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Should I add my kids to Health Insurance for more HSA space

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  • Should I add my kids to Health Insurance for more HSA space

    I just started new employment that offers a high deductible health plan. My children have always been covered under my wife's regular ppo plan that she wants to keep the kids on. I added myself as a individual and started contributing to the hsa up to the individual allowed amount. If my kids stay on my wife's health plan will there ever be a scenario where it makes finsncial sense in the long run to add my kids to my health plan so I can double my hsa contribution allowance? I ran the numbers and it seems the added premium cost to add my kids adds to much cost for this to really be beneficial but I would like to ask the group here to double check.

    Here are some more details.
    1. I live in California
    2. It costs a extra $82.69 in premiums bi monthly to add just my kids to the plan
    3. My company matches $500 for individual hsa plans but with my kids they will double the match and make it $1,000
    4. By adding my kids my contribution allowance is doubled from I think $3,600/year to $7,200.
    5. I plan to keep this as a long-term investment and the funds will be used for health care during retirement.

    Thank you

  • #2
    There's still a few more variables missing if you're looking at it from a mathematical standpoint. It costs you money to add them to your plan but does it save you money from taking them off your wife's plan? What is your marginal rate? Are your children big utilizers of healthcare?

    Assuming you have a decently high marginal rate, the difference would probably be lower than you expect. It would probably still come out several hundred dollars towards keeping them on your wife's plan but for the long-term benefits of the HSA I would probably lean towards that.

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    • #3
      My wife wants to keep the kids on her plan also, don't ask me why. She's convinced a regular ppo plan is best, in her defense she is offered a good ppo plan through her employment. If i add my kids to my high deductible plan they will have dual coverage and it would mainly be for the sole purpose of increasingmy hsa contribution. My kids do not use the health plan at all except for yearly well child checks.

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      • #4
        You can check out IRS Pub. 969 but I don't think your children would qualify for an HSA since they would have other coverage. There are a few exceptions but I doubt they apply to your case.

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        • #5
          I see. I will look into this and read the IRS rules. If that's the case then I guess that answers my question and I should not add my kids to the high deductible plan. Can anyone else confirm?
          Thanks

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          • #6
            You can add them to the HDHP. You just can't contribute to the HSA if they are also on the PPO. Be careful your wife doesn't use an FSA as that also makes you ineligible for HSA conts.

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            • #7
              Originally posted by tylerjw12 View Post
              You can add them to the HDHP. You just can't contribute to the HSA if they are also on the PPO. Be careful your wife doesn't use an FSA as that also makes you ineligible for HSA contributions.
              You can add them to the HDHP and their other coverage does not affect your HSA eligibility to make contributions. Only your other coverage would do that.

              Make sure you pay very close attention to tylerjw12's last point. A spouse's enrollment in a general purpose FSA makes you HSA ineligible.

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              • #8
                Thanks everyone. We do not have a fsa. I'll just keep the hsa to myself then.

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