We all know that to be able to contribute to an HSA you need to have an HSA-eligible high deductible health plan (HDHP) and no other coverage. The HSA contribution limit looks quite straight-forward at first glance. There’s one limit for individual coverage, and there’s another limit for family coverage, which is about double the limit for individual coverage, give-or-take. If you are 55 or older, there’s an extra $1,000 catch-up.
So far so good if you have just one health plan throughout the entire year. It gets more complicated when you are married and the two of you are on different health plans. It gets yet more complicated when your health insurance changes mid-year. The insurance change could be due to a job change, marriage or divorce, enrolling in Medicare, birth of a child, and so on.
Example 1: Husband has HDHP covering himself. Wife has non-HDHP insurance from her own employer. Wife quits mid-year and husband adds her to his HDHP.
Example 2: Husband and wife have HDHP covering both of them (no kids). Husband enrolls in Medicare mid-year. Wife continues HDHP for just herself.
What’s the HSA contribution limit in these situations?
Before we continue, it’ll be easier if we understand some ground rules.
Limit On Contributions, Not On Spending
The limits on having two plans or mid-year changes are all about contributions, i.e. putting money into the HSA, not on spending the money already in the HSA. Once the money is in the HSA, it can be spent on any qualified medical expenses incurred by all members of the family (yourself, spouse, and dependents) regardless whose name is on the HSA or whether that person is covered by the HDHP.
No Joint HSA
Although there is a higher contribution limit for family coverage and, once contributed, the money in the HSA can be used to cover eligible medical expenses incurred by anyone in the family, the HSA is in one individual’s name only. There is no joint HSA. Each person’s eligibility to contribute to his or her HSA is determined separately.
This is probably the most important part in understanding the HSA contribution limit. Once you drill this into your head, everything else becomes easy.
No HDHP Coverage = No Contribution
Because it’s an individual account, only the person who has HDHP coverage can contribute. Suppose the dad covers himself and kids in a family HDHP and the mom has her own non-HDHP coverage. Only the dad can contribute to an HSA in his name (at the family coverage level). If the mom is over 55, she’s not able to contribute her $1,000 catch-up because she doesn’t have HDHP coverage.
Age 55 Catch-Up In Own Account
Again, because an HSA is in one individual’s name, the person who is 55 or over can contribute the catch-up only to his or her own account if he or she is eligible for a contribution to begin with. If both husband and wife are 55 or over, they must have separate accounts if they want to contribute the maximum.
Both Covered By Family HDHP = Split Contribution
If both husband and wife are covered in a family HDHP, they can split the family-level HSA contribution limit between the two of them however they want. It can be 100% into one person’s HSA, 50:50 into separate HSAs in each person’s name, or anywhere in between. It would be easier to understand if you simply split 50:50.
Family + Single = Family
If one spouse in a married couple has self-only coverage and another spouse has family coverage (with kids, for example) through a separate plan, they are both treated as having family coverage. They must share one family coverage limit as if they have only one family plan.
2 Self-Only Plans Are Not Family Coverage
On the other hand, if husband and wife each has their own self-only HDHP, they can only contribute to two separate HSAs in their own names at the individual level. They can’t contribute at the family coverage level to just one person’s HSA.
Month-By-Month Prorate
When insurance coverage changes mid-year, you break it down month-by-month. You fill out a table like this:
| Husband | Wife | |
|---|---|---|
| Jan | ||
| Feb | ||
| Mar | ||
| Apr | ||
| May | ||
| Jun | ||
| Jul | ||
| Aug | ||
| Sep | ||
| Oct | ||
| Nov | ||
| Dec | ||
| Average |
For every month and each person, you put down the contribution limit for that person according to the rules above. If a person is eligible on the 1st of the month and is not enrolled in Medicare in that month, he or she is considered to be eligible for the entire month. If a person is 55 or over at the end of the year, add $1,000 to each month he or she is eligible.
Let’s take a look at our Example 1:
Husband has HDHP covering himself. Wife has non-HDHP insurance from her own employer. Wife quits mid-year and husband adds her to his HDHP.
It looks like this if both of them are 55 or over at the end of the year:
| Husband | Wife | |
|---|---|---|
| Jan | self + 1,000 | 0 |
| Feb | self + 1,000 | 0 |
| Mar | self + 1,000 | 0 |
| Apr | self + 1,000 | 0 |
| May | self + 1,000 | 0 |
| Jun | self + 1,000 | 0 |
| Jul | self + 1,000 | 0 |
| Aug | self + 1,000 | 0 |
| Sep | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Oct | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Nov | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Dec | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Average |
Remove the “+1,000” part from either person who isn’t 55 or over at the end of the year. The “1/2 family” part can shift either way to one person. Then you take an average of the 12 months. That’s the contribution limit for the year for each person.
Example 2 is a mirror image of Example 1:
Husband and wife have HDHP covering both of them (no kids). Husband enrolls in Medicare mid-year. Wife continues HDHP for just herself.
Again, if both of them are over 55 at the end of the year, it looks like this:
| Husband | Wife | |
|---|---|---|
| Jan | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Feb | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Mar | 1/2 family + 1,000 | 1/2 family + 1,000 |
| Apr | 0 | self + 1,000 |
| May | 0 | self + 1,000 |
| Jun | 0 | self + 1,000 |
| Jul | 0 | self + 1,000 |
| Aug | 0 | self + 1,000 |
| Sep | 0 | self + 1,000 |
| Oct | 0 | self + 1,000 |
| Nov | 0 | self + 1,000 |
| Dec | 0 | self + 1,000 |
| Average |
Again, remove the “+1,000” part from either person who isn’t 55 or over at the end of the year. The “1/2 family” part can shift either way to one person. Then you take an average of the 12 months. That’s the contribution limit for the year for each person.
The Last Month Rule
Finally there’s a “last month rule” that says if you are eligible on December 1, you can claim to be eligible for the entire calendar year even if you weren’t eligible earlier in the year. The big catch is that you have to keep your eligibility at this level for the following twelve months (January – December the following year).
If you fulfill your promise, you are forgiven for not being eligible earlier in the year and you can contribute more than you otherwise can. If you break your promise for whatever reason, you will have to go back and remove the amount you over-contributed and pay taxes and penalty.
It’s a gamble that may not be totally under your control. Say you become eligible to contribute to an HSA late in the year. You invoke the last month rule and you contribute the full-year maximum. You intend to stay in the HSA-eligible plan the next year also, but you switch jobs (voluntarily or involuntarily) and your new employer doesn’t offer an HSA-eligible plan. Now you have to jump through hoops to calculate the excess contributions you made for the previous year and figure out how to report the income and penalty on your tax return.
For this reason I don’t recommend using the last month rule. Just contribute based on your actual month-by-month eligibility.
Reference
- IRS Publication 969
- IRS Form 8889 Instructions
- HSA Contribution Rules for Married Couples, UMB Financial
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msf says
” once contributed, the money in the HSA can be used to cover eligible medical expenses incurred by anyone in the family …”
Not exactly. Medicare premiums are eligible only if they are paid out of an HSA whose beneficiary (i.e. owner) is at least 65 years old.
So if you’re 64, and your spouse pays medicare premiums, those premiums are eligible expenses (for your spouse’s HSA). But the money in your HSA cannot be used to cover those eligible expenses.
See IRS Publication 969 here:
https://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204086
Regarding the amount that can be contributed. Instead of prorating month by month, if you’re eligible to contribute on December 1, you can contribute the allowed amount for the full year, using the Last-Month Rule.
The IRS writes:
“If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2014 is $6,550 even if you changed coverage during the year. ”
https://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204046
So in Example 1 above, both Husband and Wife are allowed to contribute half of the full year’s family HSA limit, plus a full $1,000 (each) in catch up contributions.
(If you don’t maintain the HDHP or equivalent plan through all of the following year, then some of the contributions become taxable. This is similar to what happens when you deduct state income taxes and then get a refund. You are allowed to take the deduction this year, but next year you have to declare the excess deductions, i.e. refunds, as taxable income.
Harry Sit says
I don’t consider Medicare premium a medical expense even though it may be reimbursable from the HSA. The last-month rule is nice but it’s also tricky. You never know whether you will be able to maintain eligibility in the following year. You may change jobs and the new employer doesn’t offer a high deductible plan. If that happens you will have a mess of having to figure out excess contribution and pay tax and penalty on the excess. It’s not worth squeezing in a few months worth of contributions.
Lacy Reaves says
My wife and I are covered by my employer’s health insurance plan although we are both over 65. We have maintained HSAs and have made the maximum contribution annually. My wife recently filed for spousal social security benefits and I filed and deferred. We were automatically (although we requested to the contrary) enrolled in Medicare Part A. I understand that disqualifies us from making further contributions to our HSAs. Is there any way to avoid that result?
Harry Sit says
Not really. Note the disqualification is only for the months after you enrolled in Medicare. You are still eligible for the partial year before you enrolled. If you already made the maximum annual contribution though, you need to withdraw it down to only the prorated amount.
msf says
Enrollment in Part A is automatic with SS. This is according to Hall v. Sebelius, 667 F.3d 1293 (D.C. Cir. 2012). The only way out is to not file for SS (you can’t even file and suspend) – or to withdraw an application, including paying back any benefits received.
I’ve seen writing that suggests that automatic enrollment in Medicare Part A begins as much as six months before your SS benefits (it is backdated up to six months, but not earlier than your 65th birthday). If correct, that means you have to unwind some of your HSA contributions already made.
Here’s the appellate court ruling (the Supreme Court declined to hear an appeal):
https://www.cadc.uscourts.gov/internet/opinions.nsf/890596479218E0818525799D00548389/$file/11-5076-1356903.pdf
Here’s the Code of Federal Regulations that says Medicare Part A (hospital insurance) begins as much as six months before application (see §406.6(d)(4)), that begins “Effective March 1, 1981”):
https://www.law.cornell.edu/cfr/text/42/406.6
carol says
Is Medicare Part A received because of SSDI the same rules?
I’m a little concerned. My spouse has had Medicare Part A for several years due to receiving SSDI benefits, but we have continued his main medical coverage through my employer. We switched to a HDHP with an HSA and went all in on the HSA contributions. In our benefits meetings explaining the new coverage, I specifically asked about covering my spouse even if eligible for medicare and they stated no problem. Now reading the above, I’m confused.
Harry Sit says
Carol – See comment #7 below.
Shirley Sanchez says
Question: my husband has a HDHP plan and contributes regularly to his employer sponsored HSA. I, on the other hand, have my own employer sponsored health insurance coverage and do not have access to a HSA/HDHP. HR said my husband could contribute up the family contribution amount since he’s married; is this correct? I thought because I’m not under his coverage (he has self-coverage), that isn’t possible. I understand that I could use $ from his account, but that’s about it.
Thank you in advance!
Shirley
Harry Sit says
You are correct. He can contribute at the family level only if his plan covers himself plus another person (can be a child).
Shirley Sanchez says
Thank you so very much for your help! So helpful!
Porcupyn says
Surely it should be 1000/12 in the above examples?
Also, I am confused about the separate HSAs idea. Let’s say wife’s employee plan offers the HDHP. Are you saying that the husband and wife can have a separate HSA with half of the family contributions each? That does not appear possible.
And even if it were possible, would it not be better for the contribution to come out of wife’s paycheck as husband would be unable to prevent social security and medicare being taken out of the money earmarked for HSA in his paycheck.
– Porcupyn
Harry Sit says
You put the contribution limit into each row. When you take an average over 12 months, everything gets divided by 12.
If husband is covered by wife’s plan, he’s able to open HSA on his own with a bank and contribute to it. Whether it’s better to shift a portion to his wife is a separate question. If he’s 55 or over and he wants to contribute his catch-up, it has to go into his own HSA.
msf says
Change Example 2 slightly, and the contributions change for the better.
Instead of assuming “Wife continues HDHP for _just herself_”, suppose that “Wife’s family HDHP plan continues with no change”.
Then Wife may contribute the full family amount (plus her $1K catch up) through the rest of the year. That is, she may contribute (family + 1,000).
However, Husband may not contribute his $1K catch up, because he’s no longer allowed to contribute to an HSA (since he’s covered by something other than an HDHP, namely Medicare).
See IRB Notice 2008-29 (Q&A #16)
https://www.irs.gov/irb/2008-29_IRB/ar11.html
Harry Sit says
True, but covering an extra 65-year-old person costs money. It also increases her deductible and out-of-pocket maximum. Doing so only for the sake of contributing more to the HSA probably isn’t worth it.
Dknees says
@ Harry –
You are right to say it probably won’t be worth the additional premium cost. Most of the time the difference between individual coverage and family or individual + spouse is vast.
However, it might be worth it,
a. If she has very low premiums through work – for instance, if her employer covered 80% or more of premiums for both employee and spouse (though most don’t).
b. If the scenario changes and they have children – the difference between Spouse + Dependent coverage and Family coverage is sometimes very little, or even non-existent under plans that only offer individual and family coverage tiers.
Earl Bills says
I have HDHD from my employer. My wife has Medicare Part A. We did the math. If we take her off my plan, pay premiums for Medicare Part B, Part D, and a supplemental plan, then consider the co-pays, it’s very close to the cost of keeping her on my plan. Clearly, my employer subsidizes the premium. Considering that some providers do not take Medicare, we’d rather keep her on my plan, but we’re still confused about the maximum HSA contribution. It looks like I can still make the maximum family contribution and use some of that money to pay her medical expenses. Have I got that correct?
Tracy says
My fiancé and I are both currently covered by HDHPs, and each have an HSA – his is employee only, mine is family. We will be getting married in December.
If we file jointly, am I correct in concluding that our 2015 maximum contributions for both HSAs is the family limit of $6550? Would that change in any way if we filed separately?
Thanks!
Harry Sit says
The 2015 limit for family coverage is $6,650, before any age 55 catch-ups. Other than that, as far as I understand, that’s correct and it doesn’t change whether you file jointly or separately.
Tracy says
Sorry, that was a typo. I knew the limit was $6650. Thanks for the response. I read on one forum an ‘expert’ say that we could each calculate 11/12 of our respective limits for the period of time that we weren’t married, then 1/12 of the limit for the time that we were married. In other words, I could contribute 11/12 of $6650 family limit for Jan-Nov, he could contribute 11/12 of the $3350 individual limit for Jan-Nov, and together we could contribute 1/12 of $6650 for December, since we would then be married and the family limit would apply to both of us. That would give us a combined contribution of $9720.83, which just didn’t seem right to me.
Cary says
I have a similar question. My fiancée is covered under my HDHP as a domestic partner. Since this is a family plan (with higher family deductible), I can contribute up to the family limit of $6750 for 2016 and 2017. Unfortunately my fiancée cannot use my HSA for her medical expenses until we are married. Since she is covered under a family plan and cannot use my HSA, my understanding is that she may also contribute $6750 in 2016.
The confusing part, is when we get married in August 2017 (2/3 of the way through the year). Assuming the above is correct and the averaging rule applies, I may contribute the family maximum of $6750, while she contributes 2/3*$6750=$4500, or we may both contribute $5625, both of which total $11,250 in contributions.
1) May domestic partners covered under a single family plan both contribute the family maximum to their separate HSA’s?
2) Does the averaging rule apply as stated above?
Harry Sit says
Cary – It’s better to think of it as the two of you contributing 2/3 of $6,750 each plus 1/3 of $6,750 combined. How you split the combined part is up to you.
Pam Vinson says
I am covered by my Employee’s Health insurance HSA plan and I put the max for single of $3,349. I’m 60. My husband has his own Health Insurance plan through his employer and he is not in HSA. He will be 65 in February 2016. If he retires and start collecting social security benefits and medicare, can I still be in the HSA plan for the full year or partial year and/or future years? Thanks,
Harry Sit says
The full year at self-only level just like now. By the way the maximum for single coverage in 2015 and 2016 at age 60 is $4,350.
Pam says
Thanks. Also, can I use the HSA money for insurance premiums if I retire early 61 or 62?
Harry Sit says
No, unless it’s long-term care, COBRA, when you receive unemployment, or your own Medicare premium after you turn 65.
msf says
Once you turn 65, you can use your HSA to pay for your husband’s Medicare premiums as well as your own. Yes, I know it sounds weird that you have to be 65 to cover your husband’s Medicare. But the 65+ rule (for Medicare eligibility) applies to the beneficiary (owner) of the HSA, not the person covered by Medicare.
See, e.g. this FAQ question from HSA Resources (“Can I use my HSA to pay for health insurance premiums, including Medicare, of a spouse or dependent?”):
https://www.hsaresources.com/faq/#access-02
See also my comment #1, that cites IRS Pub 969. The Pub does not require the Medicare premiums to be for your own coverage.
This is a good reason to dump all the HSA money you can into the HSA of the older spouse, rather than split it evenly.
rob kum says
Hi,
My employer provides an HDHP plan however, some of my providers are out of n/w so I am planning to buy another insurance HDHP (from health exchange). This puts me on dual coverage situation since I will continue to have two insurance plans. In this case, am I eligible for HSA? IRS publication states ” you are eligible if you are not covered by another non-HDHP plan”. Our open enrollment ends today so I would really appreciate your quick response.
Thanks
Harry Sit says
You are eligible if both plans are HSA-eligible plans.
rob kum says
Thanks Harry. I really appreciate a quick response. One more question, can I enroll anytime in HSA or only during open enrollment period?
Harry Sit says
If you want to contribute to the HSA by payroll deduction (if your employer allows, which saves your FICA taxes as well), you can only sign up during open enrollment and the contribution amount per pay period will be fixed. If you just open an HSA on your own, you can do it any time, but keep in mind that you can’t reimburse expenses incurred before you establish the HSA. So you should open it as soon as your coverage becomes effective.
Harry Sit says
P.S. Not all seemingly high deductible plans are HSA-eligible. Having a high deductible is just one of the requirements. If a plan doesn’t meet other requirements, it’s still not HSA-eligible. You want to make sure the plans are indeed HSA-eligible.
rob kum says
I double checked if both plans are HSA eligible and they are. One other question, can I terminate the health insurance that I bought from health exchange any time I want since I have the other insurance from my employer?
Harry Sit says
You can.
https://www.healthcare.gov/reporting-changes/cancel-plan/
Marlaina says
My husband and I have (2015) family HSA eligible medical insurance in my name, through the federal health exchange. We have no other medical insurance, just this family HSA.
I have deposited the total year’s contribution $7,650. The plan is dropped for 2016. In the new offerings in my area, there are only two HSA-eligible, both have very high premiums and very high deductibles. So I am looking at a non-HSA plan. Of course, I didn’t think this would happen, hence the contribution.
I am unclear about the ramifications. My question: Is my entire 2015 contribution legal? If not, is some legal? Is there a publication that helps me figure out how to withdraw a portion of the contribution, if necessary, and I’m sure there a penalty, etc., etc.,
msf says
If you and your husband were covered under your family HSA for all of 2015 (from January through December), you’re fine. That’s the usual case – no complicated prorating, no complicated rules.
If you were only covered for part of the year, then it seems you need to do two things:
1) Compute the amount of contributions you were allowed (multiple the full year amount by the number of months you and your family were covered, and divide by 12);
2) Withdraw the extra contribution before the deadline for your income taxes, including extensions (typically Oct 15th, 2016), and declare any earnings on that withdrawn amount as income for 2015 or 2016 (depending on when you withdraw the excess).
Here’s the IRS Publication 969 section that says this:
https://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204078
The rule you’re referring to is called the “last month” rule.
https://www.irs.gov/publications/p969/ar02.html#en_US_2014_publink1000204049
It says that you’re allowed to contribute the full amount for 2015 even if you weren’t covered the whole year, so long as you had your policy on Dec 1, and so long as you’re covered under an HSA for all of 2016. The idea is that you shouldn’t be discouraged from adding a high deductible plan late in 2015 just because you won’t be able to contribute to the HSA. But all hell breaks loose if you’re not covered for all of 2016. That’s why it is important to fix it now (assuming you weren’t covered for all of 2015).
Finally, I notice that you contributed the family maximum plus $1,000 catch up. If your husband is also over 55 by the end of 2015, he is also eligible to make a catch up contribution of $1,000. The catch, so to speak, is that he must contribute it to his own HSA; the money cannot be added to your HSA.
(On the other hand, if only your husband is over 55, then you are allowed to contribute only $6650 to your HSA and the extra $1,000 _must_ go into your husband’s HSA, not yours.)
Marlaina says
Thanks for your information.
**But all hell breaks loose if you’re not covered for all of 2016. That’s why it is important to fix it now (assuming you weren’t covered for all of 2015).**
And this is the problem. We will be covered by an HSA for the entire 2015, but the healthcare.gov offerings for HSAs for 2016 are ridiculously expensive. So it appears to be a better decision to drop the HSA for 2016 — our current plan has been cancelled on us — and go with a non-HSA medical plan
I read the IRS publication, regarding the “testing period, a ridiculous rule, that indicates to me that my full contribution for 2015 must now be added to income and I also get to pay a 10% tax penalty.
How mere mortals are supposed to see into the future to know if one year from now they will be able to continue with this type of insurance is beyond me? It’s crazy.
msf says
Since you were covered in all of 2015, you don’t have to worry about the last month rule – it doesn’t apply to you.
More generally, you ask how someone is supposed to predict the future. There are a few different answers.
The rule was originally designed before the ACA destabilized the market. (The ACA did tend to bring more insurers into the market, but they’re still figuring out how to price plans, and so you’re seeing a lot of volatility.) In particular, employer plans (which still provide the vast majority of health insurance) are less volatile, so easier to plan for.
The rule itself allows you to correct the situation by withdrawing the excess amount and earnings before Oct 15th. No penalty, just interest on the earnings. Same as if you’d contributed too much to an IRA (e.g. you found out at the end of the year that you made too much to contribute to a Roth). There are ways to fix these things. Not pretty, but possible.
Regarding ACA purchases in particular – one option is wait on your 2015 HSA contributions until November or December, when you’ve made your 2016 insurance purchase. Then you can contribute your full allowed amount (whatever that is) for 2015. Even better, just contribute monthly throughout 2015 as each month passes and you’re covered for that month. That’s always going to be allowed, regardless of what you do for 2016.
In your case, you were covered every month in 2015, so you could have safely contributed each month.
Even people covered by employer plans have a problem if they don’t contribute on a monthly basis. What happens if they contribute the year’s allowance in January, and then quit or get fired in July? They’ve got to withdraw part of that contribution. If you want to be 100% certain that you won’t have excess contributions, the only way I know to do this is to contribute as you go along.
FWIW, I’ve had HDHP as a self-employed person, and done this. (Well, I contributed 3 months at a time, but basically followed this idea.) I was never certain whether I’d sign onto a company that would give me health coverage that wasn’t HSA-qualified, so I would only contribute as many months as I could see into the future.
Marlaina says
Whew! That’s one worry off my plate. Thanks for your help.
I reread the IRS publication, and I see what it means about last-month rule. Really, it should say it in plain English. If one has an HSA eligible health plan for the entire tax year, all contributions for that year are eligible, even if the person has a non-HSA eligible plan the year immediately following.
I find it difficult in our business to make monthly contributions, but quarterly is a good option. I will do that if/when we come back to an HSA.
Sean says
I have been enrolled in a self-only HDHP with an HSA. My girlfriend with whom I live qualifies as a Domestic Partner with my employer and my group health insurer. She also has her own self-only coverage that is NOT a HDHP. Assuming I add her to my plan effective December (her plan will be her primary coverage, she will be secondary on mine as a dependent), my understanding is that I am now eligible to contribute the full family amount to my HSA both this year and next (assuming we maintain this arrangement through the end of next year). Is my understanding correct?
Harry Sit says
That’s correct. Covering a dependent usually costs money. Doing so only for the sake of contributing more to the HSA probably isn’t worth it. If you are adding her for other reasons anyway, you might as well contribute at the higher limit.
Sean says
Thanks! The cost to add her as a DP was more than offset by an increased employer contribution to my HSA, and she qualifies as a dependent for health insurance purposes (i.e. all conditions met except the income test) so her portion of the premium paid by the employer is not taxable to me either. The fact that I get the increased contribution for all of 2015 for just one month of premium is even better.
The only potential downside I see is that my health plan deductible is now the higher family deductible and not the lower individual deductible. But this also may work out in my favor as–if I understand coordination of benefits correctly–all of her ongoing health expenses that are mostly paid by her much richer health plan also contribute toward meeting the family deductible on my plan.
Harry Sit says
I don’t think the amount paid by her primary insurance applies to the deductible on your insurance. Anyway that’s a different topic. You will see how it works when she gets service.
Melissa Montgomery says
My husband and I both work for the same company. We both took out family HDHP plans so we could both have HSA accounts. The reason we did this is because our employer contributes 1,000 dollars to your HSA account if you have a family HDHP so I figured if we both took out family plans it would mean an extra 1,000 we would have by having another HSA account. We will not be contributing over the max combined limit. Also we have very good premiums. I am only paying 27 per month for a family plan so about 300 per year for premiums. In my calculations that means i am actually getting close to 700 dollars free from the company by having a second HDHP and HSA account. However now I am wondering — will my employer actually give me 1,000 in my HSA since my husband also will be getting 1,000 in his HSA and we work for the same company?
Harry Sit says
You may slip under the radar but usually dual coverage from the same employer’s plan isn’t allowed.
Pedro, Centereach NY says
My wife and I both work for the same company we both have HDHP & HSA’s. She has the employer + children option and I have the self plan. My son needs his wisdom teeth extracted which is a qualified expense for my HSA (after the dental plan coverage kicks in), since my wife does not have enough in her HSA to cover the remaining balance can I also use mine for the difference even though I only have self coverage?
Harry Sit says
Yes. The money in the HSA can be used to cover eligible medical expenses incurred by anyone in the family.
Pedro, Centereach NY says
Thanks for the quick response!
cheryl says
Unmarried couple, A & B, working for the same company with HDHP, contribute $ 6,650 in March, 2015 to their respective HSA’s (both qualify for family plans). A & B marry in October, 2015. Are they limited to $ 6,650 in HSA family contribution?
Harry Sit says
Yes. You are considered married for the whole year if you are married on the last day of the year.
Steve Sunny says
Nice website. Here are some facts and three questions
#1. Jan 01, 2015 – HDHP plan in effect for family from healthcare.gov
#2. Feb 10, 2015 – – Contributed $6650 Fam HSA, Invested in investment account with mutual funds
#2. May 31, 2015 – HDHP Plan dropped, by the exchange
#3. Jun 1,2015 – Enrolled in Non HDHP Plan
#4. Read this nice article today, and said to myself “oh no, gotta do a rollback of $= 7/12*6650”
#5. Jan 11, 2016 – But wait, the Investment account dropped in value to $6300
Now the questions:
Q#1. Do I need to withdraw 7/12ths of the account value ($6300) or 7/12ths of the contribution ($6650)?
Q#2. Do I report this amount as income in Tax year 2015 or 2016?
Q#3. Can I rollover the withdrawal into a contribution for Tax year 2016, as I have an HDHP plan? Or do I need 2 transactions, one withdrawal, and one contribution ?
Thanks for your advise !!!
Harry Sit says
Find “excess contribution” in IRS Publication 969.
1) 7/12th of the account value if you only had that one contribution into the account.
2) The excess contribution isn’t income. It reduces your HSA deduction. The earnings are income in 2015 if withdrawn by the due date but if they are negative, then nothing to report.
3) I would do it as two. If you don’t withdraw but count the excess toward the following year, you’d have to pay an excise tax on the excess.
Steve Sunny says
Thanks Harry, now moving along, can I report the short term loss (negative earnings) on the excess contributions that I am withdrawing, and use them to offset gain? It sounds reasonable to be able to do that….If you agree, then how, and where would I do that?
Harry Sit says
No you can’t deduct the loss.
Denise Worley says
My spouse and I are both in the catch-up age group, we each have individual HDHP from our respective employers. Since we each have individual plans, can we each contribute $3,350 + 1,000 for a total of $8,700.00? Thank you. Great information, btw.
Harry Sit says
Yes. Note that any employer contribution also counts toward the limit.
Denise says
Thank you so much!
Shannon Andersen says
We’ve had an interesting situation come up at work. We have an employee who has single HDHP coverage with an HSA. His two children have their own “family” HDHP policy with no adults also covered under the plan.
How much can our employee contribute to his HSA? The single limit or the family limit?
The rules are pretty clear when a spouse is involved, but not when it’s just children being covered. They’re not “eligible” to open an HSA (or even own a checking account on their own for that matter), but does dad get some “ownership” points in this?
Harry Sit says
Don’t know. It looks like single limit to me.
Shawn says
I have a question which is similar to Example 2 but I would like to confirm:
A and B (both < 55) originally covered by A's HDHP family plan.
They got divorced in January that for the rest of the year A has self coverage.
So my question is that A's contribution limit for that tax year will be
1/12 family limit + 11/12 self limit
Am I correct?
Or it will be only self limit (as A is considered as single for the tax of that year)?
I just wonder if there is anything I missed here?
Thanks in advance!!!
Harry Sit says
Not sure. I guess for that one month A and B must agree how to divide the family limit. What if B wants to take it as well? It doesn’t matter whose insurance it was when both were covered. Lack of any specific agreement, the default is each takes half of the family limit for that one month.
Steve says
Another variant of #2. I have HDHP family coverage at work, covering wife and daughter, age 1 2. I turned 66 in October of 2015, and also signed up for SSI, which then enacted Medicare coverage effective 3/1/2015. I continue to work and maintain the HDHP family coverage above. So now I have excess employer contributions, and am only entitled to the 2 months HSA maximum contribution for Jan & February. I need to withdraw the excess contributions before I file. Can I open an HSA for my wife with those funds? She is not on medicare, and is under my HDHP. Also, can she have a HSA for 2016 even though I am on medicare. She has no other insurance than being covered under my plan. Thanks much!
msf says
Boiling down your question to the basics:
– H has HDHP family plan and is also covered under a disqualifying plan (here, Medicare; could also be nonHDHP plan)
– W is covered only under H’s HDHP family plan
Questions raised:
1) Is W an “eligible individual” (i.e. eligible to contribute to an HSA)?
2) If so, eligible to contribute how much (i.e. family limit or individual limit)?
This is an unusual situation, generally not covered by the literature, because usually once one is covered by a disqualifying plan such as Medicare, the HDHP plan is dropped. The more standard situation is where W had, and continues to have, family plan coverage.
I’m not certain I’m reading the regs correctly, but I think the answers are as good as you could hope for: (1) W is an eligible individual (can contribute to her HSA), and (2) can contribute up to family limits.
W appears to be an eligible individual according to Pub 969: (a) covered by an HDHP, (b) no other health coverage, (c) not enrolled in Medicare, and (d) not a dependent on someone else’s tax return.
https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204025
W appears to be covered under a family plan. IRS Notice 2004-50, question Q12 says that: “Family HDHP coverage is a health plan covering one eligible individual and at least one other individual (whether or not the other individual is an eligible individual).”
Here, W is an eligible individual, and H (though not an eligible individual) remains covered under the same family plan. NOTE: Check the plan terms, to make sure that H (i.e. you) really are still covered under the family plan even though you have Medicare.
https://www.irs.gov/irb/2004-33_IRB/ar08.html#d0e1696
Since W appears to be covered under a family plan, the family contribution limits would apply. See question Q-31 in the same Notice:
https://www.irs.gov/irb/2004-33_IRB/ar08.html#d0e1841
Q: “How do the maximum annual HSA contribution limits apply to family HDHP coverage that may include an ineligible individual? ”
The answer given is essentially that the family HSA limit applies, with the qualification that unlike the normal situation, you can’t split that contribution between H and W, because H is ineligible to contribute.
xno says
This is why my husband didn’t go on Medicare or SS, since he was still working. I could put money in my HSA and still be covered on his plan but he couldn’t and we’d also be saying goodbye to the $6k his employer puts in his HSA every year.
Justin Smith says
Hi Harry, what’s your view on the following situation my fiance is in:
Officially single person started on HDHP in July and was considered to be eligible (based on last-month rule) for the whole 2015 year. Now, she had a baby on December 16’2015 and her insurance added baby to the plan and converted plan from single to family on Dec 16’2015.
This results in deductible going up from 3k to 6k on the plan (due to the switch). Childbirth expenses result in easily maxing out the 6k between Dec 16’2015 and Dec 31’2015.
However, if I read the rules right, HSA limits remain at 3350 since on Dec 1st, it was still a single-family plan?? Am I missing something? I thought child birth may have some exception but did not see any. :-(((
Justin Smith says
Hi Harry, what’s your view on the following situation my fiance is in:
Officially single person started on HDHP in July and was considered to be eligible (based on last-month rule) for the whole 2015 year. Now, she had a baby on December 16’2015 and her insurance added baby to the plan and converted plan from single to family on Dec 16’15.
This results in deductible going up from 3k to 6k on the plan (due to the switch). Childbirth expenses result in easily maxing out the 6k between Dec 16’15 and Dec 31’15.
However, if I read the rules right, HSA limits remain at 3350 since on Dec 1st, it was still a single-family plan?? Am I missing something? I thought child birth may have some exception but did not see any. :-(((
Christian says
Here’s the situation. Two separate high deductible health plans. One for me, one for my dependent son. Can I contribute the full family amount to my hsa?
Shannon Andersen says
We ran into this recently, too. Our EE has a HDHP, wife has her own PPO, children have their own HDHP.
Our broker stated that since the children do not have a person covered under their plan who is “qualified” to have an HSA account, contributions cannot be made to an HSA account on their behalf.
Jason says
My wife and I each had a HDHP at the start of 2015. I had single coverage and she had family coverage (son). At the end of May she changed jobs and no longer had a HDHP but still covered my son leaving me the only one with a HDHP for the remainder of the year. So is this an accurate worksheet for that scenario?:
Jan: Family =$6,650
Feb: Family =$6,650
Mar: Family =$6,650
Apr: Family =$6,650
May: Family =$6,650
Jun: Single = $3,350
Jul: Single = $3,350
Aug: Single = $3,350
Sep: Single = $3,350
Oct: Single = $3,350
Nov: Single = $3,350
Dec: Single = $3,350
_______________________
Total: $56,700/12
Max Contribution $4,725
Can that $4,725 come in any combination from us? She/Employer had contributed $2,220 before she left in May and I/Employer had contributed $1,840 for the entire year. So together we were under the max contribution at $4,060 but how does it get distributed because she left a HDHP?
Don Snook says
Hi Harry,
I looked through the comments and didn’t find my situation, so my apologies if I missed it and this was already covered. Simple (I think) scenario:
My wife and I (no kids) work for the same company and both have individual HSA accounts. For our 2015 contribution limit, are we able to each max out the $3,350 amount? Our employer is telling us our contributions are combined and maxed out under the family limit of $6,650. I wouldn’t cry over $50, but to add insult to injury, they put $3,400 into mine and $3,250 into my wife’s and said that since it’s considered a combined family (even though we are all in agreement that we are set-up as individuals) we meet the requirement of not going over a combined amount of $6,650. Seems to me, I need to remove $50 so my W-2 doesn’t show a $3,400 HSA contribution for 2015. Am I wrong? What do you think? The only reference I found in Pub 969 was page 6 and I didn’t see any specific reference to what my ER is talking about. Help! Thank you!!
msf says
Let’s make sure we’re using the right names (acronyms). Health Savings Accounts (HSAs) are always individual – they’re the bank/investment accounts with your money. High Deductible Health Plans (HDHPs) can be individual or family.
If your insurance (HDHP) plan is structured to cover you and your spouse, with a single combined deductible, then it is a family plan. The plan terms will show an individual deductible and a family deductible (twice as much). You could check with your insurer to see if you must meet that family deductible (which would not be the case if it were an individual policy covering only you).
If you are covered by a family HDHP, then you’re allowed to divide the family HSA contribution limit any way you want (with the exception that if you’re eligible for a catch up contribution due to age, that this must go into your personal HSA and not into your spouse’s).
Don Snook says
Thank you Harry and that’s a great distinction and I hadn’t thought about it. We are definitely separate because we have two separate deductibles that are calculated and tracked and get separate statements, etc. But I will make sure that distinction is captured as I move forward in my discussions. It seems I need to remove $50 from my contribution total and start tracking this on my own. Especially with the Family max going up for 2016 to $6,750. According to their interpretation, that would mean we could now contribute $3,375 each next year as individuals! That’s seems like a ridiculous interpretation, but as you said, they could be considering us as a Family HDHP, which I’m certain is not the case. But that may be where their misinterpretation is occurring. Thank you!
Jason A. says
Hi. Situation is married man and woman, two kids. I (husband) have a non-qualifying plan, covering the whole family. Wife just got hired and will start at new (steady) job in July, with HDHP plan available for her, her plus one, or family, and eligibility for an HSA (and FSA.) The employer makes a very nice contribution to the HSA…so much so that it looks lke the best plan for her to at least take employee + 1 or family, in order to get the extra basically free money (double the amount of the individual) into her HSA.
I understand that she always needs to remain not covered under my plan in order for her to have an HSA…but my questions are as follows:
A) If she takes family coverage, can she still only use the HSA funds for out of pocket costs for her only, or is it just while, of course the HSA is hers, but she can use those monies for the eligible out of pocket expenses for anyone her plan is covering, even if THEY (not her) are also covered by a non-qualifying plan? (Which I and the kids would be, and,based on our birthdays, my insurance would be primary.)
B) Same question, but for the FSA. (which will help us determine how much we plan to put in there, based on past claims, etc.
C) Assuming the answers to A & B are “yes, as long as SHE isn’t covered by the other plan, she remains HSA eligible, she can use those funds for anyone in the family if she has family coverage, regardless of whether the others are also covered by a non-qualifying plan…then the question is…can she use FSA funds first and exhaust them annually before (if needed) using any of the funds in the HSA?
D) In this scenario, if she takes family coverage for us four on her eligible plan, and I insure myself and the kids only (not her) on my non-qualifying plan (which would be the primary insurance on us three since I am me, and for the kids, my birthdate is earlier in the year), if there are out of pocket expenses for myself or the kids, is there some restriction that says we have to use funds from my FSA first before hers, or does the “ranking” of primary insurance versus secondary not have anything to do with FSA’s and HSA’s?
E) Finally, her hire date is August of this year. I can carve her out of my insurance at any time. She could get on to her insurance at hiring, or during this year’s enrollment period (mainly it’s December.) From what I can tell, if I carve her out of my insurance on her hire date it is allowed for her to start her insurance and start her HSA and FSA at hiring…but the amount she can put into her HSA might be limited. That part gets confusing because I am reading prorations, but also reading some areas that say she could do the full amount for 2016, then also do the full amount for 2017. FYI, she is at a stable employer, under a bargaining unit contract valid for two more years, so the HSA-eligible insurance is not likely to change. In this scenario, assume she takes family coverage, what is the max that could be placed into her HSA for 2016 ( in which she would be employed and under the eligible insurance plan from mid-late August through Dec 31, 2016) and the max for 2017? (FYI, by max, I mean the max total between employer contribution and her directing the remainder up to the max, into it, from her pre-tax pay.)
Thank you so much, in advance!
msf says
Some of the confusion may because there are different rules for contributing to an HSA (pretty strict) and spending from an HSA (pretty lax). I usually double check my responses, but these are off the top of my head, so be sure to check yourself (good advice in any case) …
A) To be considered a family plan, an HDHP must cover one eligible person (your spouse, once she is dropped from your plan), and at least one other family member who doesn’t have to be eligible (you and/or kids). This allows your wife and employer to contribute up to the family max.
Spending rules are more generous. The HSA can be used for any eligible medical expenses for any family member, so long as they are incurred after the HSA is opened. The family members don’t even have to be covered by the HDHP. For example, later when she’s on Medicare (so not covered by an HDHP), she can use any money left in the HDHP to pay her Medicare premiums.
B) Haven’t looked at FSA rules in years.
C) Yes. The rules for using HSA money is that you can (not must) use it for eligible expenses that aren’t applied to some other tax purpose (typically itemizing medical expenses on your tax return, or spending FSA money).
D) Again, I’ll duck the FSA part. But I will say that if you two had HSA accounts, you could spend them in any order that you wanted on any eligible expenses for either of you (or kids). Just don’t double dip – don’t use the same $100 eligible expense to justify spending $100 from one HSA _and_ $100 from another HSA or FSA.
E) There’s a rule that says so long as one’s covered on Dec 1st, one can contribute a full year’s worth (for 2016). Assuming that December coverage is family coverage, that would be the full 2016 family amount. But as you wrote, this rule comes with a gotcha. Your spouse has to stay covered under an HDHP for all of 2017. If not, some of the 2016 contributions are excess contributions and it’s a mess to unwind.
Harry Sit says
If she wants to contribute to the HSA, neither she nor you can contribute to a general-purpose FSA, because FSA money can be used by anyone in the family, regardless of health plan coverage, and having FSA money available before the deductible is met counts as having other health coverage, which makes her ineligible to contribute to the HSA. Only limited-purpose FSA (dental and vision only) or post-deductible FSA (designed to not reimburse before deductible is met) are allowed.
Jason A. says
Thank you very much! Any other comments welcome, especially if anyone has more FSA expertise than the gentleman who replied humbly acknowledged he might not.
Jason A. says
I really appreciate the responses. One thing I did not perhaps make clear enough was that we didn’t know my wife would get this job, nor that if she did, that they had an HDHP, so just like I have for years, I signed up for my FSA at my employer and funded it to the max, as we always use it up. Our rep is saying that since there was / is an FSA ni this tax year, she is not eligible to open an HSA this year at all. Her employer and our CPA seem to say otherwise, and that as long as I have used up my funds in the FSA prior to her hiring, and I carve her out of my insurance (which is not at HDHP) on / by her hire date, that she can do her employer’s insurance, and open the HSA, and even that her employer can put into it a prorated amount (4 months’ worth) for the HSA. It’s not clear whether she can contribute a prorated amount or the full amount for 2016 in addition, but the point is, I have two sources saying “yes, it’s a “life event” / qualifying event” and she can indeed switch insurance and open an HSA from her hire date in August, through the end of 2016, and one source (the rep from the company that manages our Section 125) saying no, it simply cannot be done in the same tax year. Since it means at least some “free” money into the HSA from her employer, naturally we want to do this if it legally can be. Please note, that in all of these scenarios, I understand that I will do no FSA in 2017, and that her FSA there will be a restricted one for dental and vision only.
If any can shed some light on to whether my wife can indeed open and HSA when she’s formally hired later this year, that would be helpful. If she can’t, we’ll just keep all as is until January of 2017.
Thanks in advance.
Jason A. says
Unless something has changed, it appears something I found in the tax code answers my question:
“If the individual is a participant in an FSA, they will not be eligible for HSA contributions until the end of the Plan Year for the FSA, even if the health FSA balance has been exhausted. IRS guidance 2005-38 confirmed again that the introduction of a new benefit such as an HSA is not a qualified change of status that allows a change in the health FSA election, so they cannot choose to drop their FSA coverage.”
This means she can’t do an HSA until January 2017…which is fine, I guess. If I’m reading correctly, however, she could do an HRA for the remainder of 2016, even though I have the general purpose flex plan in place already, as long as I carve her out of my insurance at that time. This would mean at least she’d get the employer’s contribution into her HRA, which is like “free” money (it’s in addition to salary, coming straight from the employer.)
If that all sounds ok, then my question would be: if she doesn’t use any of the funds in her HRA in 2016, and switches to an HSA in 2017, does she lose the funds in the HRA? (The employers does do rollover on the HRA) or can the be transferred into the HSA, or do they sit in an HRA until used, it’s just that neither she nor the employer could contribute more to the HRA once she has the HSA?
I’m hoping my stupidity helps someone else who read this thread, and your wise answers, some day. 🙂
Thanks.
Harry Sit says
The same reason you don’t want to contribute to FSA in 2017 applies when you already contributed to FSA in 2016. Good to see you finally got the answer.
What happens to the remaining funds in the HRA depends on how the employer does it. If the employer does it right, it can become a limited purpose HRA, or it can be rolled over into the HSA. You don’t want to have the HRA money roll over to the following year as a general purpose HRA; otherwise it will make you ineligible to contribute to the HSA.
Johanna Turner says
Client couple have qualifying HDHP, family plan HSA. Husband dies 4/2/16. Can the wife max out the family plan level for 2016? I have found the prorata rules for not having an eligible plan for the full year, but not for change from family to single. My gut is telling me she can max out family for 2016, but I cannot find anything to back it up. If they maxed out before his death, do they need to take $$ out? Thanks very much!
Harry Sit says
Isn’t it similar to the case of going on Medicare and changing to a single plan, as shown in the example here?
Johanna Turner says
Harry, I wish I knew. The IRS will treat her as MFJ (surviving spouse) for the whole year so I was hoping that death in mid-year would be some kind of qualifying event for a family HSA for the year. Seems like there should be an example addressing this but I just cannot find. Thx, jft
TwylaMay says
I’m confused about what exactly is meant by a “family” plan. My husband & I have no kids. There have been times when one of us has been on the other’s HDHP through work. So, if a husband & wife are both on one spouse’s workplace plan & it’s a HDHP that’s HSA eligible does that make it a family plan? Thanks if advance if anyone has input!
Harry Sit says
Yes. A plan covering two or more people is a family plan for HSA.
Ralph says
I am currently 55+ with 1 child on the family HDHP and maxing the HSA to $6,750 + $1,000 catchup. Child is graduating from college and will hopefully be employed 7/1, at which time I will drop to single coverage if he get his own health insurance. So, what strategies are there to put the max into the HSA for this partial year under the family HSA limit?
Harry Sit says
Keep him on the plan even after he gets a job?
xno says
If the child is still on the HDHP and not covered by another plan, can he (the child) also make a $6750 contribution to his own HSA, he is covered by an eligible family plan?
Walter says
On May 1st my wife and I (both over 55) changed from a HDP to a non-HDP. I understand I will need to prorate contribution levels when I do taxes for 2016. I am contributing all family and my catch up into HSA in my name. Can I add prorated catch up for my wife into a HSA in her name – 4 months worth $333?
Harry Sit says
Yes. Look at the table near the end of this post.
Bob says
Hope I’m not repeating a question already answered. I turn 65 in June of 2016 and will be on Medicare, terminating my employers HDHP. If I have not max’d out my 5 month pro-rate contribution to my HSA for the year can I still make that contribution, and, does that contribution have to be made while I’m still covered under the HDHP in May? In other words, I can’t contribute in Jun or Jul? The contribution can be pre-tax if my employer makes the deposit, correct?
Thanks
Harry Sit says
You can still contribute. It can be any time up to April 15 the following year. If you contribute on your own it’ll be from after-tax money but you take a deduction on your tax return. If you do it through the employer it can be pre-tax money but you don’t take a deduction again on your tax return.
Bob says
Harry,
Thank you so much. That was my understanding but my employer is saying no contribution allowed after May. I’ll make the additional contribution myself and take the tax deduction .. problem solved.
Awesome site.
FS says
Can I have a HDHP / HSA covering my self and children while my employed wife has one covering herself/myself (I anticipate using it as secondary insurance to get benefits in her network that I cannot receive). If so, what are the contribution limits? I’m assuming it is $6650 split between the two of our HSAs. If she covers just herself while I cover myself and kids, is she eligible to contribute $3350 while I contribute $6650?
Harry Sit says
Family + Single = Family.
msf says
I think it depends on what the insurance covers, not how you use it.
You write: ” If she covers just herself while I cover myself and kids”. It’s not her decision on whom the plan covers – it’s the terms of the plan that matter. That is, if she has a plan that covers you (which is what you seem to have written), then you can’t just willy nilly say, never mind, we’re going to pretend it doesn’t cover me.
If her plan is really set up as an individual plan (that you cannot use as secondary coverage), and if your plan is really set up so that it excludes her (but does cover your kids), then we have something to talk about.
In that case, I believe (though haven’t found writing with precisely this example) that the contribution limits you ask about would apply. Married individuals with completely separate individual plans can each contribute $3,350 to their own HSAs. It seems to me that the same reasoning would apply if one plan covers kids (still not spouse) – except now your contribution limit would be for a family plan.
To take this one step further, what if both parents had HDHPs that covered themselves and their kids, but didn’t cover the other spouse? Would they each be eligible to contribute $6650 to separate HSAs? This is less clear to me.
msf says
My error – it appears that even if your spouse’s family plan excludes you, you are still viewed as covered under that plan, so a combined $6650 applies.
See Pub 969, Chapter 2, “Rules for Married People”
https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204059
“If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2015 is $6,650. ”
It still doesn’t say what happens if the “family” plan of one spouse doesn’t cover the other spouse, so I’m not 100% convinced that the rule applies. That is, it may tacitly assume that the family plan does cover spouses (as one would expect of family plans). But at least based on the words on the page, one would not be entitled to contribute twice.
Sri says
Hello,
My friend referred me to this website and I really appreciate you for taking your time to answer all the HSA related questions and helping people.
Here is my question:
I have an individual HDHP plan with HSA from my employer. My wife and kids are on a private HDHP (HSA eligible) plan (my employer’s family plan is very expensive). She does not have a HSA account as she is unemployed and it did not make sense to create a HSA for her.
What is the contribution limit to my HSA in this case? Can i contribute $6750 to my HSA as both me and my family are having HDHP plans? Or Will I be able to contribute only $3350 to my HSA as my plan is an individual plan?
Harry Sit says
See above. Family + Single = Family.
Scott Prior says
Right now I have a HDHP for me and my daughter. We have already put in the family max plus $1000. In September she will be getting employer coverage and coming off my HDHP and my plan then would only individual coverage. At the end of the year it will look like I put to much money into the account. Will this cause me a problem a the end of the year?
Harry Sit says
Scott – You will have to work with your HSA provider to withdraw the excess contribution.
Prav says
I have HDHP for my family and HSA limit $6650. Wife got new job and wants to take HDHP with HSA herself and kid. Do I need to tell my employer remove dependents ? or can I continue until her job is stable.
Ralph says
Unless the premiums are materially different, I’d suggest keeping you and kids as family under HDHP, and setting up your spouse as single for the rest of the year. Then revisit for 2017.
VK says
I would like to confirm that my following understanding is correct. I will appreciate your comments.
My wife is currently enrolled in a family HDHP plan that covers our entire family (both of us and our kids). She has opened her HSA and she contributes to it as well as her employer contributes a small portion to it. I do not have any other health coverage (i.e. I am only covered under her HDHP plan).
I also have an existing HSA account that I had opened a number of years ago when we were all covered under my employer’s HDHP plan back then. I had stopped making contributions to my HSA account as soon as my wife’s Family HDHP plan covering me went into effect. However, if I understood your examples correctly, then it means that both my wife and I can contribute up to the Family contribution limit in any proportion between our two individual HSAs. Is that correct?
Thank you for your help.
Harry Sit says
The contributions from you to your HSA and the contributions from her and her employer to her HSA added together can’t exceed the family maximum, except whoever is over 55 can contribute additional $1,000.
Joe says
What if there is a one-month break in HSA eligibility during the year?
I am currently in a HDHP, but will be leaving my job next month. And I will have made 8 months of prorated contributions. My new health plan kicks in October 1, and will also be a HDHP. That leaves September, where I will probably have to go on my wife’s plan which is not HSA eligible.
I understand that because of eligibility on Dec 1 I can contribute for the whole year, but I can’t guarantee I will be on HDHP all 2017 (as my wife will switch job’s next year too, and I imagine we will end up on her plan).
So I know I can contribute 11 months prorated for 2016. But does that lapse in eligibility impact withdrawals? Will I only be able to use the HSA for eligible expenses incurred post-my new health plan start date of Oct 1?
Harry Sit says
It doesn’t affect withdrawals. You can still use the money after you are no longer on HDHP.
Joe says
The money going in under the second HDHP (after a month of lapse of no HDHP coverage) can be used for distributions for expenses that pre-date the second HDHP? The expenses were incurred after setting up the HSA and while still covered by the first HDHP.
Harry Sit says
Even when you have only one plan during the year, the HSA contribution eligibility is still determined month to month. You can use the contribution based on your October eligibility to pay for your expenses incurred in July. As long as you contribute to the already established HSA, I don’t see how two plans make any difference . Some employers make you open a new HSA with their chosen provider if you want to contribute through payroll deduction and the employer contribution would only go there. The money going into the new HSA can only pay for expenses incurred after the new HSA is established. If you want to withdraw for expenses incurred before then you have to contribute on your own to your already established HSA, foregoing the payroll tax savings.
msf says
“The money going into the new HSA can only pay for expenses incurred after the new HSA is established. If you want to withdraw for expenses incurred before then you have to contribute on your own to your already established HSA, foregoing the payroll tax savings.”
If you were to transfer that money (via rollover or direct transfer) to the already established HSA, then it would seem that this money would now be usable to cover the earlier expenses, since all that supposedly matters is the date the HSA was established.
But the rules don’t force you to go through such contortions. So long has you had money in the old HSA account within 1.5 years before opening the new employer HSA , you can use that older HSA’s date for the new HSA also.
IRS Notice 2008-59: https://www.irs.gov/irb/2008-29_IRB/ar11.html
Q&A41 “If an account beneficiary establishes an HSA, and later establishes another HSA, any later HSA is deemed to be established when the first HSA was established if the account beneficiary has an HSA with a balance greater than zero at any time during the 18-month period ending on the date the later HSA is established.”
In addition, one preserves one’s original HSA date when doing a complete transfer (i.e. move an HSA from one custodian to another). Q&A 40 addresses that specific case.
Harry Sit says
msf – Thank you for finding the 18-month backdating. I didn’t know that.
CI says
My spouse is between jobs and past and future employers’ offer only non-HDHP plans. Can she qualify for an HSA for the month or 2 (i.e. September and October) it will take to find a new job, if she purchases a self-only HDHP qualified medical plan? If so, is it correct that the amount she can contribute is $3,350/12x#of months she has the HDHP? In this example she didn’t have an HDHP in the early months of the year and she will not have an HDHP at the end of the year. I don’t qualify for an HSA because I’m on Medicare.
Harry Sit says
Yes. Eligibility is determined on the 1st of each month. If she starts new job on November 10, she’s still eligible for November.
CI says
Thank you Harry. I was hoping that was the case but I couldn’t find anything specific in the IRS documents about the example.
Additional question: If my spouse turns 55 years young before the end of December 2016 and has an HDHP for only the months of September and October 2016 (not in a HDHP in her 55th birthday month – December) , is she able to also take a prorated portion (2/12 of $1000) as additional contribution?
Harry Sit says
Yes.
CI says
Hello – If I have used my available employee FSA account dollars ($1,170) for 2016 and lost my job, can I open a HSA account for 2016 after securing a personal HDHP?
Details are – I have lost my job but before it happened, I had used all the 2016 FSA (through my employer) dollars I signed up for. I have enrolled in a personal HDHP for the next 2 months to cover myself while finding a new job.
Harry Sit says
Yes. See HSA and FSA In The Same Year.
Judy says
My husband and I are self-employed and had a family HDHP until we were age 60. Then we each got our own individual HDHP. We had only set up one HSA and kept it that way even after having our own individual plans. I want to know if I can set up my own HSA and contribute the full amount for 2016 ($3350 + $1000). Does the fact that I turn 65 in May 2017 subject me to the Dec. 1st rule? If I understand correctly, it doesn’t because I’ve been covered for the entire year of 2016.
And I can contribute 4/12ths in the year 2017, correct?
Harry Sit says
Correct. You are not relying on the last month rule for 2016. Now the question is whether your husband contributed more than his individual limit plus catch-up to his HSA. If not, you are good.
Judy says
Thank you for the response! He’s only put in $1000 for the year 2016 so far. (We’re both very healthy and not on medications) So, he can put in $3350 additional, correct? His 65th birthday is in January 2017, so his contribution for 2016 will be his final contribution.
Harry Sit says
Correct.
Chinmay says
So I have a scenario which I didn’t read above:
My wife was working for the first quarter and had a HSA plan, but she left her job in April, and is not working anymore (so she is a dependent on me). I have a HSA plan since the beginning of this year, and I added her to my plan after she left her job in April. In this case, would I be able to contribute the remaining amount from $3350 which my wife didn’t contribute to my HSA account + my individual contribution OR will I be considered under the Family HSA limits? To clarify, see the example below.
For example:
Say she contributed $350 up until April, so the remaining amount is $3000
Can I contribute only — 3350 + 3000 –> $6350 OR Can I still contribute upto (Family HSA Limit) 6750 – 350 –> $6400?
Harry Sit says
Fill out the table. Each of you had a single coverage in the first four months. Then you had family coverage until now. Assuming this continues to the end of the year, then you can use the table to calculate how much each of you can contribute. The “1/2 family” part can move between the two of you but her allowed contribution when she had single coverage can only be contributed to her own account.
David says
I have had an HDHP and have maxed out my HSA for years. I got married in July, and in August moved off of my individual HDHP to a new HDHP from my wife’s employer that covers us both. She had been on a non-HDHP prior to August 1. She does not yet have an HSA. We are both under 55.
Is the following correct (provided we maintain the same coverage through Dec 1, 2016):
My contribution limits for 2016 are the weighted average of 7 months individual + 5 months family? Her contribution limits for 2016 are 12 months family as a result of the Last-month Rule? Combined we can contribute $6735.42 in 2016?
Is there a need (or benefit) in her opening her own HSA before the year she turns 55?
David says
Her employer does not make contributions for her. I understand that would be a reason/benefit to her having her own account prior to the year she hits 55. In this case, however, it is not relevant.
And now that I’m thinking about it more…does it even matter that I was on an HSA-compatible plan before? Shouldn’t we be able to contribute at the Family level for 2016 since we both fall under the Last-month Rule?
Tommy says
I have always had an HDHP and contributed to my HSA the maximum amount.
My wife started the year without an HDHP, she had a PPO.
Then on 4/25 she switched to a contractor role with no insurance, joined onto my HDHP as an Employee+Spouse plan.
Then on 9/19 she switched to an HSA plan where the company will contribute $300 for free.
So I will end the year with my HSA that was “Family” for almost 5 months and back down to individual, but I don’t know how much I am allowed to contribute.
If I am reading this right:
Jan 3350 0
Feb 3350 0
Mar 3350 0
Apr 3350 0
May 3375 3375
Jun 3375 3375
Jul 3375 3375
Aug 3375 3375
Sep 3375 3375
Oct 3350 3350
Nov 3350 3350
Dec 3350 3350
Total average is 5604.17
Did I do the month rounding right?
Can I contribute over on my HSA (5304.17) and her only contribute the $300 from her company?
Harry Sit says
The total is correct but you have to do the two columns separately. The average of the left column goes to your HSA; the average of the right column goes into her HSA. If you want, you can move the 5 $3,375’s either to the left or to the right to make it $6,750 and recalculate the averages. Her last 3 $3,350’s must stay on her side.
Tommy says
So, I can contribute up to $4766.67 and she can contribute up to $837.50?
I’m not allowed to contribute more than $4766.67 into mine even if it’s under our $5604.17 joint limit?
Also, for next year, we will just have 2x individual limits as long as we have 2 separate coverages?
Harry Sit says
There is no joint limit or joint HSA, as explained in the main article. For the five months when you had family coverage, you can split the limit however you want. Once you have separate plans, you have to contribute to separate HSAs.
Dee says
I’m having a hard time sorting this out and hope you can help.
I have a 2016 ACA marketplace HSA plan for myself and 19-year-old daughter. I contributed the full family amount into my HSA account ($6700 or whatever the exact number is) early in the year.
About halfway through the year, my daughter got a job and is now contributing more than half her own expenses so I can no longer claim her as a tax dependent (and i understand, can’t pay for her health expenses out of the HSA anymore). She has remained on the HSA plan, however, since she had no insurance from her part-time job.
Two weeks ago, she started working full time and is now covered under an employer health plan. I am going to call the Marketplace to have her removed (?) for the last two months of 2016.
What do I do about the money I already contributed to the HSA? Do I prorate (from when? the time she was no longer a dependent, or when she got the fulltime job?), withdraw the excess, and pay taxes on the small amount of interest earned? Or what??
Thanks for any help.
Harry Sit says
You are eligible to contribute to the HSA at the family level when your plan covers more than one person. It’s looked at on the 1st of each month. If your daughter is taken off from your plan effective November 1, you switch from the family level or the self-only level in November and December.
Shirley Hurtado says
My husband and I are self employed, participate in a HDHP through our own company and have fully funded our individual HSA’s for 2015 and 2016. He will be 68 this month and I turned 66 in June 2016. Due to the 2016 changes in Social Security rules on the file and suspend strategies, my husband filed for and suspended his claim for SS benefits in April 2016. Although he was diagnosed with pancreatic cancer in July, he has not claimed/ received any money nor has he used any medicare covered medical services. (We have continously been covered by our HDHP.) We just recently realized that this filing and suspending automatically enrolled him in medicare retroactively back to Sept 2015. Now we find that he became ineligible to contribute to his HSA as of Sept 2015 and has made an excess contribution for both 2015 and for 2016. Am I correct in thinking that we will have to pay a 6% penalty for contributions+interest income made for Oct, Nov and Dec 2015. However he can withdraw the entire $4250 + interest that was made for 2016 and owe no penalty. This amount just has to be included as income on our 2016 tax returns. If I am correct what are the mechanics of getting this done?
Harry Sit says
Contact his HSA provider. They usually have a form to withdraw the excess contributions. They will calculate the earnings. The 2015 excess contributions withdrawn count as 2016 income, plus 6% penalty. The 2016 excess contributions withdrawn don’t count as income. The earnings on the 2016 excess contributions count as income, but no penalty. If you are keeping the HDHP covering both of you, you are eligible to contribute at the family level to your HSA.
Jamie Neverman says
My husband is divorced and insures his children on his fully insured first dollar gold plan through the county and has for 5 years. His ex-wife refuses to pay her portion of this coverage and he would like to drop them and is now finding out she claims to have covered them on her Consumer Driven Health Plan HSA since 2014. I thought IRS regulations prevented the children from being covered on an HSA and having contributions made on their behalf since they are under a fully insured plan with him. When I called the Public Employees Benefit Program she claims to cover them with they refused to verify coverage but said she CAN insure them on the HDHP HSA because they are children, not spouse. Is this correct?
Harry Sit says
She can cover the kids. Even if the kids have other insurance, she can still contribute to her HSA.
Sophia says
I started a job in January and got a HDHP/HSA. However, I did not know that I couldn’t have non-HDHP secondary coverage, so I also stayed under my parents’ PPO plan. As long as I drop my parents’ insurance by Dec. 1, would the last month rule apply to me?
Harry Sit says
Yes.
Deb says
I am confused about what my husband’s employer says. He has had (and will continue to have) an HDHP – family coverage (himself and the kids) and an HSA. He is over 55. His employer contributes $1000 to his HSA. They told him that he could not contribute his catch up amount because of their contribution and limited him to taking out only $5750. Together his total is only $6750. I am now going to have my own single coverage HDHP plan beginning Jan 1, 2017. I am also over 55. Shouldn’t I be able to put in $2000 and play with the “split”? That is a split that allows us to get to the maximum contribution amount for family coverage with each person being over 55. I don’t understand why, according to his employer, we would be limited to the $7750 amount. I think we work the split so that the $5750 to which they are limiting him, includes his catch up amount, so that I can put in the balance to get us to the limit to which I think we are entitled of $8,750. Is there some rule about employer contributions that changes that of which I am unaware?
Harry Sit says
It could be that his employer’s payroll system limits everyone with family coverage to the same amount, without regard to who’s 55 and who’s not. If he wants to contribute his catch-up, he can contribute on his own outside payroll for 2016, or split the limit with you when you are also eligible to contribute for 2017.
Texangirl says
First off, these answers are awesome. I have yet to see my situation though. I have an HDHP+HSA and my husband has a non-hdhp plan, through our respective employers. Can I use my HSA money to pay for his medical expenses(ie. coinsurance, copays, and prescriptions) even though he has a non-hdhp coverage? We file jointly and are not covered on each other’s insurance.
Harry Sit says
This article is about the HSA *contribution* limit (see title). Once contributed, the money can be used to cover the eligible expenses from both of you no matter who contributed or who has what coverage.
VeeBee says
Both my wife and I have had HSA/HDHP plan from our employers and our employers contribute as well. At the beginning of the year, I and my older son were on my plan and contributed (Me:1375 + Employer:2000) $3,375 and my wife and my younger son on her plan and similarly contributed $3,375. Thus reaching our limit of $6,750.
I happened to quit my job at the end of Sep and all of us moved under my wife’s plan. Her employer according to their policy is now contributing additional $ in her plan on a pro-rated basis which will amount to $125 by the end of the year to her account.
What would be the next steps? Is it just that I need to withdraw excess contribution from my account in the order of $125?
Harry Sit says
Yes but you have to follow specific procedures at the HSA provider to withdraw the excess contribution. They usually have a form for doing so. Don’t just take the money out yourself.
Angela says
I have an employee who has had a HDHP plan with HSA since the beginning of 2016. He had EE only coverage Jan–Sept, Family (EE+CH+SPOUSE) coverage Oct–Nov, and now his wife is changing to her employer’s coverage as of Dec 1. The new coverage the wife has is a non-HDHP/HSA plan and it covers herself, the children, AND my employee. From what it appears, my employee, who as of Dec 1 is taking EE only coverage with us, cannot contribute (nor take the Employer contribution ) to an HSA plan because he now has dual coverage–one plan of which is not a HDHP/HSA eligible plan. Is that correct?
Secondly, I have another employee who has had HDHP/HSA coverage as EE only all of 2016. He plans to be married in September of 2017 and,, more than likely, go onto the new spouse’s coverage in October following the marriage. Is he able to contribute the max $3400 between the months of Jan–September, knowing that he will be changing to a new plan later in the year? I think not, but wanted to double check because I was emailing you about the first question.
Harry Sit says
It’s more about the contribution limit in dollars, not about in which month the contribution is made. Your first employee’s contribution limit for the month of December is zero but if he hasn’t contributed to 100% of the limit he’s allowed from January to September (single coverage) and October to November (family coverage), he can still contribute or receive employer contribution in December to make it up.
For your second employee, it’s not October 2017 yet and things can change between now and then. If the new plan he moves to is also an HSA-eligible plan, he may very well be able to contribute $3,400 to his HSA in 2017.
Angela says
Thanks for your replay.
For the first employee, I understand what you’ve stated for 2016. But with him being dually covered Jan 1, 2017, he cannot contribute (nor can the employer) to an HSA, correct?
For the second employee, assuming he is moving to a non-HSA plan October 1, he can only contribute the single pro-rated amount for 2017 (Jan–September), correct? He cannot contribute the entire $3400 from the period of Jan–September, then move October 1 to that non-HSA plan, correct?
Thanks for your prompt response.
Harry Sit says
As an employer, it’s best not to worry about what other coverage the employee has. Even if you know what other coverage it is today, you won’t know when it will end or how it will change. Just make the employer contribution as if the employee has no other coverage and let the employee tell you how much they want to contribute themselves. You can tell the employee about potential issues with dual coverage but ultimately it’s a problem between the employee and the IRS. If the employee ends up with an excess contribution, the employee can withdraw the excess. The money is still theirs; it just becomes taxable.
Jackie Willis says
Would like to know if I can contribute to my HSA the maximum family amount this year. My daughter has been on my insurance this year until she turned 26 in April. American Fidelity said I can contribute the family amount all year. I thought I could contribute the family amount while she was on my insurance and then from May on I could only contribute the individual amount. Thanks for,your help.
Harry Sit says
See The Right And Wrong Types of Questions For Customer Service.
Susan Kramer says
I have an employee who had single HDHP from 01/01/2016 – 04/27/2016. He went to employee +1 coverage on 04/28/2016 when child was born. He is adding his spouse to his plan 12/11/2016 so he will then have family HDHP. Can he pay any expenses his wife incurred before their marriage date?
Harry Sit says
No, only expenses after their marriage date.
Yvonne McVay says
I tried to find the answer in black and white and I can’t – husband and wife each had individual coverage and are 55+. Wife died 07/02/2016. So, husband $4,350 average and wife is $2,537.50. Is that correct?
Harry Sit says
You found it. You get exactly those numbers when you fill out the table and calculate the averages. When two people have separate individual coverage, the limit is also separate for each person’s own account; no mixing.
Daniel Chou says
2017’s self-only HSA contribution limit is $3400 and family $6750 that is less than 2X$3400. We have one single HDHP and one family HDHP plans. Can we put the maximum of $3400 into both HSA accounts? Thanks!
Harry Sit says
See comment 41.
Carol Kohan says
I had family coverage through June 1, 2016, when I changed my coverage to single, due to my daughter’s marriage. Am I able to pro-rate for the first part of 2016 for my deductions. I am age 61 and have medical expenses which go above the 3500 maximum for single coverage incurred after June of 2016. I want to be able to add as much to pay these medical costs for 2016.
Amy Lee says
My husband had an HSA for a job he held from July 2014-July 2015. After he left the job we used the funds that were left over up until the spring of 2016 when the account was depleted. The beginning of this year we started a new HSA insurance plan through Cobra. My husband had surgery on Jan. 5th but I wasn’t able to put money into the account until Feb. 3. Since this is an HSA account that was already established, even though there wasn’t any money left in it, can it be used for the Jan. 5th charge or only for medical care after Feb. 3rd when the money was deposited?
Harry Sit says
It can be used for the Jan. 5th charge.
Betty says
Husband age 58, HDHP/family with HSA. Wife age 55, HDHP/single with HSA. What is the best strategy for contribution. Max. out husband at $7750 and wife at $1000, since husband has fewer years to contribute, until age 65?
Harry Sit says
That works. As long as they each contribute at least $1,000, how they allocate the rest between the two doesn’t matter.
Chris says
I have a different scenario to run past you. Starting 1/1/17 we had a non-HDHP plan under my wife’s work (family coverage). We elected a Heath FSA to help pay the deductible/copay expenses.
Unexpectedly, my wife lost her job. She is deciding to take time away from work. I can elect health coverage through my employer, but it is a HDHP plan. Since she is no longer employed and lost medical coverage, we are stopping the monthly Health FSA contributions.
My question: when we elect the HDHP through my work, am I eligible to setup a HSA to pay for expenses under the new coverage? In other words, can you switch mid-year from a non-HDHP with FSA into a HDHP with HSA if you have a valid life event, and assuming you pay the appropriate expenses with FSA and HSA based on coverage beginning & ending dates?
I read through IRA Publication 969 and didn’t see a clear answer to this situation.
Thanks!
Harry Sit says
If the FSA was through your wife’s employer, the coverage ended with her employment, possibility through the end of the month of her last day. It’s only available for services received before the end date. After that date, you’re free to sign up for HDHP with HSA. Your HSA contribution limit for this year will be prorated.
Jessica says
I have a question about filling out the proration table. We began family HDHP coverage on 7/1/2016. We may change insurance to a non-HDHP plan on 3/7/2017. We would be eligible for the full $6,750 under the last month rule, but because I am anticipating a change in coverage, I don’t want to over contribute to our HSA for 2016. Do we prorate beginning on 12/1/16, which would make us eligible to contribute $2,250? Or do we prorate starting with the date we began HDHP coverage (7/1/16), which would make us eligible to contribute $5,062.50?
In short, do you prorate starting during the test period, or starting when you became eligible for an HSA? Or am I off in both scenarios?
Thank you!
Harry Sit says
You do each calendar year separately. For 2016 you are eligible for 6 months. For 2017 you are eligible for 3 months if you have HDHP on 3/1/2017. Make separate contributions for each year. Make sure the HSA provider attributes the contribution to the correct year.
Bob says
Have a question. Me and wife work for different employers and both started contributing to HSA since jan 1 2017 ($3400 each with 24 equal payments). I am in between jobs now and will add myself to my wife’s plan. Can I increase wife’s monthly hsa contributions going forward as long as the total amount of her contributions so far + my contributions before leaving job + contributions for the rest of the year = $6750. Thanks.
Harry Sit says
Yes, if she stays on the plan covering both of you until the end of the year.
Bob says
Awesome, thanks for quick response.
Aaron Ward says
Thanks for the insight on this topic. I currently have an HSA account, but have NOT contributed any funds in 2017. My spouse opened an FSA that became active on 1/26/17. She is covered by a shared coverage plan and never received benefits beyond the FSA with her current employer.
Her employment will cease on March 3rd and be joining a new employer on March 8th that offers an 75/25 HRA or 70/30 HDP plan. Myself and children have remained on my HDP plan. On March 8th, my spouse and children will pick up coverage on the new HRA or HDP plan.
Question #1-Can I contribute to the HSA again once the FSA coverage ends? If so, can I make claims for myself and children that were not submitted the to FSA account? I wasn’t sure if I could submit claims from the dates the FSA was active for her.
Question #2-If I am able to contribute to the HSA again, is there a maximum amount beyond the IRS limit I can make prior to March 8th, when the children move to her plan?
Question #3-After March 8th, would the entire family be eligible for claims submitted thru the HSA account, even if my spouse and children are on an HRA plan?
Question #4-Is my understanding correct that she and the children can only still use the HSA once her coverage starts, is using HRA funds only after the HSA claims have been submitted to meet the deductible ($5k for family)? I was trying to determine if the HSA contribution for 2017 would be “family” or “individual” category
Harry Sit says
I added a paragraph to make it clear that all the limits we are talking about here are about contributions, not about spending the money in the HSA. To see how much you can contribute, you will have to go through the month-by-month table. When she has the FSA, your limit for Jan. to March is zero. After she goes onto the HRA, depending on its term, if the HRA money can be used on your expenses whether you actually use it or not, your HSA contribution limit continues to be zero. If the HRA money can’t be used on your expenses, you have single coverage limit from April to December. That would $3,400 * 9 / 12 = $2,550 for 2017.
Aaron Ward says
Harry,
Thanks for clarifying. The HRA does not allow me to pull any claims, if I am not on the HRA plan.
So to clarify, I am eligible to contribute to the HSA in 2017? On another site I was reading, it appeared I could be ineligible to contribute to the HSA until it was the end the FSA plan year. Would the FSA account have to be closed and have a zero balance before I can make an individual contribute again in April 2017?
Harry Sit says
The FSA will end with her employment, possibly to the end of her last month. It’s only available for service dates before then. If she stays on it will last until the end of the plan year even if you already spent all the money in it.
Aaron Ward says
Can I go ahead and make the full year pro-rated contribution in one month or can I only are monthly contributions capped or just based on the yearly formula? I wanted to go ahead an contribute the $2550 since I use my HSA for claims.
Harry Sit says
The limit is for the year. It doesn’t matter when you contribute. Keep in mind if you come off the high deductible plan later in the year your limit will be reduced.
Dale DeJager says
I have a question about your scenario #2. Assuming the wife wants to use the “last month rule” and she is over 55 in 2016. Is she able to contribute $4350 to the HSA? It seems so based on the IRS document quoted below. (the coverage changed during the year and we want to contribute the maximum based on the maximum annual contribution).
If you were, or were considered (under the last-month rule, discussed later), an eligible individual for the entire year and didn’t change your type of coverage, you can contribute the full amount based on your type of coverage. However, if you weren’t an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of:
1) The limitation shown on the Line 3 Limitation Chart and Worksheetin the Instructions for Form 8889, Health Savings Accounts (HSAs), or
2) The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year.
Vickie Sienknecht says
My 62 yr old husband & I (61) are both covered under his HDHP & he has a family HSA. I have been receiving SSDI for a couple of years and became eligible for Medicare on June 1, 2016. I automatically received part A, and elected to defer Part B, since I’m covered by my husband’s HDHP. We’ve received conflicting information from his employer’s HR department about the maximum HSA contribution he can make for 2016. A call to the IRS was even less helpful, as I was told that due to to budget cuts, they have no one trained to answer questions on HSA’s and all they could tell me to do was read their HSA publication, which doesn’t address this. Very frustrating! Can he contribute the full family amount plus his $1000 catch up for 2016, or does he have to prorate it and do the family rate for Jan-May 31, and the single rate from June-Dec. 31? And what about 2017–from now on is it the family rate or does he have to use the single rate contribution?
Harry Sit says
The HSA publication actually addresses it if you know how to interpret it. He is eligible because he has HDHP with no other coverage. He can contribute at the family level because his plan covers two people. He’s eligible for the catch-up due to his age. You on the other hand aren’t eligible to contribute. So make sure the contribution only goes into an account in his name.
vince says
65 yr old Wife has HDHP and HSA family account. She started medicare in July 2016. Can we contribute up to the limited family contribution (including the $1000) for 2016 to her HSA? Or is her account closed to new contributions? Do I , 64 yr old, need to open my own HSA to contribute any additional money ?
Dale DeJager says
You can only contribute 6/12 of the maximum to your wife’s HSA for 2016. You need to open a new individual account to contribute additional money (assuming you as an individual have new HDHP that covers you). Now the question is how much money can you contribute to your new, individual HSA. See item number 76 in this thread for my thoughts regarding the amount you can contribute.
vince says
Thanks Dale. Since my wife is 65 and on medicare, when she tried to make a deposit to the HSA, the trustee (Credit union) flagged the account as ineligible for additional deposits. In my understanding, she can fund for 2016 up to the allowable limits, since she turned 65 during the course of 2016. As my daughter and I continue to be covered under her old HDHP plan, I can fund a new family plan HSA for us , recognizing the worksheet limitations for 2016.
Thanks
Dale DeJager says
For 2016 your wife should be able to fund for any months prior to the month in which she turned 65. If she turned 65 in July of 2016, she should be able to fund 6/12 (6 months out of 12) of her maximum allowable contribution. If you are making this contribution now and have not made any contributions yet in 2016, you need to tell the trustee that this is a 2016 contribution,not a 2017 contribution. You will need to open an individual plan because your wife is over 65. However, you, your daughter and wife can all use the money from your wife’s account (until it is depleted) or from your account for eligible expenses.
Michael Hamm says
Hello – Both myself and my wife are under 55. My wife had single HDHP coverage all year, while I had family HDHP coverage for the first 8 months of the year, then dropped to single HDHP coverage Sept-Dec when my son got his own insurance. My employer guided that I could make excess contributions. Everything I am reading tells me excess contributions are for people 55 and over ($1,000). On my W-2, I had $6,668 of HSA contributions, including $236 of contributions made in 2017 for 2016. My wife had $2100 of HSA contributions on her W-2. I feel like we contributed too much and need help trying to figure out how much. I understand if we did contribute too much, we just need to withdraw it prior to 4/18/17. Thanks!
Leroy says
I was laid off in February from my last job which has a non-HDHP. My new job offers a HDHP plan which I signed up for and that went into effect April 1st. My previous employer automatically paid for Cobra for 2 months (March/April) as part of my severance package. So for one month, I will have had a HDHP plan and a non-HDHP through Cobra. Is this going to create any issue for me during tax time? The open enrollment period at my new job has ended so I wasn’t able to hold off on selecting a new plan. Just curious what to expect now. Thanks!
Harry Sit says
It limits your maximum HSA contribution to 8/12th (May – December) of the normal annual limit. You can still contribute to HSA in April. Just your total HSA contribution this year, including any HSA contribution made by your employer, can’t exceed 8/12th of the normal annual limit. If you go over, you can work with your HSA provider to withdraw the excess.
Noel says
Thanks for this post.
Currently, I have HDHP plan covering me, DW and our child. The employer plans to change the insurance to EPO (non-HDHP) starting July 1. DW is not employed. If this turns out as planned, I can contribute only $3275 towards HSA for 2017, right?
Harry Sit says
$3,375 actually. Plus another $500 if you are 55 or older.
Angela says
I have someone who had an FSA with her previous employer. She had coverage through that company thru May 31, 2017. She started with our company a the end of April 2017 and is eligible for our HDHP plan with an HSA starting July 1, 2017. Does the fact that she had an FSA in 2017 (Jan-May) contribute to whether she (or we) can contribute to an HSA plan? Does her HSA limit remain the same (Single coverage July to December = $283.33x6months =$1699.98) or is it in any way affected by how much she may have received in FSA funds at the beginning of the year with her previous employer?
Harry Sit says
It’s not affected.
Randy P says
Hi – I have a HSA as part of my employer’s Health Insurance. I’m over 55 and my wife is covered under my insurance so our maximum allowable contribution for 2017 is $7750. My wife is going off my employer’s insurance and going on to Medicare on December 1, 2017. Does this drop my maximum contribution for the Tax Year to $4,400? I sure hope not. Thanks.
Mckay says
My wife and I are covered under a HDHP through my employer and we have an HSA. My wife just got a new job and is being offered a non-HDHP. I will not be covered under her new insurance and she will continue to be covered under my HDHP even if she accepts her employer’s insurance. If she accepts her new employer’s non-qualifying health insurance will I be able to contribute to my HSA at the family contribution limit, or can I only contribute up to the self-only contribution limit?
Harry Sit says
You can continue at family level. She can’t contribute. She can’t elect FSA at her new employer.
B says
Can you clarify this point? How can he continue at the family level if his wife is the only other person on the HDHP and she is not a qualified individual?
This is the paragraph you allude to:
Self-only HDHP coverage is HDHP coverage for only
an eligible individual. Family HDHP coverage is HDHP
coverage for an eligible individual and at least one other
individual (whether or not that individual is an eligible indi-
vidual).
But a couple paragraphs below that the IRS includes your spouse in the reasoning?
Other health coverage. If you (and your spouse, if
you have family coverage) have HDHP coverage, you
generally can’t have any other health coverage. However,
you can still be an eligible individual even if your spouse
has non-HDHP coverage provided you aren’t covered by
that plan.
I bring this situation up because I’m fully reimbursed for HSA by employer and newly married, would like to add my wife who currently has a non qualifying PPO and keep her cheap insurance. Thus increasing to a family level HSA and keeping her insurance for herself as an individual. At least for the rest of the year to cover a few expenses. I would appreciate your interpretation if this is acceptable by the IRS. Thanks.
Harry Sit says
B – Because the HSA is always only in one person’s name, the HSA owner goes through these tests on the 1st of each month to determine contribution eligibility and level for that month:
– Have an HSA-eligible high deductible health plan? (Yes)
– On Medicare? (No)
– Have other non-HDHP coverage (including spouse’s FSA)? (No)
– How many people does the HDHP cover? (1 – single; 2 or more – family)
That’s all. The special coordination between a married couple is Family + Single = Family and Family + Family = Family. Family + Nothing = Family.
B says
Thank you for the timely response. Appreciate your input.
Mike A. says
I start Medicare in August and we have employer insurance which I am keeping. Also I have an HSA in my name and contribute family + 1000. I know I can’t contribute but can she open an HSA in her name and contribute the family amount + 1000 or just for herself amount?
I never read anywhere about the catch-up part splitting.
Harry Sit says
If she has only HDHP, the HDHP covers both of you, she’s not on Medicare, and she’s over 55, she can contribute at the family level (less any amount you already contributed not counting any catch-up) plus her $1,000 catch-up. Basically fill out the table and move the 1/2 family to her side.
KC says
Hi. Looking for guidance with my situation to determine the maximum annual contributions to the respective HSAs for myself and my wife (no dependents):
January – March (3 months): Husband has HDHP and contributes to Husband’s HSA at $3400 annualized rate ($283.33/mo). Wife’s employer during this time offers a non-HDHP plan and thus no HSA.
April – August (5 months): Wife changes jobs and is ineligible for employer-sponsored plan at the new employer for an introductory period. Husband adds Wife to Husband’s HDHP and converts to family HSA, contributing at $6750 annualized rate ($562.50/mo).
September – December (4 months): Wife becomes eligible for employer-sponsored HDHP at new employer and establishes Wife’s individual HSA. Husband removes Wife from Husband’s HDHP.
My understanding is that Husband’s annual maximum contribution will be prorated for each participant at the family maximum for the time Wife was on Husband’s HDHP plan ($281.25 x 5 x 2 = $2812.50) and prorated at the individual maximum for the other 7 months ($283.33 x 7 = $1983.31) for a total annual maximum of $4795.81 to Husband’s HSA account.
My question is what, if any, impact does Wife gaining eligibility for her own individual HSA affect Husband’s maximum? Are we free to contribute $4795.81 to Husband’s HSA and the full $3400 to Wife’s HSA, or is there a rule that I’m missing which would cap the combined contribution at a lower amount?
Thanks in advance.
Harry Sit says
It doesn’t affect Husband’s maximum but Wife’s contribution to her own HSA for September – December is also prorated. With the last month rule, and its required strings, she can add Jan – March. So she can do $3,400 * 4 / 12 without the last month rule, or $3,400 * 7 / 12 with the last month rule.
Clayton says
If I prefer my HDHP and HSA over what I’m being offered at a new job do I meet the HSA eligibility requirement by declining their insurance? Thanks.
(must not be covered by other health insurance that is not an HDHP)
Harry Sit says
You are not covered by something you decline. Where are you getting your HDHP from then? COBRA? Spouse’s plan? If it’s from the ACA marketplace you likely won’t be eligible for a subsidy any more when you have the option to get insurance from your new employer but you choose not to.
Jim says
Hi. Question I hope you can help with. I have a Family HSA for himself and three kids. I got married on June 18th, 2017. Wife had her own Single HSA for the year. We both work for the same company and are technically in the same High Deductible Plan. Are we now constrained by the $6,750 limit as a family for the entire year?
Thank you very much!
Harry Sit says
The IRS says you are married for the entire year when you are married on Dec. 31. You can work with the HSA provider to withdraw the excess contribution. Make sure you follow the specific process for withdrawing excess contribution, not just take the money out on your own.
Ray says
Got married and will be moving to my spouse’s HDHP at the end of this year. What are the pros/cons of having our own HSA’s versus just contributing the family max to the HSA that my spouse has already been contributing to for years?
Also, from a tax benefit perspective, if one spouse earns more than the other, does that impact who should be contributing more if we both have HSA’s, as long as we stay within the limits (i.e. would it make sense to contribute more to the HSA of the spouse who earns more, to lower the taxable income)?
I am new to the HSA philosophy and trying to figure out the best way to maximize its benefits between the two of us. Thanks in advance for any guidance!!
MikeF says
I have a HDHP which covers my son and myself. I contribute to an HSA at the family limit of $6750. My son graduates in Dec, starts a job in January with insurance coverage and turns 26 in Sept. 2018. As my premium increase for family HDHP is less than the contribution my company will make to my HSA for family vs. individual I am planning to keep him on my policy until he turns 26. My understanding of the HSA contribution limits are 1) for 2018 I can contribute $6900/9 plus 3450/3 to my HSA and 2) Assuming son’s insurance through his new job is an HDHP he can contribute 3450 for 2018. Is this correct?
Thank you for the blog – and your many replies. It’s very educational reading.
Harry Sit says
You can contribute $6,900*9/12 + $3,450*3/12 to your account. He can contribute the same amount to his account if his insurance from his job is also HDHP. His payroll may only limit him to $3,450 because they can’t verify your insurance. He can contribute the difference on his own to a different account.
MikeF says
Thank you, much appreciated!!
Vince says
We had a HDHP for spouse and daughter. spouse and I are both now on Medicare. HDHP family plan converted to an individual HDHP for our daughter when I turned 65 in Oct. Does she qualify for an HSA for the balance of the year?
Harry Sit says
If she can’t be claimed as a dependent this year, she’s eligible at the family coverage level for the months when it was a family policy and at the single coverage level afterwards. If she can be claimed as a dependent she’s not eligible.
Jennifer says
At the beginning of the year my husband had an HSA covering him and his children he contributed 1425 to it. I had and HSA covering me and my children I contributed the family limit to mine. In July we got married used his to pay off his sons braces. Now we are over the limit by 1425. How do you fix this? I keep getting told to with draw it and I cant its been spent.
Harry Sit says
You can withdraw the excess contribution from your account instead of his. Be sure to work with your HSA provider and follow their special procedure for withdrawing excess contribution.
Peter Kluck says
I had family HDHP January-July 2017. End of July I entered the VA health care system and dropped my HDHP and no longer was eligible for HSA. MY wife immediately got a family HDHP for herself and our children. My wife and I are both over 55. I understand the contribution limit for my HSA (7/12 of $6750 and 7/12 of $1000 = $4521). But what is my wife’s limit for her HSA, since she was covered by a HDHP all year? Can she contribute the full $6750 since she now has her own HSA (and qualifies under the last month rule), or is she limited to the “leftover” amount of $2812 ($6750 x 5/12)? Can she contribute her full $1,000 catch-up?
Harry Sit says
The leftover plus full $1,000.
Peter Kluck says
thanks, Harry!
Gopal says
I have a question on switching plans mid year. I have a High Deductible plan and HSA through my employer covering me and my family. Spouse found a new position and her employer offered High Deductible plan/HSA is better (lower premium, better coverage etc). Can we switch mid year to the new plan for the whole family, and if so what do we have to look out for in terms of compliance to the rules.
thanks
gopal
Harry Sit says
You can switch mid-year. Between two HSAs just make sure the total contributions from both yourselves and your employers don’t exceed the annual limit for family coverage. On the health insurance side, if you already met part of your deductible with one plan, you will start over again with the other plan.
msf says
Not relevant to the specific question (voluntary change of policies), but in exceedingly rare circumstances, credit for deductibles may transfer to the new policy.
When Health Republic went bankrupt in NY (mid-year), the NYS regulators (Department of Financial Services) advised the insurer’s customers to hold onto their proof of deductible payments to get credit for them with their new policy.
I don’t know whether the customers ultimately were able to save on their deductibles that way.
MC says
I had a low deductible plan with an FSA at job 1. I left that job mid January 2017 and supposedly my low deductible plan/FSA was effective through January 31, 2017. I then started a new job (job 2) where I signed up for an HSA from February 1 – October 2017. In October 2017 I got married and switched to my wife’s low deductible plan (but with no FSA) from October 2017 – end of the year of 2017. I’m now doing my taxes and it looks like there was an excess contribution of about 400$. Is my overall HSA fine just that I need to return the $400 excess contribution? Or was I not supposed to have the HSA at all due to job 1 (with the FSA) and thus am I better off just trying to unwind the entirety of the HSA? Thanks!
Harry Sit says
You were eligible for part of the year. You have a prorated lower contribution limit.
J says
My spouse and I each had self-only HDHP plans from Jan-May of 2017. She changed jobs and went we switched to a family HDHP for June-Dec of 2017. We’ve elected to split the family contribution equally. We are under 55.
Under the prorata rule, our limits would be ($3400*5 + $6750*7*0.5)/12 = $3385
Under the last month rule, our limits would be $6750*0.5 = $3375.
Can we each contribute $3385 using the prorata rule?
Additionally, we will not maintain family coverage for 2018, so we will not be eligible for the last month rule anyway.
Harry Sit says
The math looks correct to me. Make sure to count the coverage on the 1st of each month.
S Leary says
I had an HSA through my employer and lost my job mid-year of 2016. Contributions were made monthly, so I’m not concerned about the contribution limits being exceeded. However, my question is, what do I do with the HSA now that I’m not on an approved plan? I no longer make contributions, but it may have earnings. Do I need to close out the account or can I still use it to pay expenses moving forward?
Harry Sit says
You can keep the account or move it to another place with lower fees or better investment options (if desired). You can still use it to reimburse eligible expenses.
Dan says
Had HSA in 2016, 2017 and again at the beginning of 2018.
Has a large remaining balance.
Switched jobs in March and new job does not have HSA plan.
Now I have a standard PPO plan.
>>Limit On Contributions, Not On Spending
Can the remaining money in the HSA be utilized for co-pays, other deductibles, dental, Vision etc. ?
If yes then how long? Only in 2018 or beyond?
If yes then the the remaining HSA balance becomes a FSA account with no time limits. Correct?
Thanks
Harry Sit says
Until you die. HSA stays as HSA. It doesn’t become FSA.
Dan says
>>Until you die. HSA stays as HSA. It doesn’t become FSA.
I did not mean to say that HSA becomes FSA.
What I was trying to say was that HSA balance effectively becomes a balance in the FSA account if we are able to utilize HSA balance while we do not have a HSA plan but a traditional plan.
Let me take a step back.
Someone told us that remaining HSA balance can only be utilized while we are covered by a HSA plan.
Is that true?
Harry Sit says
It does not effectively become a balance in the FSA. FSA terminates when you leave your employer. HSA is yours forever. You can withdraw from the HSA for qualified expenses at any time regardless what type of insurance you have.
Butch says
Hi, I hope you can clarify my dilemma.
Both of me and my wife work with different companies.
We are covered with HDHP ( Self+ Wife+ Child) as a family under my health plan.
Wife is 58, I am 57 years old.
Wife is not covered by any health insurance from her work since she is covered under mine.
I max out on the family HSA less employer contribution + 1K catch-up.
Can my wife open her own HSA account to any bank or HSA designated brokerage for her 1K catch-up?
Will she be contributing after-tax money from our savings or it has to go to her employer to contribute a pre-tax contribution from her paycheck?
We called her employer HR regarding the plan or what we wanted to do, but was told not applicable since my wife is not covered under her employer HDHP plan? Is this true or if not, can she still contribute the 1K catch up from after-tax money from our savings?
Thank you for your guidance.
Harry Sit says
She can open an HSA at a custodian of her choice and contribute $1,000 after-tax money. If she had family coverage in all of 2017, she can contribute before April 17, 2018 and count it as contribution for 2017 (be sure to tell the custodian the contribution is for 2017 tax year). You then take the $1,000 as a deduction on your 2017 tax return. If you already filed you can amend the tax return.
Butch says
Thank you for the very informative reply, we are glad, you guided us on this matter. Cheers.
JoAnn says
I don’t think I saw an answer any where to my question and apologize if you have already responded to something similar on another post. I had a family HDHP for 3 and 1/2 months last year (2017) – I know I get a prorated contribution for the full 3 months I had an HDHP, but do I get it for the 1/2 month since it was in effect one the 1st of that month? I do not currently have a HDHP for 2018.
Harry Sit says
You get 4 months. If a person is eligible on the 1st of the month and is not enrolled in Medicare in that month, he or she is considered to be eligible for the entire month.
JoAnn says
Thank you. That is exactly what I thought but wanted confirmation.
alex says
Hi,
What if: we both have HDP (high deductible plan) through our employers. She has HSA family, I have HSA family.
We agreed to split 50/50 through the year. 6850/2=3425.
I already contributed as of May 1st my portion to my HSA.
I`m changing jobs and jumping on her HDP insurance on May 1st.
Do I have to prorate my contributions I made through my previous employer or not?
thank you.
Brad says
I was covered by a HDHP (self + spouse) through my employer with a family HSA. I’ve already contributed the maximum amount for 2018 ($6900) *and* had the funds transferred to another HSA (trustee-to-trustee). I am resigning and will lose my HDHP coverage at the end of July and am not moving onto another employer right away. My wife works but doesn’t currently work enough hours to qualify for medical benefits at her current employer. We are both under 55.
I want to know the cleanest (and ideally cheapest) way to keep my full contribution for 2018. Here are some options I think I have. Am I missing anything and what would you do if this were your scenario? Thanks so much!
1. Seems like I can continue the same coverage through COBRA, which would cost $$$ (but COBRA payments are considered qualified medical expenses — pg. 8, Pub 969). I suppose another perk to this option is I get to keep the amounts I’ve accrued toward my deductible.
2. Find another HDHP through CO state exchange — question on this: does the plan have to be classified as a high deductible health plan, or does it qualify as long as the criteria is met on pg. 3 of Pub 969?
3. May qualify for Medicaid coverage; but does having Medicaid mean you aren’t eligible to contribute to HSA for that month?
4. Be considered eligible on first day of last month (Dec 1) according to Last Month Rule (which is so stupid IMO because it’s not like I have a crystal ball). Wife plans to ramp up hours and if she has access to HDHP through employer and elects self + spouse coverage, that would still mean that I was eligible to contribute to family HSA all year, correct?
Harry Sit says
1) Yes continuing the HDHP with COBRA will maintain your eligibility for the HSA.
2) Plans eligible for the HSA usually say so. If it’s not clear, ask the exchange. You can’t just go by the deductible and out-of-pocket maximum numbers because Not All High Deductible Plans Are HSA Eligible.
3) Medicaid doesn’t have the high deductible necessary to keep you eligible for the HSA.
4) Correct. If she’s able to choose family coverage on December 1 you will be considered to be eligible for the entire year. Keep in mind you have to keep the eligibility for the following 12 months through any combination of her work, your work, exchange policy, etc.
Jay says
I currently have a HDHP family plan with my employer and i have already met the deductible which is $3000, so moving forward i am only responsible for paying 20% instead of 100% that i was responsible before i met the deductible. Now my spouse got a job and i am moving our Insurance to her HDHP plan. I know i can only make remaining contributions to the the HSA plan as i have already paid almost half for the year, but my question is, do i need to now pay the 100% of medical cost until i reach the deductible with the new plan. On the new HSA plan under my wife, we as family has deductible of $3000 and i have not incurred any expenses yet. I already paid $3000 and met my deductible under my previous plan but with this new plan do i still need to meet the $3000 deductible and start over
Harry Sit says
When you move to a different employer’s plan, you will start over on the annual deductible, which is not prorated even when you join mid-year. This is true whether the new plan is HDHP or not. The new plan simply doesn’t care what you did with the old plan with regard to the deductible.
Lisa K says
I have a question, and I haven’t been able to find an answer for my particular situation.
Currently enrolled in my employer’s HDHP with Family coverage, with employer funded HRA (which can be spent on anyone in family, regardless of coverage).
I have reached my individual deductible, and all the HRA money is spent.
In August, husband gets a new job, and we have the opportunity to make “life event” changes. His employer offers a HDHP and HSA.
Since I have met my deductible, I am staying on my current plan. If we drop my husband from the plan, and he uses his employer’s HDHP:
1. Can he even open an HSA? Or is he still considered “covered” by my HRA, even if the balance is $0?
2. Would he fall under the “last month” rule, or would he be limited to Aug-Dec contributions because he was covered under HRA Jan-Jul?
3. For next year, is he considered eligible to contribute to his own HSA if he is back under my HDHP?
I hope I explained it clearly enough. Thanks in advance for the input.
Harry Sit says
The possibility of using the HRA to pay his expenses makes him not eligible for HSA contributions. Whether you actually pay his expenses from the HRA or whether you still have money in the HRA doesn’t matter.
Michelle says
My husband and I both qualify for our own HSA contributions for our HDHP plans with our employers. We work for separate companies. I cover myself and our 3 children and he covers himself. We split the max family contribution limit in half between the 2 of us. We are divorcing this year and it will be final in November. I will still continue to insure myself and the children and he will insure himself. I have primary placement.
How does this affect our contributions for 2018 and then for 2019?
My understanding is that because we both have dependents to claim on taxes and we both have our own plans is that we each can take the full family amount for the year and we no longer split the one amount in half. Is that correct?
Harry Sit says
The contribution limit isn’t set on who has dependents. It’s set on how many people your HDHP insurance covers. Because your insurance covers you and kids for all 12 months, you will be eligible for full family coverage contribution limit. Because his insurance only covers himself for all 12 months, he will be eligible for only the single coverage contribution limit.
Linda King says
wHAT IS THE MINIMAL AMOUNT I CAN CLAIM ON MY 2018 ? dO I HAVE TILL aPRIL OF 19 TO MEET THIS MINIMUM AMOUNT . STARTING a HSA C in Sept of 2018
Tina Smith says
I have always had traditional insurance and contributed the max to my Fsa, I cover myself and mt 21year old daughter (who isn’t on my taxes ) my husband also had traditional insurance and a Fsa. Next year his employer I’d now offering a HDHP with a HSA, if I keep the same traditional plan for me and daughter and I contribute to the FSA his employer is stating he will not be eligible for the HDHP and HSA and he will be forced to take the traditional plan at a much higher cost vs. this year but they are not going to offer a FSA, is this allowed? It would mean he is excluded from any tax benefits and if I switch to a HDHP plan with a HSA at my employer he Han then pick that option but then neither if us would be allowed to cover our daughters expenses , how can this be ? And how can my S2650 exclude amy HSA from him when the HSA plan allows more per individual ? Shouldn’t employer be forced to offer a FSA if they are forcing you to take a traditional plam?
Harry Sit says
Between the general-purpose health care FSA and the HSA, between the two of you, the IRS wants you to pick one but not both. He can choose the less expensive HDHP with HSA and you stop the FSA. Or you can continue with the FSA but he chooses only the HDHP without contributing to the HSA. He isn’t forced to take the traditional plan at a much higher cost. He can enroll in the HDHP but set the HSA contribution to zero. Employer contribution to the HSA can be withdrawn as excess contribution, which is taxed, but he’s still better off after paying the tax.
Ravi says
I have HDHP plan and set up HSA family(myself+kid) at work. Wife is on a separate HDHP/HSA(Individual) plan through her employer. Can I contribute max(6900) as I have family HSA and wife contribute individual maximum into her HSA?
Harry Sit says
No. The two of you are limited to one family coverage limit.
Brian says
I have a family HDHP with HSA for myself and my children. My wife is excluded from my plan and has her own Non-HDHP. I am planning to leave my current employment and join her plan mid year. Am I correct to believe that I can contribute X/12ths the family limit where X is the number of months I am covered by my HDHP and not by her plan? I understand that this is the case for individual plans but I recall seeing somewhere that if children who were covered by a Non-HDHP at any point during the year disqualified you from contributing at the Family level. I haven’t been able to confirm this and am optimistic that I would be able to compute the contribution limit on a monthly basis as you describe.
Harry Sit says
That’s correct. It only matters that you are covering more than yourself in the HDHP and you yourself don’t have other coverage during those months. Whether your children have other coverage concurrently or afterwards doesn’t matter.
“Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual).”
https://www.irs.gov/pub/irs-pdf/p969.pdf
Frank says
Here’s a bit of a complicated scenario. My wife and I are self-employed and have two children. We have a daughter that has high annual medical costs, so we have her on her own separate HDHP that is HSA eligible. She meets her deductible around March every year and all medical expenses are paid by the plan afterwards. Question #1: I have an HSA account. Can I contribute to my HSA based upon her coverage if I don’t carry a HDHP for myself?
For the rest of the family I find that plans are generally less expensive annually if they are not HSA eligible. Question #2: Can I insure my wife and son on a non-HSA eligible policy and insure myself on a separate HSA eligible HDHP (with a much higher deductible than my daughter’s policy) and then contribute at the Family level? So I’d have three policies. Two of which are individual HSA eligible HDHP’s (1 for Dad/1 for Daughter) and one of which would not be HSA eligible (Mom/Son on same policy). Hope that makes sense. Thanks in advance!
Harry Sit says
1) No. 2) No.
HSA eligibility is evaluated for each individual (the “you” below).
“To be an eligible individual and qualify for an HSA, you must meet the following requirements.
– You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
– You have no other health coverage except what is permitted under Other health coverage , later.
– You aren’t enrolled in Medicare.
– You can’t be claimed as a dependent on someone else’s 2017 tax return.”
https://www.irs.gov/pub/irs-pdf/p969.pdf
When you are eligible to contribute, your contribution limit is then determined by how many people are covered by the plan you are in. When your plan only covers one person, you can contribute only at the single coverage level.
Chris says
Hello
I read through the long comment history and did not see my particular situation:
From 2016-July 2018 I was with an Employer that offered HDHP and HSA and contributed $800 automatically after qualifying health assessment exam. I did not make any contributions from my own paychecks. I still have funds in my HSA.
On July 15 2018, I changed jobs to an employer with a low deductible plan that only offers FSA. Because I am not on an HDHP eligible plan any longer, I cannot make the maximum contribution to the existing HSA for the full year.
However, I am wondering if I can still contribute a lump sum from my bank account to the HSA for the pro-rated amount of $3450 x 7/12 months of the 2018 year that I was HSA eligible, even though now I am under a non-HDHP plan today and file that lump sum post-tax contribution as a deduction from taxable income.
My concern is if the timing of my prorated 7/12 lump sum contribution to the HSA while no longer under HDHP is allowed, and if I can indeed deduct that from my gross income when filing.
Thanks
Harry Sit says
If the $800 was contributed in 2018, you need to subtract the $800. If it was contributed in previous years, you can still contribute the pro-rated amount now, in the same year you are eligible (actually up to April 2019), using your own money. You report the contribution on Form 8889. The amount becomes an adjustment on your tax return.
Chris says
Thanks a lot Harry, very clear and helpful! Since I can contribute up to ~$2000 at the 7/12 prorated amount while I was HSA-eligible, less the $800 my employer contributed for me this year, do I report the full prorated contribution on the Form 8889 (~$2000), or just the delta that I contributed out of pocket (~$1200)? Also, do I need to have proof of HDHP coverage for Jan-July of this year?
Thank you again, this is the clearest and quickest answer I got after hours of searching Google for my situation.
Harry Sit says
Take a look at Form 8889. Your pro-rated amount (line 3), your own contribution (the delta, line 2), and the employer contribution (line 9) are all reported separately. If you use tax software, the software will ask you questions about those and use your answers to fill in those fields. You don’t need to send in proof when you file but as with everything on your tax return, you need to be prepared to defend every entry when you are asked to show proof.
Mark K says
We have a HDHP For 2019 (husband and wife). We work with two different employers. Initially we decided to have $7000 withheld from one of our pay who is under age 55. Reading your article we realize it’s better to have the spouse that is over 55 contribute $4500 to his HSA and the younger spouse contribute $3500 to hers so combined we can contribute $8000 in 2019.
We asked the younger spouse’s employer to decrease her 2019 withholding from $7000 to $3500 but her employer is saying HSA contributions can’t be reduced after the annual open enrollment which closed Nov 2nd. Is their denial based on an IRS rule? Or does the IRS allow changes to HSA withholding mid-year as long as the annual limits are not exceeded?
Harry Sit says
The IRS allows changes to HSA withholding mid-year.
https://tax.thomsonreuters.com/blog/when-can-participants-change-their-hsa-contribution-elections-under-our-cafeteria-plan/
If you have two separate HDHPs each covering just one person, you can’t contribute $7,000 to one person’s account. You have to do $3,500/$4,500. If one of your plans covers 2 or more people, you can do $7,000 for one person, and $1,000 for the person 55 or older.
Jennifer Blackburn says
In my state, the “bronze HSA” plan was eliminated leaving us to choose either a bronze non HSA plan (that still has a high deductible, just no HSA), or go with a “silver HSA” plan that costs about $6000 more annually which wipes out the tax deduction for the HSA. Reading this, it sound like possibly I could opt for the HD plan just for 2 of my kids (since that would be cheapest), contribute the maximum and use those funds for any member of my family. Is that correct?
Harry Sit says
No. The person who contributes has to be covered by an HSA-eligible plan.
LYNN says
My spouse has an HDHP and an HSA through her employer and contributes at the individual level. I have a non HDHP through my employer. We are enrolling our 6yo in a child only, individual HDHP. Can my spouse open a second HSA account at the individual level to be used for my son?
Harry Sit says
No, because her plan only covers one person. A child can’t contribute to an HSA. If she adds the child to her plan, instead of a separate child-only plan, she would then be able to contribute at the family coverage level.
Bob says
My wife’s company is switching the family HSA to a new custodian for 2019. It appears there will be some type of rollover for the balance held by the old custodian into the new account. We had not been paying attention to the potential benefits and have only contributed about 3000$ to the old custodian account for 2018. We have until April 2019 to contribute the remaining 4900$ (including catch-up) left for the 2018 limit, but do you think the new custodian will be able to accept this? It seems they should since it is simply an HSA and we are eligible to contribute for 2018 until April, but perhaps they might say, “The account opened Jan. 1, 2019, so we can’t accept contributions for 2018.”
Harry Sit says
Just ask them. It’s normal to open an HSA in the following year and contribute for the previous year before April 15. They usually have a paper form for you to mark whether the contribution is for the current year or for the prior year. If your new custodian can’t do it, there are plenty of others who will. See Best HSA Provider for Investing HSA Money. You are not limited to having only one HSA. Only the total contributions for one year to all your HSAs must not exceed the limit.
Jan Larsen says
Does the same monthly calculation of the limit apply if for some reason the employee has HDHC coverage on January 1st, then loses coverage (so they have no coverage at all) on June 1st, and then gets HDHC coverage again on October 1st for the rest of the year? (ignoring the full year rule) So in this case if they had employee only coverage when they were covered, they would have 6 + 3 months or 9/12 of the employee only limit (plus 9/12 of the catchup if applicable)?
Harry Sit says
January through May is 5 months, not 6. So 8/12th.
Paul S says
Hello – My wife and I were covered under a Family (Husband/Wife) HDHP provided by my employer for the first four months of this year. Both my wife and I are over 55. Our HSA contribution election for 2019 was $8,000 ($7,000 family limit + $1,000 catch-up) . We have always assumed that the catch-up provision was for me alone, as the primary insured, hence the $1,000 the allocation.
Note: My wife has always been covered under my employer health plan, even though she has access to coverage under her employer. As a result, we have a single HSA.
At the end of April, I left my current employer and joined a new firm. As a result, my wife and I have decided to unbundled our medical insurance coverage – beginning on June 1st I will be enrolled in an Individual HDHP with my new employer and my wife will enroll in an Individual HDHP with her current employer.
We are simply trying to figure out how much we can contribute to our new individual HSA’s for the remainder of the 2019. Our assumptions are as follows (round numbers for ease of presentation):
– 2019 Limits: We each have $4,500 in an annual contribution limit for 2019 – $3,500 standard limit + $1,000 catch-up.
– HSA Contributions To Date: $2,667 was contributed to our existing HSA through the first four months of the year. Our assumption is that $2,333 was attributed to $7,000 Family limit and $334 attributed to my $1,000 Catch-Up Limit.
Given that, we assume the following allocation of Individual HSA contributions:
-My Contributions To Date: $1,500. 50% of Family Limit contributed to date and 100% of Catch-Up contributed to date. Leaving $3,000 eligible to be contributed to my new HSA for the remainder of 2019.
– My Wife’s Contributions To Date: $1,167. 50% of Family Limited contributed to date and 0% of Catch-Up. Leaving $3,334 eligible to be contributed to her new HSA for the remainder of 2019.
Are our assumptions correct? Thank you in advance for your response and guidance!
Harry Sit says
You didn’t say what’s happening in May. If neither of you has HDHP coverage in May, your contribution limit is 0 for that one month. If you have the same coverage as January to April, and just no actual HSA contributions are deducted by payroll, you still have the eligibility. Between January and April, you decided to shift your wife’s 1/2 family contribution limit to you. So you will fill out that table this way:
Jan – Apr = You: family + 1,000 | Wife: 1,000
May = You: ? | Wife: ?
Jun – Dec = You: single + 1,000 | Wife: single + 1,000
Add up the columns and divide by 12. That’s the total annual limit for each person. Subtract the contributions already made.
Paul S says
Hi Harry – Thanks for the feedback. May is a no coverage month…so good to know that is a bagel month for the two of us. I appreciate your guidance and help!
Jason says
Hello,
here is our situation, please advice:
Me, my wife, and one kid participate on HDHP family health insurance from January till today. I currently have hsa account and contribute to maximum family limit per month ($7000/12 = $583.33) (my wife doesn’t have hsa account).
My wife has got a new job this month (august) and plan to join non-HDHP insurance to cover herself only so she will have both HDHP coverage (through my family insurance) and non-HDHP coverage (through her employer). How does it affect my hsa contribution limit?
will she cap down my hsa contribution limit for this year so my contribution hsa limit become: ($583.33*8 + 291.67*4) = 5833.33
or since my kid is still with my family non-HDHP insurance, so my max contribution hsa limit is still $7000 for 2019?
Thank you!
Harry Sit says
You can continue to contribute at the family coverage level when your plan covers 2 or more persons – yourself and your kid – and you don’t have other coverage. Make sure your wife doesn’t enroll in the healthcare FSA at her new job.
John says
Thanks for a great article.
I read the scenarios in 2008–25 I.R.B., particularly example 3, and was hoping you could confirm the 2019 HSA limit for my situation.
My wife and I (both <55) worked at different companies with our own separate HDHP HSA-eligible plans starting Jan 2019.
We both contributed each paycheck with the goal to reach the individual maximum.
Wife lost job in May with 2019 contribution equaling $1700.
Wife added to my HDHP HSA-eligible plan and changed from individual to family.
Based on the “last month rule” (assuming no changes Dec 2019 and we fulfill the testing period into 2020), the $1700 from her HSA contribution would be included in the $7000 family plan limit? I would then be able to contribute $5300 total in my HSA account for 2019? FWIW my job has more stability and I am okay with the testing period.
Thank you.
Harry Sit says
Under the last month rule, when you have family coverage on December 1, you are considered as having family coverage for the entire year. You then split the family coverage limit between the two of you. Her $1,700 contributed earlier in the year is part of the split. You then are able to contribute $5,300. These numbers also include any employer contributions.
Julie says
Hi Harry,
Thank you for the article and being so responsive. It’s all very confusing!
I read through most but not all of the comments but did not see this scenario:
My husband and son will be on a shared HDHP from my husband’s employer all of 2020.
I plan to switch coverage from my own HDHP from my employer at the end of March during our next enrollment plan so that I will have an HRA plan instead – still my own plan from my employer. From my understanding, I then lose HSA eligibility but my husband maintains his family level eligibility.
My husband and I both have HSA accounts. How much can I put into my account to account for the three months that I am eligible? And then how much can he put into his account?
Hope that makes sense.
Thanks,
Julie
Harry Sit says
For the first three months, it’s a simple case of Single + Family = Family. Both of you are considered to have family coverage. You can divide the maximum for family coverage between the two of you however you want.
For the months after you have an HRA, ask what the HRA _can_ pay — just your own expenses or theoretically your husband’s expenses as well (whether you actually submit your husband’s expenses for reimbursement or not). If the HRA can pay your husband’s expenses, even if you don’t submit any of his expenses for reimbursement, his eligibility for HSA contribution will stop as well. If the HRA can only pay your own expenses, then he will continue his eligibility with family coverage for the remaining months.
Liz says
Hi Harry, I really appreciate for such a great article!
I have PPO for the first 9 months in 2019 and switching to a single HDHP for the last 3 months. I took advantage of the last month rule and contributed the maximum $3500 in 2019. My husband has single HDHP for the entire year 2019 and is also contributing max $3500. Starting 1/1/2020, I will be withdrawing from my current HDHP and join my husband’s HDHP which will then be converted into a family plan. In this case, I will still be covered under a HDHP but however will not be contributing to HSA under my name, my husband will be the one contributing the maximum 2020 contribution under his own account. In this situation, am I still an eligible individual since I am not the main account holder of the HDHP and HSA? Will I pass the testing period in 2020 if I will be under my husband’s HDHP for next year instead of my own?
Thank you so much for taking time to respond.
Best,
Liz
Harry Sit says
To be an eligible individual you are only required to be _covered_ under an HSA-eligible high deductible plan with no other coverage. That plan doesn’t have to be under your own name. You also don’t have to contribute to an HSA yourself.
luna jha says
I and my husband are on separate plans. My husband has our kid on his insurance and contributes $6000 by the year end
I had set my HSA account and contributed $1000 towards my HSA. Is it acceptable?
Thomas Lin says
I had an HSA for the family HDHP from Jan to Nov 2019. Since Dec 2019, I have had Medicare while my wife has had her self HDHP. So, she also has an HSA. Not sure whether my question below would relate to the so-called Last Month Rule, so please note that she will have her Medicare in March 2020.
I contributed $7,333 to my HSA based on the calculation ($7,000 + $1,000) x (11/12). Our question is how much my wife can contribute to her HSA. My understanding of your example 2 made me say she could contribute $1,292 [ = ($0 + $1,000) x 11 + ($3,500 + $1,000) x 1 ]/12. Is this correct? If not, please advise the correct amount. Thank you.
Harry Sit says
That’s correct.
Thomas Lin says
Thank you very much for the prompt confirmation. If possible, please allow me to ask further – since totally I and my wife will be contributing $8,625, short of the $9,000 max limit, which is the sum of $7,000 for family and $1,000 catch-up apiece for each spouse. Does it mean actually she could put an extra $375 into her HSA on top of the $1,292?
Harry Sit says
No, because the two of you didn’t have family coverage for the full year.
ISU-Cyclones says
Thank you for the thorough work and examples. On 1 Jan 2020, my wife and I worked for the same company. We each had our own individual insurance coverage with the company that qualified as a HDHP plan and thus we each have our own individual HSAs. For prev years, it was very clean that we each contributed to our own HSAs up to the individual amount. In mid-March 2020, my wife quit her job and joined my insurance coverage. I still work for the same company and my wife is not working. We are both early 50’s in age so catch-up is not a factor. Prior to my wife quitting, she had contributed $625 in 2020 to her individual HSA via pre-tax payroll deductions. If the family maximum contribution for 2020 is $7100, then should I increase my pre-tax payroll deductions to reach $6475 ($7100 – $625) by the end of 2020? This way, the sum of our 2 total contributions for 2020 equals $7100 (hers at $625 + mine at $6475). As an alternate, I have read that certain mid-year changes can actually allow a family’s total contributions to EXCEED the $7100 for that calendar year in which the change occurred. In this case, I could increase my pre-tax payroll deductions to reach $7100 by the end of 2020 just in my HSA. Add in the $625 that my wife contributed while still on her individual plan in Jan-Mar and our family’s total for 2020 would be $7725. Of course, this only applies in 2020. Please advise….thank you.
Harry Sit says
Each of you has individual coverage for 3 months. Together, you have family coverage for 9 months. When she gives her 1/2 family coverage limit to you, that table shows her limit is $3,550 * 3/12 = $887.50 and your limit is $3,550 * 3/12 + $7,100 * 9/12 = $6,212.50. Although the two of you together have a total limit of $887.50 + 6,212.50 = $7,100, she can’t give her individual limit to you. So you can only go up to $6,212.50. She can still contribute a little more ($887.50 – $625), but only to her account.
Carl says
Hi. My wife has had no medical insurance, so I have been putting her on my company HDHP plan over the years and contributing the maximum employee plus one amount to HSA. She has decided to leave me in no-fault divorce. The final divorce decree likely will not be signed by the judge until approximately March 2021. I will continue covering her until then. But it sounds like from all the discussions above that perhaps I should only contribute the maximum amount to HSA for me only beginning in 2021, since she may get a HDHP plan on her own sometime during 2021 and contribute to a HSA. What do you think? If I contributed more than for just me I would likely get in a penalty mess, right? Thanks for any input you might have.
Harry Sit says
You will be eligible for 3 months of family coverage plus 9 months of single coverage if you will keep her on your insurance for three months before you drop down to only yourself. If you’d like to keep it simple and just contribute at the single coverage level for the full year, that’s perfectly fine.
Sana says
Even though I have an HSA through my ex-employer via COBRA, I would like open a personal Fidelity HSA due to more investing options.
Question: Can I contribute directly to Fidelity HSA and not contribute at all to employer-HSA? I will make sure that the total contribution for the year does not exceed the maximum allowed.
Harry Sit says
You can choose which HSA to contribute to when you have more than one HSA. If your ex-employer is auto drafting your bank account, contact them to stop the HSA part.
Sana says
Thank you so much, Harry!
What a wonderful website you have. Recommending it to everyone!
Pam says
My husband and I each have a family HDHP plan through our employer and contribute the max available each year. His 65th birthday is on December 19th, 2022, and he will be retiring Jan 1, 2023. I will be retiring at the same time but I will not be 65 yet. How does his December social security eligibility affect what our contribution would be for 2022? His work insurance would cover him through the end of December.
Angela says
I have an employee who has EE Only coverage with a HDHP, with an HSA. She is over 65, having previously waived all of Medicare (including Part A). She plans to enroll in Medicare with this upcoming enrollment, effective 1/1/2023. We are trying to figure out how she might be affected by the 6 month rule. She made her last HSA contribution on 10/21/22, with a total 2022 contribution (employer and employee contribution total) of $2075. Is the 6 month rule based on her last contribution date or is she safe with her $2075 total contribution because that would be less than her 6 month (Jan-June) prorated max of $2325 (50% of the 2022 max of $3650 plus $1000 catch up). Does she need to back out the contributions she made from July-October or is she safe because it’s less than her pro-rated max amount for the first 6 months of 2022? Thank you!
Harry Sit says
The contribution dates within a calendar year don’t matter. If she’s eligible in six months, her maximum is 6/12 of the annual maximum.
Sunny says
I am enrolled in a HDHP for self and my spouse (no other dependents) through my employer. My spouse also has individual self coverage in an HMO Plan through her employer. As per the COB, her HMO Plan is her Primary plan. I am not covered under her plan. We don’t have any health FSA or HRA.
Can I contribute to the family maximum to my HSA ?
Sean Paul says
Yes…I have done this in the past. I had to pay a surcharge, but the value of the increased employer contribution and higher contribution limit more than offset it. Just be aware that it is still your HSA, and the entire family contribution has to go to your HSA (although you can get reimbursed for spouse’s expenses that are not otherwise reimbursed by another source).
Sunny says
Thanks for the reply Sean. I wrote to my benefits team and got the response that I can contribute up to the family maximum but it is against the IRS regulation that my spouse has other first dollar coverage under the HMO. I searched regarding this in the IRS Publication 969 (https://www.irs.gov/publications/p969) but didn’t find anything a regulation regarding our situation.
Harry Sit says
It’s the other way around — she can’t contribute to her HSA when she has first-dollar coverage under the HMO. It’s not against any regulation to have first-dollar coverage when she’s not contributing to an HSA. You can still contribute to an HSA in your name at the family coverage level and you can still use the HSA dollars to cover her deductible and copays.
Sunny says
Thanks for the reply, Harry!