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Double insurance coverage in order to contribute to an HSA?

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  • Double insurance coverage in order to contribute to an HSA?

    Hi gang,

    I wanted to get your opinion on my insurance plan selection this year.

    My wife has good insurance coverage through her job and we have been using her medical coverage as our primary insurance with me as a dependent. My job provides me an option to have a high deductible health insurance plan for which is no cost to me. If I waive my coverage, they provide me a $1,500 stipend in its place.

    My question is would you waive the insurance coverage in order to get the stipend of $1,500 or would you elect to have a second insurance coverage primarily to have the option to contribute to an HSA account for the tax benefits? (Our combined estimated gross income this upcoming year will be $400,000).

    Thanks in advance!

  • #2
    Does your job contribute anything to the HSA?

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    • #3
      Yes, my job pays a monthly premium of $400.

      Which leads to a follow up question which I have looked into but wanted to confirm. Does my job's health insurance contribution affect my taxable income?

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      • #4
        That's not the question. Sometimes employers contribute/match some $ into your HSA. Paying the premiums is different.

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        • #5
          Originally posted by buffaloboyanders View Post
          Does my job's health insurance contribution affect my taxable income?
          It shouldn't, but the stipend would be taxable at marginal rate.

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          • #6
            Originally posted by JBME View Post
            That's not the question. Sometimes employers contribute/match some $ into your HSA. Paying the premiums is different.
            Oh, sorry I misread. No, the company doesn't contribute to the HSA.

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            • #7
              Originally posted by buffaloboyanders View Post

              Oh, sorry I misread. No, the company doesn't contribute to the HSA.
              So if you're in the 35% marginal bracket, you'll save $2500 in tax by maxing out the HSA while losing out on $975 in after-tax income from the $1500
              Yeah do it. Also the second insurance is nice to have just in case.

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              • #8
                Originally posted by childay View Post

                So if you're in the 35% marginal bracket, you'll save $2500 in tax by maxing out the HSA while losing out on $975 in after-tax income from the $1500
                Yeah do it. Also the second insurance is nice to have just in case.
                Just to clarify, my company will only cover the cost of coverage for myself. If I chose to cover my entire family I would have to pay a premium, so I think my max contribution limit to the HSA would be $3,600.

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                • #9
                  Originally posted by buffaloboyanders View Post

                  Just to clarify, my company will only cover the cost of coverage for myself. If I chose to cover my entire family I would have to pay a premium, so I think my max contribution limit to the HSA would be $3,600.
                  I see. Math still works out unless I'm missing something. And that's without factoring in state tax or future value of HSA moneys etc

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                  • #10
                    Originally posted by childay View Post

                    I see. Math still works out unless I'm missing something. And that's without factoring in state tax or future value of HSA moneys etc
                    Alright, thanks for your help!

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                    • #11
                      You should also compare the actual quality of your insurance coverage vs. your spouse’s in addition to out of pocket maximums, etc. between the two before making a decision.

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                      • #12
                        Be careful your wife's plan doesn't run afoul with eligibility rules for the HSA. To be extra clear, you are free to sign up for the QHDHP no matter what. The IRS may not allow you to make your contributions to the HSA if you are enrolled in another plan with copays, FSA, etc.

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                        • #13
                          Originally posted by tylerjw12 View Post
                          Be careful your wife's plan doesn't run afoul with eligibility rules for the HSA. To be extra clear, you are free to sign up for the QHDHP no matter what. The IRS may not allow you to make your contributions to the HSA if you are enrolled in another plan with copays, FSA, etc.
                          Alright, thanks! That's really helpful to know. Last thing I would want to do is create an IRS issue with this.

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                          • #14
                            Originally posted by buffaloboyanders View Post

                            Alright, thanks! That's really helpful to know. Last thing I would want to do is create an IRS issue with this.
                            You only qualify for the HSA if your ONLY health plan is a HDHP. My situation is my employer gave me a HDHP while my wife was on her hospital's insurance plan (Non-HDHP). Even if I asked for family coverage for the HDHP, which double coverage for my wife is fine, I cannot make the family contribution on her behalf since she is insured also by a non-HDHP.

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