It is expected that MSAs will be administered under procedural rules similar to those applying to IRAs. As mentioned earlier, the MSA concept is a pilot program. It will expire after the year 2000 unless Congress takes further action. In addition, new employees of previously participating small employers will generally still be eligible for MSAs even if Congress lets the program die after 2000. Beyond the potential 2000 cutoff issue, remember that Congress intends to limit MSA availability to 750,000 individuals.
Complicated rules apply in determining when the cutoff point has been reached.
In other words, as long as one of the above standards is met, MSA eligibility is assured even if the 750,000 cap turns out to be grossly exceeded next year. As stated, MSAs will be available only to self-employed persons and small employers. A small employer can establish and maintain an MSA program but is not required to make contributions to employee MSAs. Contributions to MSAs are deductible if made by a sole proprietor or employee and excluded from taxable wages if made by the employer. Thus, the deduction is allowed regardless of whether the employee is able to itemize deductions.