QHSA and Medicare

[marko]

Just discovered the benefits of a QHSA and have a few questions:

DW will be 59 1/2 in December
I will be 65 and eligible for Medicare in June

We currently have a HD policy which is eligible for an HSA with DW as the primary.

Considering that I will be on DW's HI for only half the year:
1) What is the max we could transfer for 2017 into our current HSA as a QHSA? We've already maxed out '16.
2) Am I correct that if we go the QHSA route that the amount would have to come from DW's IRA instead of mine as she is the primary? Can she transfer her full amount and half of mine?
3) Also assuming that since I will no longer be eligible to be counted on her HI that this year would be the year to do this rather than 2018, when her deduction would be for a single.

Anything else I should consider?

 

[Accidental Retiree]

You haven't mentioned whether you have a second HSA account for yourself so that both of you can take advantage of the age 55+ $1000 catch-up contribution. If you don't have 2 HSAs, you could still max out the second $1000 for 2016 for yourself, I believe by April 15, as well as contribute a pro-rated amount for 2017 (January through May.)

DH and I looked at that rollover option but decided we'd rather reduce our taxable income by $8750 while we can. We were going to roll his from his IRA to his HSA. I don't see it written anywhere that he could fund mine or vice versa, but I could have missed something.

He started his HSA a while after I did mine, so lately we've been putting the full family amount plus his $1000 catch-up into his HSA while I just put my $1000 catch-up into mine.

 

[marko]

You haven't mentioned whether you have a second HSA account for yourself so that both of you can take advantage of the age 55+ $1000 catch-up contribution. If you don't have 2 HSAs, you could still max out the second $1000 for 2016 for yourself, I believe by April 15, as well as contribute a pro-rated amount for 2017 (January through May.)

No. We have a single, family account.

 

[Accidental Retiree]

No. We have a single, family account.

Well, you can open your own, as I mentioned, if it's worth it to you,
and split contributions between the two.

People are often surprised to find this out and miss out on the 2nd catch-up opportunity.

 

[Accidental Retiree]

View attachment 25377
Excerpted from the HSA authority dot com

 

[marko]

I get that. What I want to know is how much we can contribute with me going onto medicare in June

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[bingybear]

prorate it. you'll have 5/12 as a family and 7/12 as a single. If DW is the only one with an HSA, then she is the only one that can do a catch up. If you had an account, then you do 5/12*1000 in catch up.

However, I still don't know what a QHSA is. I do understand HSA.

 

[marko]

prorate it. you'll have 5/12 as a family and 7/12 as a single. If DW is the only one with an HSA, then she is the only one that can do a catch up. If you had an account, then you do 5/12*1000 in catch up.

However, I still don't know what a QHSA is. I do understand HSA.

Qualified HSA which allows a direct transfer from one's IRA

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[bingybear]

Qualified HSA which allows a direct transfer from one's IRA

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I've searched for QHSA in relation to IRA to HSA transfer of funds and have not found it. I did find

Qualified HSA Funding Distribution (QHFD)

which is not a change in HSA name, but a name for the process of using an IRA to fund an HSA. It can only be done once in a life time.

Personally I think funding the HSA with after tax dollars (to get income reduced) is better in my case and then doing roth conversions from the IRA is better again.. in my case.

 

[Accidental Retiree]

QHFD is what Ed Slott calls this: Qualified HSA Funding Distribution.

If DW does this from her IRA, I think she would be eligible to contribute/roll over IRA funds as follows:

** calculate 5/12 of the year's contribution available for both of you (family plan, which you can split up however you want)

** add 7/12 for self-only plan contribution for her

** add another $1000 for her catch-up

That is the way I understand it, and I look forward to being set straight if I've got it wrong.

You asked a great question.

 

[marko]

QHFD is what Ed Slott calls this: Qualified HSA Funding Distribution.

If DW does this from her IRA, I think she would be eligible to contribute/roll over IRA funds as follows:

** calculate 5/12 of the year's contribution available for both of you (family plan, which you can split up however you want)

** add 7/12 for self-only plan contribution for her

** add another $1000 for her catch-up

That is the way I understand it, and I look forward to being set straight if I've got it wrong.

You asked a great question.

Thank you. I think this is what I was looking for.

 

[MBSC]

QHFD is what Ed Slott calls this: Qualified HSA Funding Distribution.

If DW does this from her IRA, I think she would be eligible to contribute/roll over IRA funds as follows:

** calculate 5/12 of the year's contribution available for both of you (family plan, which you can split up however you want)

** add 7/12 for self-only plan contribution for her

** add another $1000 for her catch-up

That is the way I understand it, and I look forward to being set straight if I've got it wrong.

The contribution amount depends on the plan (self-only or family) in effect during the transfer month.

Qualified HSA funding distribution. A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA.

The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year. The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made.

You can make only one qualified HSA funding distribution during your lifetime.

Funding distribution – testing period. You must remain an eligible individual during the testing period. For a qualified HSA funding distribution, the testing period begins with the month in which the qualified HSA funding distribution is contributed and ends on the last day of the 12th month following that month. For example, if a qualified HSA funding distribution is contributed to your HSA on August 10, 2015, your testing period begins in August 2015, and ends on August 31, 2016.

If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the qualified HSA funding distribution. You include this amount in income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. The income and the additional tax are calculated on Form 8889, Part III.

Reference: https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204081