When I read the IRS form 5305-C I read it as we as the custodian only have to monitor to ensure that the yearly contribution limit for family coverage plus the catch up is not exceeded.

So for 2006, is all we have to monitor on contributions an amount of $5,450 or an additional $700 for age 55 and older for ALL contributions made, whether the owner has individual or family coverage?

Most banks do not monitor for this and rely on Article III. It is really not your responsibility,.

Thanks Randy.....I did see the Article III statement that it is the responsibility of the account owner to determine whether contributions have exceeded the maximum, but what about the statement made in Article I:
"No contributions will be accepted by the custodian for any account owner that exceeds the maximum amount for family coverage plus the catch-up contribution."

If we don't monitor for this and we do accept excessive contributions, will this statement cause us to have the liability?

It appears you just have to monitor for the maximum amount allowed, but not monitoring individuals, i.e., if they are 55 or older, etc.

Q-73. Is there a limit on the annual HSA contribution which the trustee or custodian may accept?

A-73. Yes. Except in the case of rollover contributions described in section 223(f)(5) or trustee-to-trustee transfers, the trustee or custodian may not accept annual contributions to any HSA that exceed the sum of: (1) the dollar amount in effect under section 223(b)(2)(B)(ii) (i.e., the maximum family coverage deductible) plus (2) the dollar amount in effect under section 223(b)(3)(B) (i.e., the catch-up contribution amount). All contributions must be in cash, other than rollover contributions or trustee-to-trustee transfers. See section 223(d)(1)(A).

Q-74. Is the HSA trustee or custodian responsible for determining whether contributions to an HSA exceed the maximum annual contribution for a particular account beneficiary?

A-74. No. This is the responsibility of the account beneficiary, who is also responsible for notifying the trustee or custodian of any excess contribution and requesting a withdrawal of the excess contribution together with any net income attributable to the excess contribution. The HSA trustee or custodian is, however, responsible for accepting cash contributions within the limits in Q&A 73 and for filing required information returns with the IRS (Form 5498-SA and Form 1099-SA).

Go here: http://www.treasury.gov/press/releases/reports/hsanotice200450072304.pdf

Thanks for the link Randy.....I did read it and from what I understand we do have to monitor individual contributions along with all other contributions. However, we only have to monitor one amount.....and that is the family coverage amount. In other words, we may not accept a contribution on any HSA (whether individual or family) in an amount above the family coverage amount plus catch up where applicable.
Do you agree?

I read it to say one amount - period. You add the family amount plus the catch-up amount. You do not have to determine whether they are eligible for catch-up ot not.

Or is that Katsup? I'm hungry and going to lunch now.

I think we are in agreement Randy.....so thanks for your advice and help.