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  • Unique Health Savings Account Question about Contributions

    Here is a unique question regarding my Health Savings Account that I could use some opinions on.
    I currently have a Health Savings Account for 2016 as an individual and will be maxing out my contribution this year. My wife is currently utilizing a different health insurance plan through her employer which does not qualify for an HSA. The reason we did this is because we were expecting to become pregnant during the year and wanted to have a more comprehensive medical plan for her delivery.

    Things went according to plan and we are expecting in mid-November. Since the birth of our child will qualify as a "major life event" and allow me to make changes to my current plan, I was thinking of switching my plan from an individual to a family for the 4-6 weeks left in 2015. My hope is this would allow me to then contribute an additional $3400 ($6750-$3350) for the year. Is this possible or do I need to be on the family plan for the entirety of 2016? I'll of course need to reevaluate for 2017 but was curious about my options for 2016.

    Thanks for the help.

  • #2
    The rules are pretty interesting with regards to partial year HDHP. I think you may actually qualify to put in the whole $6750 this year. It's all about the last month.

     

    If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2015 is $6,650 even if you changed coverage during the year.
    Last-month rule.   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month.

    Testing period.   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. For example, December 1, 2015, through December 31, 2016.  If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. You include this amount in your income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. The income and additional tax are calculated on Form 8889, Part III.



    https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204025
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    • #3
      Great point from WCI. Thanks! Quick follow up question.

      Let's assume I make no changes for 2016 and now we're talking about 2017 plans.
      I will likely stay on my individual HDHP with an HSA as an individual and my wife switches to her own HDHP with HSA as a "parent + dependent." The reason why I wouldn't join her coverage (as the third member) is that her plan has a clause where they'd charge a very high ADDITIONAL premium for a spouse if that spouse has an opportunity to get their insurance through their own employer (which I can). Having her join my plan as a family isn't a great option either as my in-network is very far from where we live (I have a long commute as a medical resident) and it would be too difficult to have a pediatrician/hospital that far away.

      Question:
      For 2017, am I able to contribute to an individual HSA ($3,400) while my wife contributes as a family HSA ($6,750) since our child will be on her plan? This would total $10,150 (3,400 + 6750). Is this legal and will it work? If not, what is my best alternative to maximize my HSA contributions given my unique situation?

      Of note, we currently file a married, joint tax return if that has any bearing.

      Thank you.

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