HSA Contribution in year turning 65 - Please check my math!

[Potstickers]

We currently have an HSA-eligible HDHP. I want to maximize our HSA contribution this year.

DH is eligible for Medicare September 1. I am eligible October 1.

I think the HSA contribution math is:

8/12* $7100 = $4733 for the months we are both covered by the family plan
+ 1/12* $3550 = $295.83 for the month of September when I am covered by an individual (not family) HDHP and DH is on Medicare
+ $1000 catch-up contribution for me (does not seem to be pro-rated)
+ $1000 catch-up contribution for DH.
= 7028.83 total

Is that the right way to calculate it?

I assume (and you know where that gets me) that at least $1000 needs to be put in DH's HSA and the rest can be put in my HSA.

I'm happy that Medicare will start soon, but geez is there a lot to think through.

 

[SecondCor521]

Not an expert, although I was HSA-qualified in the AARP Tax Aide program this year.

I read the instructions for Form 8889 to indicate that the catch-up contributions are prorated by month. See the flowchart for line 3 limitation coverage on page 4 here: https://www.irs.gov/pub/irs-pdf/i8889.pdf

So you'd have 8/12 * $8,100 plus 1/12 * $4,550.

As far as the split goes, I think the catchup amounts need to go into your accounts. So I think you need to put at least 9/12 * $1,000 into DH's HSA and at least 8/12 * $1,000 into your HSA; the remainder could be split however you wish.

It seems that you might need to change your health plan in September, but I'm not sure the government would ever catch that issue.

 

[audreyh1]

We treated the $1000 catch-up contribution as pro-rated.

Yep that’s the rules

If you are eligible for catch-up contributions and your HSA eligibility changes mid-year, those contributions must be prorated. To calculate the prorated catch-up contribution limit, start with the total available catch-up contribution amount ($1,000 for 2018), divide it by 12 months and multiply by the total number of months you qualified for participation.

• For example, if you turn age 65 and enroll in Medicare in July, you are no longer HSA-eligible. To prorate your catch-up contribution amount, divide the maximum catch- up contribution amount ($1,000) by 12 and multiply by 6, the number of months you qualified for participation. The prorated amount is $500.

https://www.wageworks.com/media/566858/4078-hsa-midyr-elections-fly-2018.pdf

 

[Potstickers]

Thanks to both of you. So, our revised calculation is 666.66 catch up for DH (8 months) and $750 for me (9 months).

 

[cathy63]

Would it make sense for your DH to start Medicare a month later on Oct 1 instead of Sept 1, so you'd both have the same HSA contribution and not have to deal with switching insurance from a family plan to a solo plan for one month?

It's my understanding that you have until three months after the month with your birthday to sign up for Medicare. We are a few years away, so I haven't done a lot of research and maybe I've missed something in the deadlines. Since my DH's birthday is in Dec and mine is in Jan, I was hoping that when the time comes, we'd be able to end ACA coverage for both of us on 12/31 and make a nice clean break.

 

[Potstickers]

Would it make sense for your DH to start Medicare a month later on Oct 1 instead of Sept 1, so you'd both have the same HSA contribution and not have to deal with switching insurance from a family plan to a solo plan for one month?

It's my understanding that you have until three months after the month with your birthday to sign up for Medicare. We are a few years away, so I haven't done a lot of research and maybe I've missed something in the deadlines. Since my DH's birthday is in Dec and mine is in Jan, I was hoping that when the time comes, we'd be able to end ACA coverage for both of us on 12/31 and make a nice clean break.

We're on $$$ COBRA, so probably not -- but it would have been a great idea had DH not retired.

 

[audreyh1]

Would it make sense for your DH to start Medicare a month later on Oct 1 instead of Sept 1, so you'd both have the same HSA contribution and not have to deal with switching insurance from a family plan to a solo plan for one month?

It's my understanding that you have until three months after the month with your birthday to sign up for Medicare. We are a few years away, so I haven't done a lot of research and maybe I've missed something in the deadlines. Since my DH's birthday is in Dec and mine is in Jan, I was hoping that when the time comes, we'd be able to end ACA coverage for both of us on 12/31 and make a nice clean break.

Once you are eligible for Medicare, you no longer can contribute to an HSA.

 

[cathy63]

Once you are eligible for Medicare, you no longer can contribute to an HSA.

According to the IRS (pub 969), what matters is when you enroll in Medicare, not when you become eligible. You can sign up for Medicare up to 3 months after the month of your 65th birthday, so I think it's o.k. to delay it a month and make that last HSA contribution if you want to. After reading here about everyone's hassles with switching from ACA to Medicare, I am really hoping we can finally get a benefit from having both our birthdays right near the holidays and take advantage of that natural end-of-year boundary to move to Medicare.

From Pub 969:

Qualifying for an HSA
To be an eligible individual and qualify for an HSA, you must meet the following requirements.
* You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
* You have no other health coverage except what is permitted under Other health coverage , later.
* You aren’t enrolled in Medicare.
* You can’t be claimed as a dependent on someone else’s 2019 tax return.

 

[MBSC]

According to the IRS (pub 969), what matters is when you enroll in Medicare, not when you become eligible. You can sign up for Medicare up to 3 months after the month of your 65th birthday, so I think it's o.k. to delay it a month and make that last HSA contribution if you want to.

Medicare Part A enrollment is retroactive up to 6 months but not before the month a person turns 65. Delaying Medicare enrollment by one month only delays Part B enrollment. HSA contributions are no longer allowed once enrolled in Part A.

Part A coverage begins the month the individual turns age 65, provided he or she files an application for Part A (or for Social Security or RRB benefits) within 6 months of the month in which he or she becomes age 65. If the application is filed more than 6 months after turning age 65, Part A coverage will be retroactive for 6 months.

NOTE: For an individual whose 65th birthday is on the first day of the month, Part A coverage begins on the first day of the month preceding their birth month. For example, if an individual's birthday is on December 1, Part A begins on November 1.

Source: https://www.cms.gov/Medicare/Eligibility-and-Enrollment/OrigMedicarePartABEligEnrol/index

In IRS Information Letter 2016-0082, the IRS holds that individuals who delay applying for Medicare and become covered by Medicare retroactively cannot make contributions to an HSA for the period of retroactive coverage.

Retroactive Medicare enrollment makes an individual ineligible to contribute to an HSA for those months.

Source: https://www.lexology.com/library/detail.aspx?g=3f769337-99ee-4254-ac2d-7c508ad52ea8

 

[cathy63]

Medicare Part A enrollment is retroactive up to 6 months but not before the month a person turns 65. Delaying Medicare enrollment by one month only delays Part B enrollment. HSA contributions are no longer allowed once enrolled in Part A.

Well damn! That is disappointing. Thanks for the info though.