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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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.