On December 20th, 2006, President Bush signed the Tax Relief and Health Care Act of 2006. This Act enhances the use of Health Savings Accounts (HSAs).

The Tax Relief and Health Care Act of 2006 allows for the following (click this link for a more detailed summary):

One-time Health FSA or HRA Rollover
The Act allows certain amounts in a Health FSA or HRA to be distributed and contributed through a direct transfer to an HSA.

Certain Health FSA Coverage Disregarded
If an employer has amended its cafeteria plan to provide a “grace period,” such provisions will be disregarded for determining a participant’s eligibility to contribute to an HSA

HSA Annual Deductible Limitation Repealed
The Act repeals the requirement limiting HSA contributions to the lesser of specified dollar amount or the annual deductible under the HDHP. Each participant can contribute the maximum ($2,850 for singles and $5,650 for families).

Allow Full Contributions to an HSA for any Participation during the Year
The Act provides that an individual, who becomes covered under an HDHP in a month other than January, may make a full deductible HSA contribution for the year if certain conditions are met.