in 2003 and ended up replacing the Archer MSA. It has even become popular as a vehicle for retirement savings.

HSA vs. MSA

Both the HSA and the MSA are tax-deferred savings accounts meant to be used for medical purposes that must be paired with an HDHP. There are, however, some differences. Unlike the Archer MSA, which was only available to self-employed people and small businesses with 50 or fewer workers, an HSA can be offered in any size business. Also, HSA accounts may receive funding from both an employer and an employee, rather than being limited to contributions solely from one or the other. Basically, HSAs took the Archer MSA model and expanded it.