What is an Archer MSA

An Archer MSA is similar to an HSA in offering the account holder a tax-deferred way to save for medical expenses.

Breaking Down Archer MSA

An MSA is a United States medical savings account introduced in the 1990s. It has largely been replaced by the more popular and flexible Health Savings Account (HSA). 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 from the employee or the employer but not both. Account holders would incur penalties if they withdrew funds for non-medical uses.

The MSA got its name from Bill Archer, the Texas congressman who sponsored an amendment in 1996 that led to the establishment of the account type. 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 not as far-reaching as its replacement, the HSA.

The Archer MSA was a pilot program created in the 1990s in part to help limit the overuse of healthcare services. The goal was to bring awareness among employees of the true costs of healthcare services through higher deductible plans and the use of their own medical savings accounts to pay for healthcare. Congress opted to discontinue the MSA pilot program in 2007 instead of reauthorizing it, although some MSA accounts remain active to this day. The more flexible Health Savings Account (HSA) largely replaced the MSA in 2003.

The Difference Between an HSA and MSA

Many employees today are familiar with Health Savings Accounts (HSA), which have increased in popularity as the cost of health insurance has risen. Both an MSA and HSA are tax-deferred savings accounts to used for medical purposes but there are several differences. The MSA was only available to self-employed people and small businesses with 50 or fewer workers. The MSA had to be funded by either the employer or the employee, but not both. HSA accounts may receive funding from an employer and employee, and the accounts pair with high-deductible health plans. Unlike an MSA, an HSA account can be offered in any size business.