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.