Double coverage HSA question

[tex]

Situation:

-Wife has free health insurance through her employer. We will obviously be keeping it. (It does not qualify as HDHP)

-My new employer's plan covers expensive, expected medical care that hers does not. I start July 1 and will select coverage for both of us for this reason.

-I've got the choice of 3 plans, including a HDHP, which all other things being equal is the best, which I talked about here. Employer contributes 600 to an HSA for single coverage

-I don't seem to be able to elect HDHP for myself and PPO for her. If we're both on HDHP employer contributes another $600 to my HSA

-My understanding is that somebody can't contribute to HSA if they have double coverage with a non-HDHP (my wife)

 

Question: if I elect the HDHP for both of us, do I need to refuse the additional $600 (if I can figure out how to do this with human resources)? Can I only contribute up to an HSA to the single limit, $3350? Can I keep the additional $600 but only contribute up to the single limit?

If she hits her out of pocket max (expected this year) and I incur minimal medical expenses (most likely scenario), HDHP is still the best option. If worst case scenario happens and we both hit OOP max, HDHP is more costly by a negligible amount that we can cover.

 

edit: I think I'm scenario 2 in this IRS explanation? Which makes me think I can contribute up to the family max (including employer contribution).

edit 2: from here: "Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual)" "If you have family HDHP coverage you can contribute up to $6,750"

"if you were not 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."

By form 8889 my max would be $3325, but by option 2 it would be $6750, right? So if I'm paying for a family HDHP on Dec 1, 2016, my max contrib is: 6750 - 1200 employer contribution = $5550?

Using option 2 subjects you to the testing period, which means I have to be an eligible individual for 2017. It would seem I can switch to self-only HDHP for 2017 and still pass the testing period.

 

[jfoxcpacfp]

As I read it, this is Situation 1 in Rev. Rul. 2005-25 in your link. Because your wife is already covered by a non-HDHP plan, she cannot count to bump you up to the family contribution amount for your HSA. If you have children, however, and at least one of them is covered under your HDHP plan, then you can contribute the family max.

[tex]

Thanks for your comment. What do you think about this from my second link though?

“Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual)”

My take from this is that I meet criteria as an eligible individual who is paying for family HDHP coverage, so I can contribute up to the family limit. She obviously is not an eligible individual, so cannot have her own HSA.

[tex]

bump

[jfoxcpacfp]

tex wrote:

Thanks for your comment. What do you think about this from my second link though?

“Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual)”

My take from this is that I meet criteria as an eligible individual who is paying for family HDHP coverage, so I can contribute up to the family limit. She obviously is not an eligible individual, so cannot have her own HSA.

Click to expand...

Sorry I missed your followup question. I still think you do not qualify to contribute the family amount but that "whether or not" quote gives me pause. Given the below, it seems we are going in circles.

"Rules for married people.   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2015 is $6,650. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.

The rules for married people apply only if both spouses are eligible individuals."

So, I think no family-size contribution, but I wouldn't bet my career on it. This is the best I can do at this point!

[tex]

jfoxcpacfp wrote:

The rules for married people apply only if both spouses are eligible individuals.”

Click to expand...

My spouse was never an eligible individual, so that's why I ignored that part, but I agree that it's not all that straightforward. I really appreciate your response!

[zdr81]

I have a similar yet different question - can't find much guidance on this.

 

Can I have a HDHP / HSA covering my self and children while my employed wife has one covering herself/myself (I anticipate using it as secondary insurance to get benefits in her network that I cannot receive). If so, what are the contribution limits? I'm assuming it is $6650 split between the two of our HSAs. If she covers just herself while I cover myself and kids, is she eligible to contribute $3350 while I contribute $6650?

[jfoxcpacfp]

zdr81 wrote:

If she covers just herself while I cover myself and kids, is she eligible to contribute $3350 while I contribute $6650?

Click to expand...

No. The maximum that can be contributed per family is $6,650 plus another $1,000 if age 55+.

[zdr81]

Thanks Johanna! I thought that was the case. I suppose, all of us being healthy and high earners, it still makes sense over paying towards an HMO..

[jfoxcpacfp]

zdr81 wrote:

Thanks Johanna! I thought that was the case. I suppose, all of us being healthy and high earners, it still makes sense over paying towards an HMO..

Click to expand...

It depends on comparison of policies and benefits (including tax savings) but that is what I would strongly suspect.

[nachos31]

Johanna, I believe the >55 yo applies to each spouse as long as both are over 55 and each has an HSA. So there's the $6650 general limit + $1000 for one >55yo spouse in that spouse's HSA. And the other if >55yo can also add $1000 but only if they have a separate HSA available to them. Total HSA contribution could then be up to $8850. Of course, as mentioned that $6650 general limit could be split any which way between the two HSAs.

[jfoxcpacfp]

nachos31 wrote:

Johanna, I believe the >55 yo applies to each spouse as long as both are over 55 and each has an HSA. So there’s the $6650 general limit + $1000 for one >55yo spouse in that spouse’s HSA. And the other if >55yo can also add $1000 but only if they have a separate HSA available to them. Total HSA contribution could then be up to $8850. Of course, as mentioned that $6650 general limit could be split any which way between the two HSAs.

Click to expand...

nachos31, you are correct as long as each spouse has a separate HSA account. Thanks for the clarification.

[tex]

Just in case anyone ever stumbles on this thread, my exact question came up on Bogleheads and the consensus seems to agree that the family contribution applies:

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=202120&newpost=3097257

[jfoxcpacfp]

tex wrote:

Just in case anyone ever stumbles on this thread, my exact question came up on Bogleheads and the consensus seems to agree that the family contribution applies:

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=202120&newpost=3097257

Click to expand...

Are you saying you read the whole thread? (And are you too young to remember the AlkaSeltzer commercial "I CAN'T BELIEVE I ATE THE WHOOOLE THING"?)

[DMFA]

https://www.irs.gov/pub/irs-pdf/p969.pdf

Page 3:

Self-only HDHP coverage is an HDHP covering only an eligible individual. Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual).

Page 4:

Other health coverage. You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. You can have additional insurance that provides benefits only for the following items.

• Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property.


• A specific disease or illness.


• A fixed amount per day (or other period) of hospitalization.

You can also have coverage (whether provided through insurance or otherwise) for the following items.

• Accidents.


• Disability.


• Dental care.


• Vision care.


• Long-term care.

Page 7:

Rules for married people.  If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2015 is $6,650. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.

The rules for married people apply only if both spouses are eligible individuals.

___________________________________

• The HMO provides more than listed above, so your wife is not an eligible individual


• The rules for married people therefore don't apply to you


• You can not be on your wife's HMO (would render you ineligible)


• She can be on your HDHP


• Since you are eligible and she is covered (even though she's ineligible), it is a family plan

So, the one of you with the HDHP can contribute $6,650 to an HSA if you're both on the HDHP and only the other one is on the HMO, based on that.

Seems super-fishy, though.  I don't think this situation is often encountered because who the ************************ would pay for two health insurances for a healthy person?

Also, did you switch who has what coverage?  Seems like in this post, you have the HMO, but on Bogleheads, she does.  Forgive me if there are some misplaced you/she, is/are, etc.  Is this all a giant hypothetical?