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HSA Confusion for First Timer
Old 07-03-2014, 12:41 PM   #1
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HSA Confusion for First Timer

Hello, my apologies if this question has been answered in the past. I couldn't find the answer to our situation:

Wife 52 Husband 61

This is our first year we are eligible to contribute to an HSA and I would like to make a lump sum deposit in our accounts for the year.

We have separate accounts.

We have had an HDHP since February, so my understanding is that the maximum amount we can contribute is prorated by the number of months we have had this type of health care coverage.

Our maximum combined contribution of $6966.67 includes the $1000 catch up contribution for my husband since he is over 55 ($3025 + 3941.67)

If the family maximum amount that is deductible for 2014 is $6550.00, how much can I deposit in each account? Is the $6550 maximum also subject to pro rationing since we started coverage February1? Is our maximum $7550 due to the catch up provision?

Thanks very much for the help : )
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Old 07-03-2014, 12:52 PM   #2
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This should answer your questions: Health Savings Account (HSA) Contribution Calculator
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Old 07-03-2014, 01:05 PM   #3
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Thanks, REWahoo, my calculated numbers were a little off, so it looks like we are able to contribute $3002 in mine and $3919 in my husband's account for 2014.
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Old 07-03-2014, 01:12 PM   #4
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Each account? I think you all can have one HSA. You should want only one anyways since once one is over a minimum, the fees can drop to zero. I assume neither of you are working, so there is no employer contribution?

I use HSABank for my HSA. No fees for me since I am above the minimums.
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Old 07-03-2014, 01:17 PM   #5
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LOL, neither of us works, and I opted for two separate accounts, thinking that there was an advantage to having separate accounts as my husband approaches 65 but I could be wrong!
I see your point about double fees.

Should we have separate accounts? Or do separate accounts make sense for working spouses?
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Old 07-03-2014, 02:28 PM   #6
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We went for separate accounts because I misunderstood the catch up rule. Two HSA accounts is a PITA, especially when they are used for investment. The only potential problem is the account cannot be joint, has to be in the name of the primary policyholder.
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Old 07-03-2014, 02:34 PM   #7
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I think if your HDHP is a family plan, then you should have only one HSA.
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Old 07-03-2014, 03:12 PM   #8
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Thanks MichaelB and LOL.

I haven't funded the accounts yet and will call them after the holiday to see if I can merge them into one name.

One other question, if I make my husband the primary account holder, will the rules about contributions change when he becomes Medicare eligible in 4 years?

In other words, would it make more sense as the younger spouse to make myself the primary account holder?
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Old 07-03-2014, 05:47 PM   #9
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Quote:
Originally Posted by Tandemlovers View Post
I haven't funded the accounts yet and will call them after the holiday to see if I can merge them into one name.
You don't need to merge them. As LOL pointed out, if your HDHP is a family plan, just deposit the total yearly contribution in your account and close the other one.

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Originally Posted by Tandemlovers View Post

One other question, if I make my husband the primary account holder, will the rules about contributions change when he becomes Medicare eligible in 4 years?

In other words, would it make more sense as the younger spouse to make myself the primary account holder?
Good question. My guess is when your husband retires, if the HSA account is in his name, the bank won't take any more deposits and you'll need to open a second account. Smart move is to do that now, keep all the funds in the account in your name so you can continue depositing until you hit Medicare age.
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Old 07-03-2014, 06:09 PM   #10
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One should check if the account owner needs to be 55 or older to be able to contribute the $1,000 catch-up. I'd just have the oldster as the account owner and worry about medicare issues later.

To my knowledge, the HSA folks never asked about ANY of the other folks in the family who might have expenses paid from the HSA. My HDHP was for me and the kids and not my spouse as she had her own employer-provided health care plan.
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Old 07-03-2014, 07:33 PM   #11
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I apologize if I am reading any of this wrong, but you can deduct the whole $3300 for the entire tax year. I know at least through November of the taxable year. Just make sure you keep the plan enforce for 12 months though or you will owe some money and penalties.


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Old 07-03-2014, 08:50 PM   #12
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Mulligan, since I established the hdhp in February, I am under the impression that the contribution for the year and the amount I can deduct is prorated.

LOL, you are correct that if I establish the account in my name for our family, I will not be able to take advantage of the catchup provision until I turn 55 in three years. Establishing my husband as the primary account owner would allow us to contribute almost 4k more before he turns 65, but may change the rules about future contributions or necessitate my opening my own account at that time. Hmmm. Not sure which makes sense. I guess that is why I had thought about establishing two accounts to begin with.
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Old 07-03-2014, 09:43 PM   #13
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Originally Posted by Tandemlovers View Post
Mulligan, since I established the hdhp in February, I am under the impression that the contribution for the year and the amount I can deduct is prorated.

LOL, you are correct that if I establish the account in my name for our family, I will not be able to take advantage of the catchup provision until I turn 55 in three years. Establishing my husband as the primary account owner would allow us to contribute almost 4k more before he turns 65, but may change the rules about future contributions or necessitate my opening my own account at that time. Hmmm. Not sure which makes sense. I guess that is why I had thought about establishing two accounts to begin with.

Tandem, I am almost positive you can do the full amount. When I started my HSA, in November of 2010, I dumped the full amount in immediately and took the entire deduction on my taxes for that year. I researched it prior to doing it and now am going off a fading memory, but I do know you could, but you have to keep the HD policy in full force for 12 months or face penalties. Rinse and repeat each year. Now the year I turn 65 I do not know if I can get the full amount that year or if I have to prorate it then, though.


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Old 07-03-2014, 09:49 PM   #14
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Tandem, this appears to confirm my thoughts.

11. What if I am only eligible part of the year?
If this is your first year of coverage under a HDHP and you start mid-year, you can contribute up to the full applicable federal limit; including a full catch-up amount if between ages 5565, so long as you start your HDHP coverage no later than December 1 of that year. In this case; however, you will be subject to a testing period. The testing period requires that you maintain HSA eligibility for a period beginning on December 1 of the year you started and ending on December 31 of the next year. See our HSA Testing Period Worksheet for details.

If this is not your first year of the HSA and you stop your HSA eligibility mid-year, you are only allowed to contribute 1/12 of the applicable federal limit times the number of months you were eligible. please see our Eligibility & Contribution Worksheet.

12. When do I have to make my contribution?
You can make your HSA contribution until your tax filing due date (April 15 of the year following the tax year for most people).

https://www.hsaresources.com/faq/#contributions-11




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Old 07-03-2014, 09:59 PM   #15
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Mulligan, I found this info on the HSA Bank site which seems to corroborate what you are saying, except that coverage must extend for 18 months following coverage that begins in July:

Prorated HSA Contributions

If you do not have HSA-compatible health coverage for an entire calendar year, you must prorate your HSA contributions to avoid tax penalties. Examples are as follows:

Annual Contribution Limit/12 MonthsX# of months eligible=Prorated Contribution

$3,300(individual)/12 MonthsX4 (months eligible)=$1,100

$6,550(family)/12 MonthsX6 (months eligible)=$3,275

Mid-year Coverage
If your HSA-compatible coverage begins in July, you can contribute the maximum amount for that year provided you maintain coverage until December 31st of the following year.

Health Plan Status Change
If you begin the year with family coverage and switch to single coverage in July of that year, you are eligible to contribute half of the family coverage contribution maximum and half of the individual coverage contribution maximum.
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Old 07-03-2014, 10:03 PM   #16
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Looks like we were researching at the same time, Mulligan!

Thanks very much : )

Now my question is why not establish separate accounts to take advantage of the extra catch up provision for my 61yo spouse? Establishing the entire account in my name would not allow a catch up contribution.

MichaelB, you mentioned that having two accounts was a PITA. How?
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Old 07-03-2014, 10:07 PM   #17
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Quote:
Originally Posted by Tandemlovers View Post
Looks like we were researching at the same time, Mulligan!

Thanks very much : )

Now my question is why not establish separate accounts to take advantage of the extra catch up provision for my 61yo spouse? Establishing the entire account in my name would not allow a catch up contribution.

MichaelB, you mentioned that having two accounts was a PITA. How?

Tandem, you got me curious based on what you sent and I looked at that site you mentioned,and they did write that. But they are dim wits. The below post is direct from IRS. So relax and load up the full amount!

Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers).
If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you.

http://www.irs.gov/publications/p969...link1000204025




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Old 07-04-2014, 10:29 AM   #18
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Good question. My guess is when your husband retires, if the HSA account is in his name, the bank won't take any more deposits and you'll need to open a second account. Smart move is to do that now, keep all the funds in the account in your name so you can continue depositing until you hit Medicare age.
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Once one of you is Medicare eligible, your contribution is limited in the first year one is eligible on a pro-rated basis. After that, he can make no further contributions.

That is, just as this year when you got your HDHP in February, your husband's contribution in the year he gets Medicare will need to be pro-rated for the period BEFORE he had Medicare.

So, to avoid confusion, it would probably be best to have 2 accounts.

Your HSA provider can provide you with info on this.
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Old 07-04-2014, 10:51 AM   #19
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We are both doing catch-up contributions, so we both have HSA accounts. We have separate insurance as well. There was no price advantage to getting a family plan. We have no children.

As far as taxes - you file two forms instead of one, and the combined contributions can't exceed a limit that is currently $25 less than the two individual limits combined.
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Old 07-04-2014, 01:36 PM   #20
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We are both doing catch-up contributions, so we both have HSA accounts. We have separate insurance as well. There was no price advantage to getting a family plan. We have no children.
To get this straight: if both spouses are eligible for catch-up contributions then each person must have their own HSA account which must split the family maximum between them, then add their $1000 catch-up contribution. Can this be done if they have only one HSA eligible family policy between them? Or must each adult have their own policy to qualify for this? We will have one child still a home and therefore will benefit from a lower family maximum out-of-pocket amount vs. each adult having their own separate policy with the child added to one. We are both retired and no employer is involved, if that matters.

Yet another confused first timer, planning for next year
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