HSA question

[PNWskindoc]

Sorry if this has already been asked before but I couldn't find this specific question when I searched the forum.

1) If I enroll in a HDHP plan next month, how much can I actually contribute for my entire family for 2016? Is it the full $6750 or is it pro-rated? I looked online and there apparently is some type of chart or calculation but I can't make sense of it

2) If my employer doesn't offer a HSA and I decide to get one on my own, it looks I'll be responsible for the SS/medicare taxes. Has anyone had luck getting their employer to somehow pay those taxes for you?

Thanks!

[East coast]

I'll let the CPA's give you a full answer, but I'll respond with my anecdote - I enrolled in a HDHP and started an HSA about half way through the year. My provider made it clear to me that i can contribute up to the max as though I had the HSA for the full year.

On number two - You don't need to 'get your employer to somehow pay those taxes for you'. They just don't get 'charged' (at least your portion, don't really know if the employer is still on the hook for the employer portion). But you do need them to deduct it from your paycheck to not get 'charged'.

[jfoxcpacfp]

PNWskindoc wrote:

Sorry if this has already been asked before but I couldn’t find this specific question when I searched the forum.

1) If I enroll in a HDHP plan next month, how much can I actually contribute for my entire family for 2016? Is it the full $6750 or is it pro-rated? I looked online and there apparently is some type of chart or calculation but I can’t make sense of it

2) If my employer doesn’t offer a HSA and I decide to get one on my own, it looks I’ll be responsible for the SS/medicare taxes. Has anyone had luck getting their employer to somehow pay those taxes for you?

Thanks!

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1. Yes, you can contribute for a full year as long as you are still eligible on December 1.


2. If your employer offers an HSA, you will still pay FICA taxes on your own contributions to it. Any employer contributions would not be subject to taxes, same as with employer 401k contributions. You are talking only about Medicare taxes on $6,750 (assuming your employer contributed the full amount, which would be pretty rare) - worth less than an hour of your time, I would presume. I wouldn't waste any negotiation power on this.

[East coast]

jfoxcpacfp wrote:

1. If your employer offers an HSA, you will still pay FICA taxes on your own contributions to it.

Click to expand...

Hi Johanna - Want to clarify for my own education as well as for others reading this:

While my understanding of the topic is that your statement is correct, in practice, that's not necessarily the case. The explanation as to why is over my pay grade, but has to do with cafeteria plans/salary reduction.

I tell my employer how much I want 'deducted' (maybe that's not the correct/legal word in this instance) out of my salary to go into my HSA per month and they put it in there. I definitely don't get FICA/Medicare withheld on this amount.

[jfoxcpacfp]

East coast wrote:

I tell my employer how much I want ‘deducted’ (maybe that’s not the correct/legal word in this instance) out of my salary to go into my HSA per month and they put it in there. I definitely don’t get FICA/SS withheld on this amount.

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I'm sorry, I overlooked one point. If you are contributing through an employee section 125 plan that has been modified to allow HSA contributions, then you will not owe FICA taxes on your contributions. Otherwise, the FICA taxable wages on your pay stub should include the HSA amount you contributed. I presume your employer has implemented such a plan. My apologies and thank you for asking for clarification.

[PNWskindoc]

Thank you Johanna and east coast for your replies. What if your employer doesn't offer a HSA? If you open up one on your own, then I get to deduct the federal (no state tax) taxes but not the FICA taxes ?

[jfoxcpacfp]

PNWskindoc wrote:

Thank you Johanna and east coast for your replies. What if your employer doesn’t offer a HSA? If you open up one on your own, then I get to deduct the federal (no state tax) taxes but not the FICA taxes ?

Click to expand...

Yes. Contributions to an HSA are an "above the line" deduction (meaning they are entered on page 1 of 1040 and reduce your AGI, which is beneficial in a number of ways). The only way to reduce FICA taxes on your return is to have deductions that reduce SE-taxable income (but not below zero), such as on schedule C or schedule F.

[PNWskindoc]

So my question arose from reading this thread on the bogleheads: https://www.bogleheads.org/forum/viewtopic.php?t=151121

My current practice offers a HDHP but does not have a designated HSA custodian. As such if I wanted to contribute to a HSA on my own, I could get a deduction on my federal/state taxes but I would still be paying FICA taxes. According to this thread, however, if I can get my employer to write the check on my behalf for my contributions, both the employer and employee don't have to pay FICA taxes. I just wanted to make sure I was understanding this correctly.

[jfoxcpacfp]

Yes, if the practice contributes to the HSA on your behalf as compensation to you, then FICA taxes would be avoided. However, they would land squarely in a bigger pile of feces under the non-discrimination rules. Cannot pick and choose which employees get benefits. Is it possible to negotiate on behalf of all employees? Of course, as I stated earlier, I don't exactly understand why a benefit worth around $200 is worth this much attention (at least looking at FICA only). If you can get your employer to contribute $6,750 to your HSA, otoh, that's different.

[jfoxcpacfp]

Yes, if the practice contributes to the HSA on your behalf as compensation to you, then FICA taxes would be avoided. However, they would land squarely in a bigger pile of feces under the non-discrimination rules. Cannot pick and choose which employees get benefits. Is it possible to negotiate on behalf of all employees? Of course, as I stated earlier, I don't exactly understand why a benefit worth around $200 is worth this much attention (at least looking at FICA only). If you can get your employer to contribute $6,750 to your HSA, otoh, that's different.

[PNWskindoc]

Thanks Johanna. I'll have to talk with the practice owner to see if all the employees can get this option.

As for the FICA taxes, I agree that we're not dealing with a huge sum of money here but to me, it seems no different than people looking for a custodian that has the lowest fees. WCI and boglehead followers seem to be willing to leave a company because the maintenance fees go up a few dollars a month. Imagine if they added an extra $1-200 per year in fees.

 

[jfoxcpacfp]

PNWskindoc wrote:

As for the FICA taxes, I agree that we’re not dealing with a huge sum of money here but to me, it seems no different than people looking for a custodian that has the lowest fees. WCI and boglehead followers seem to be willing to leave a company because the maintenance fees go up a few dollars a month. Imagine if they added an extra $1-200 per year in fees.

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Yeah, I was afraid this was your POV. We have very different beliefs regarding financial priorities and planning. I've never understood why so many folks on both forums swat at gnats while they are choking on flies.