HSA Contribution for last year worked

[a60dan]

Planning to pull the trigger at the end of 2021, and manage taxable income to qualify for ACA medical until 3/2026 when my younger bride will qualify for Medicare.

I'm thinking to work just enough in 2022 to max out our HSA contribution before my last day of work. Work just enough to earn the $8300 (MFJ with catch-up) and zero out the income with the HSA contribution.

Will still be on the qualifying high deductible plan until the end of the month of my last day.

I'm allowing for any unused vacation that might be paid in 2022 as well, and assuming that is also "earned income".

Does this sound logical, or might I be missing something?

 

[RunningBum]

I have an HSA plan through my individual ACA plan and can contribute the max without any wage income. Can't remember how it works with an employer plan. The max might be fractional based on how much of the year you work. But if you get an HSA eligible plan thru the ACA you can contribute the full.

You might see if it's worthwhile to work long enough to do a Roth contribution, which you must have wage income to do.

 

[CardsFan]

I have an HSA plan through my individual ACA plan and can contribute the max without any wage income. Can't remember how it works with an employer plan. The max might be fractional based on how much of the year you work. But if you get an HSA eligible plan thru the ACA you can contribute the full.

You might see if it's worthwhile to work long enough to do a Roth contribution, which you must have wage income to do.

Bold by me. Yes, it is pro-rated for the number of months you were on an eligible plan.

So:

if OP is on the plan through December, no problem.

if OP switches to another eligible plan mid year, no problem.

if OP does not stay on the plan for the entire year, and switches to a non-eligible plan mid-year, contributions must be pro-rated for the number of months on the plan. I got caught in this trap and needed to pull funds back. It was a hassle.

 

[Aerides]

It's smart to look at all your compensation triggers and time ER around them. My company did a match for our HSA that loaded in January. But we couldn't front load our own contributions, there was a monthly cap based on the annual cap.

I could front load my 401k to do a whole year in the first quarter, DH didn't have that flexibility. My MC made 401k matches on the first day of the next quarter, only if you were employed on the last day of the prior. Bonuses were in February, as were raises (increasing the payout on unused vacation). So in my case, April 1 made far more sense than December, because my compensation was heavily loaded into the first quarter every year.

 

[Montecfo]

HSA limits are monthly so plan will not work unless successor plan is an HDHP.

 

[Out-to-Lunch]

The discussion above about prorating is on target. Look at the instructions (including a worksheet) for IRS Form 8889: https://www.irs.gov/instructions/i8889#idm139631566241040