Additional Background for Regular Contributions. The HSA rules allow you to contribute the full federal HSA contribution limit
even if you are only eligible for an HSA starting as late as December 1 of the year (this is for calendar year taxpayers – use the
first day of the last month of the tax year if not a calendar year taxpayer). This is beneficial for individuals starting HSA eligibility
mid-year. The pre-2007, “sum of the months,” rule stated that individuals could only contribute 1/12 times the number of months
eligible for the HSA times the applicable federal HSA limit (a pro-rata amount). The current law; however, has a catch. In order to
get the benefit of the full federal HSA limit, you need to meet a testing period. If you fail to meet the testing period, the pre-2007
sum of the months rule becomes a factor. If you fail the test, you will owe taxes plus a 10% penalty on the amount over
contributed – see paragraphs 5 - 7 below. For additional guidance and examples, please refer to IRS Notice 2008-52. See also
our HSA Eligibility and Contribution Worksheet.