HSA Contributions ??

[FatWallet111]

Hi Everyone...first post, wish me luck.

So here's the deal, I enrolled in a High Deductible Health Plan at the end of 2012 (changed my insurance coverage from a different plan to the HDHP) which comes with a Health Savings Account (HSA). The HSA was opened on January 4th, 2013 through a bank.

I elected for payroll deductions, and currently there is a fixed amount that is taken out of each of my paychecks. I understand that contribution deadlines for the HSA is April 15th, 2013 (tax deadline). What I'm wondering is can I fund the account so that I max it out for Tax Year 2012 by making a lump sum deposit before the tax deadline of this year. Or, does anything that goes in the account now automatically count towards tax year 2013? I have heard many different answers and no one seems to have an authoritative grasp on this.

Per the IRS website on HSA's, it states:

When To Contribute

You can make contributions to your HSA for 2012 until April 15, 2013. If you fail to be an eligible individual during 2012, you can still make contributions, up until April 15, 2013, for the months you were an eligible individual.

How do you guys interpret this? I will not bias you with my interpretation, but let's open this up for discussion of some sort. If there is anyone out there who knows for sure if I can (still have the option to) make a lump sum payment to max it out for 2012, I'd love to hear from you.

Thanks.

[nvestysly]

Hi FatWallet111,

Hello and welcome to the forum. I've certainly obtained lots of useful information from this site and I'm sure you will too.

There may be an expert on HSAs that will reply to your question. I am not an expert but I'll go ahead and take a stab at it.

Were you enrolled in the HDHP in 2012? Or, did you sign-up for it in 2012 and it became active on 1/1/2013? That makes a difference.

If you were not enrolled in the HDHP in calendar year 2012 the answer is NO! Remember I'm not an expert. However, I've had a HDHP and HSA for several year and I've read a variety of information about the plans. I don't think you are allowed to make a contribution to an HSA for a year in which you were not enrolled in a HDHP.

I may have misunderstood your scenario but I think the answer is obvious.

On a relate note - once you have an HSA it's yours to keep. You can spend the money, tax free, on qualified medical expenses. However, you cannot make contributions to the HSA unless you are enrolled in an HDHP. So if there is a year or two that you decide to enroll in an HMO you can use the money from the HSA for medical expenses but you cannot contribute to the HSA during that time. I think the same would apply in your 2012 situation if you were not enrolled in a HDHP.

[REWahoo]

Fatwallet, you can make an HSA contribution for 2012 on a pro-rated basis for the time you were in the HSA in 2012. For example, if you enrolled in the HSA on Dec 1, 2012, you can contribute 1/12 of the annual HSA amount by the April 15 deadline.

If you didn't acquire the HSA until the end of December 2012, you are not eligible to make a contribution for 2012.

[JoeWras]

Fatwallet: first, welcome!

Read the publication 969 through a few times. You'll see the IRS uses "failed to be" and "failed to remain" very specifically. There's a testing period that they talk about with half years. Basically, it is possible to do more than a pro-rated contribution for a year if you keep the testing period in the next year. Read "Example 1" and "Example 2" in Publication 969 (2012), Health Savings Accounts and Other Tax-Favored Health Plans. There are cases you can overload in the previous year if you continue on 11 months in the next year.

However...

Probably none of this matters in your case, because the key phrase is:

Quote:

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 your company is like most of them, just enrolling late last year does not put you in the plan on December 1. Check with your HR to confirm, but you likely didn't start the plan until January, so you won't qualify for being eligible on Dec 1. Right there, that will disqualify you from any contributions for 2012.

I know this came up at my Megacorp, because people wanted to do what you want to. We "enrolled" by November 15. But our HR said that was just an internal deadline, and the actual plan enrollment wasn't until Jan 1. So, no eligibility on the previous Dec 1 for my company.

Update edit: I see nvestysly mentioned the same thing about the dates and enrollment, or "sign up" and "activate" as nvestysly clearly puts it.

[juju226]

I am having no luck researching the following regarding the HSA testing period, any advice/suggestions on where to find this information. I have read through the IRS Publication 969 and feel totally lost. My situation: I began receiving PCIP insurance (Pre-exisitng Condition Insurance Plan) through the government 9/11. It is a high deductible plan so I qualified for a HSA & set one up 2/12. I got a State job and qualified for insurance through them 11/1/12 so I terminated my coverage through PCIP. Therefore according to the IRS I have failed the testing period for an HSA and must pay a penalty on my medical deductions from the HSA. I understand that but since I am unable to deduct my medical expenses paid out through the HSA and must pay a penalty on them, can I turn around and use the SAME medical expenses if I itemize? Any information where I can find the answers I am seeking would be greatly appreciated!

[JoeWras]

Quote:

Originally Posted by juju226 I am having no luck researching the following regarding the HSA testing period, any advice/suggestions on where to find this information. I have read through the IRS Publication 969 and feel totally lost. My situation: I began receiving PCIP insurance (Pre-exisitng Condition Insurance Plan) through the government 9/11. It is a high deductible plan so I qualified for a HSA & set one up 2/12. I got a State job and qualified for insurance through them 11/1/12 so I terminated my coverage through PCIP. Therefore according to the IRS I have failed the testing period for an HSA and must pay a penalty on my medical deductions from the HSA. I understand that but since I am unable to deduct my medical expenses paid out through the HSA and must pay a penalty on them, can I turn around and use the SAME medical expenses if I itemize? Any information where I can find the answers I am seeking would be greatly appreciated!

juju: wow, that's an interesting scenario. I don't know what the rule would be there. I can guess, but it is just a guess.

BUT, first things first. If your medical expenses are not more than 7.5% of your adjusted gross income, then forget it. It won't matter. So, to test it, add up those medical expenses you are thinking about deducting. Are they more than 7.5% of your AGI? If not, move on. You cannot do anything otherwise. If they are more, then you may need to get an expert opinion. Depends on how much this could save you as to whether you want to pay a tax adviser or not.

[Lcountz]

RE: HSA contributions and deductions....Make sure you take the deduction for your

STATE as well...MOST states follow the federal guidelines for this deduction. There are a

few that do not.