PURPOSE: This rule provides the reporting requirements for individual medical accounts.

Editor’s Note: The following material is incorporated into this rule by reference: 1) Office of the Law Revision Counsel of the Internal House of Representatives, Revenue Code, Title 26 U.S. Code, sections 105 and 106 (Washington: Government Printing Office, 1988). 12 CSR 10-2

In accordance with section 536.031(4), RSMo, the full text of material incorporated by reference will be made available to any interested person at the Office of the Secretary of State and the headquarters of the adopting state agency.

1. (1) Employer contributions to an individual medical account that are used to pay for health care expenses of the employee in accordance with section 143.999, RSMo, shall be exempt from state income tax under Chapter 143, RSMo, to the extent that such contributions are not excluded from gross income under 26 U.S.C. sections 105 and 106.

   1. (A) Employers making contributions to an employee individual medical account must place in the “Other” box of the year end Wage and Tax Statement, the amount of the contribution, and specify next to the contribution, the word “IMA”. The amount indicated as “IMA” must be modified (subtracted) from the employee's federal adjusted gross income to the extent that it is included in federal adjusted gross income. This amount must be entered on the Form MO-A as a subtraction from federal adjusted gross income. The box “Other” must be checked and the word “IMA” must be indicated on the description line. A copy of the Wage and Tax Statement must be attached to the employee’s individual income tax return that is filed.

2. (2) Any amount in the employee’s individual medical account that is unspent at the end of the year must remain in the account. The Department of Insurance has established by regulation (20 CSR 400-9.100) a balance for the account which, if exceeded, allows the employee to withdraw any moneys in excess of such balance. Any moneys withdrawn from the account for non-medical purposes, and interest earned on such moneys, are considered Missouri taxable income as provided in section 143.999, RSMo, and must be reported on the Form MO-1040 in the year the nonmedical withdrawal is completed.

   1. (A) The individual medical account administrator must provide to the employee no later than January 31 following the previous calendar year, a statement indicating the beginning balance of the individual medical account, the amount of contributions to the account, the amount of medical withdrawals from the account, the amount of non-medical withdrawals from the account, the amount of interest earned on the account, the amount of interest earned on the non-medical withdrawals from the account, and the ending balance of the account. This statement must be attached to the employee’s individual income tax return that is filed.
   2. (B) The moneys withdrawn from the account for non-medical purposes and the interest earned on such moneys must be reported by the individual/employee as taxable income on the employee’s individual income tax return. This amount must be entered on Form MO-A as an addition to federal adjusted gross income. The box “Other” must be checked and the words “IMA nonmedical withdrawals” must be indicated on the description line.
3. (3) The amount in the employee’s individual medical account is not subject to state income tax under Chapter 143, RSMo, while it remains in the account. Any amount spent from the employee’s individual medical account on medical and health care expenses, and interest accrued on such amount, are exempt from state income tax under Chapter 143, RSMo.

AUTHORITY: section 143.961, RSMo 1994.* Original rule filed Jan. 3, 1996, effective July 30, 1996.

*Original authority: 143.961, RSMo 1972.