IRS Form 8851: Summary of Archer MSAs

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IRS Form 8851: Summary of Archer MSAs – In the realm of tax-advantaged health savings options, Archer Medical Savings Accounts (MSAs) represent an older but still relevant tool for certain individuals. While Health Savings Accounts (HSAs) have largely overshadowed them, Archer MSAs continue to provide benefits for grandfathered participants. At the heart of managing these accounts for trustees and custodians is IRS Form 8851, Summary of Archer MSAs. This article delves into what Form 8851 entails, its purpose, filing details, and the broader context of Archer MSAs, drawing from official IRS guidance to ensure accuracy and relevance for 2026.

What is an Archer MSA?

An Archer MSA is a tax-exempt trust or custodial account established with a U.S. financial institution, such as a bank or insurance company, to set aside funds exclusively for future medical expenses. These accounts help self-employed individuals or employees of small employers cover qualified medical costs for themselves, their spouses, or dependents. Unlike flexible spending accounts, unused balances in an Archer MSA carry over year after year without a “use-it-or-lose-it” rule.

Key features include:

Tax Advantages: Contributions are deductible, earnings grow tax-free, and distributions for qualified medical expenses are not taxed.
High Deductible Health Plan (HDHP) Requirement: To qualify, the account holder must be covered by an HDHP. For 2025, self-only coverage requires a minimum annual deductible of $2,850 (up to $4,300) and maximum out-of-pocket expenses of $5,700. Family coverage has a minimum deductible of $5,700 (up to $8,550) and maximum out-of-pocket of $10,500.
Eligibility Restrictions: No new Archer MSAs can be established after December 31, 2007, except for those who were active participants before 2008 or qualify through an employer with ongoing Archer MSA plans. Enrollment in Medicare generally prohibits new contributions, except for Medicare Advantage MSAs, which are a specialized type used solely for Medicare enrollees’ qualified expenses.

Distributions from an Archer MSA are tax-free if used for qualified medical expenses, such as those defined under IRC Section 213(d), including menstrual care products. Non-qualified distributions are taxable and may incur a 20% additional tax, unless the account holder is disabled, age 65 or older, or deceased. Rollovers to another Archer MSA or an HSA are permitted tax-free within 60 days, with direct trustee-to-trustee transfers not counting toward the once-per-year limit.

The Purpose of IRS Form 8851

IRS Form 8851 serves as a summary report for trustees and custodians of Archer MSAs. Its primary goal is to provide the IRS with aggregated data on Archer MSAs established during specific reporting periods. This includes:

The total number of Archer MSAs set up.
The count of previously uninsured account holders (those without health coverage for the six months before their HDHP began, starting on or after July 1, 1996).
The number of excludable account holders (typically married individuals where neither spouse qualifies as previously uninsured, but one is treated as excludable to avoid double-counting).
Names and Social Security Numbers (SSNs) of account holders.

This form was historically used to monitor the statutory cap of 750,000 Archer MSAs (excluding previously uninsured holders) under the original pilot program. It also fulfills reporting obligations to Congress and helps enforce tax laws related to these accounts. Although no new Archer MSAs have been allowed since 2007, the form remains part of IRS documentation, with no recent developments noted as of 2026.

Who Must File Form 8851?

Only trustees or custodians of Archer MSAs are required to file Form 8851. This includes banks, financial institutions, insurance companies, or other IRS-approved entities that manage these accounts. Individual account holders do not file this form; instead, they report their own MSA activity on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, attached to their personal tax return (Form 1040, 1040-SR, or 1040-NR).

Account holders receive Form 5498-SA from the trustee reporting contributions and Form 1099-SA for distributions. Employer contributions appear on Form W-2 (Box 12, Code R).

How to Complete and File Form 8851?

Form 8851 (Revised February 2007) requires detailed information from the trustee or custodian, including their name, address, Employer Identification Number (EIN), and contact details. The form covers a specific reporting period, such as January 1 through June 30 of a given year (e.g., 2005 or 2006 in historical examples).

Key sections include:

Box a: Total Archer MSAs established during the period (excluding rollovers, prior-year setups, or Medicare Advantage MSAs).
Box b: Total number of Archer MSAs.
Box c: Count of previously uninsured holders.
Box d: Count of excludable holders.
Lines 1–20: List of account holders’ names, SSNs, and checkboxes for “Previously Uninsured” or “Excludable” (not both). Additional sheets can be attached if needed.

Filing guidelines:

Electronic vs. Paper: If reporting 250 or more MSAs, electronic filing is mandatory. For fewer, paper is allowed but electronic is encouraged.
Where to File: Send to IRS Enterprise Computing Center—Martinsburg, Information Reporting Program, Attn: 8851 Coordinator, 240 Murall Drive, Kearneysville, WV 25430.
Deadlines: Historically, deadlines aligned with specific acts, such as March 20, 2007, for 2005–2006 periods under the Tax Relief and Health Care Act of 2006. Given the program’s expiration, consult current IRS instructions for any ongoing requirements.
Penalties: Failure to file or provide accurate information may result in penalties under IRC sections, though specifics for Form 8851 are not detailed in current guidance. General information reporting penalties can apply.

A separate Form 8851 must be filed for each reporting period. Records should be retained as long as they may be material for tax purposes.

Current Status of Archer MSAs and Form 8851 in 2026

As of 2026, Archer MSAs are grandfathered for existing participants, allowing continued contributions if eligibility criteria are met (e.g., HDHP coverage without other disqualifying insurance). However, no new accounts can be opened unless through a qualifying pre-2008 employer plan. Balances can be transferred to HSAs, and distributions follow standard rules.

Form 8851’s relevance has diminished since the program’s end in 2007, as it focuses on new establishments. The IRS continues to maintain the form without updates, and periodic OMB reviews (e.g., extensions requested in 2020) suggest it’s preserved for archival or rare use cases. If you’re a trustee with legacy Archer MSAs, review Publication 969 for ongoing guidance on contributions (up to 65%–75% of the HDHP deductible) and excess contribution excise taxes (6%, reported on Form 5329).

Common Questions About IRS Form 8851

Do individuals need to file Form 8851? No, it’s solely for trustees and custodians.
What if there are excess contributions to an Archer MSA? Withdraw by the tax filing deadline to avoid the 6% excise tax; report on Form 8853.
Can Archer MSA funds be rolled over to an HSA? Yes, tax-free, providing a path to modernize savings.
Where can I find the latest Form 8851? Download from the IRS website at irs.gov/pub/irs-pdf/f8851.pdf.

Conclusion

IRS Form 8851 plays a niche role in summarizing Archer MSAs, primarily for historical monitoring of these tax-favored health accounts. While the era of new Archer MSAs has passed, understanding this form and the underlying accounts remains valuable for trustees managing legacy plans and individuals maximizing their benefits. For personalized advice, consult a tax professional or refer directly to IRS resources like Publication 969. Staying informed ensures compliance and optimizes health-related tax strategies in 2026 and beyond.