Author Archives: Evan

HSA Contribution with Upcoming Medicare Coverage

This question was submitted by HSA Edge reader Deb. Feel free to send in your question today to evan@hsaedge.com.

I will be purchasing high deductible medical insurance on Sept. 1 of this year. I will qualify for Medicare on Sept. 1 of next year. Being that is only 11 months, would it be best to prorate the $3400 for 11 months for 2017 taxes in order to avoid a penalty, or would it be better to prorate each year (2017 and 2018) separately?

HSA’s and Medicare are very entangled as some of the Medicare rules can lead to over-contribution. I would urge you to further research this and apply it to your situation.

Please see my article: Medicare Part A Retroactive Coverage and HSA’s.

Basically, there is a clause in Medicare Part A that applies if you sign up for Medicare after your 65th birthday. In those cases, your Medicare coverage will retroactively apply up to 6 months prior to that date it truly began. Weird and crazy law. The problem is having Medicare coverage makes you HSA ineligible, so if you contributed to your Health Savings Account for those months it can lead to excess contributions.

Best case is this does not apply to your situation and your upcoming Medicare coverage truly beings on September 1st of 2018. Worst case it is will retroactively begin on March 1st, 2018.

As such, this limits your contribution amounts for 2017. I do not recommend using the Last Month Rule to contribute more in 2017, since you may end up failing the Testing Period in 2018 if Medicare kicks in. For 2017, you can safely contribute 4/12 (Sep Oct Nov Dec) of your contribution limit without issue. For 2018, you can contribute the pro rata amount of the months you have HSA insurance and do not have Medicare.

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Note: if you need help determining your HSA contributions in light of Medicare coverage, please consider using my service EasyForm8889.com to complete Form 8889. It is fast and painless, no matter how complicated your HSA situation.

2018 IRS HSA Contribution Limits

The inflation forecasters at the IRS have done it again and released the 2018 Health Savings Account definitions and contributions limits. Surprisingly, this is a pretty good year for HSA savers in terms of increases to contribution limits, but HDHP definitions have tightened a little which might exclude some health insurance plans. You can see the full document released by the IRS here as IRS Rev. Proc. 2017-37 (PDF).

For 2018 the IRS has increased the amount you can contribute to HSA’s with both Self-Only and Family coverage. However, they have also increased what qualifies as an HDHP by raising the Minimum Deductible.

2018 HSA Contribution Limits

If you have an HDHP and have opened a Health Savings Account, below are the contribution limits for self-only and family coverage for 2018.

	2015	2016	2017	2018
Self-Only HSA Contribution Limit	$3,350	$3,350	$3,400	$3,450
Family HSA Contribution Limit	$6,650	$6,750	$6,750	$6,900*
55+ Additional Contribution Limit	+$1,000	+$1,000	+$1,000	+$1,000

*Note: the IRS reduced the 2018 Family Contribution limit from $6,900 to $6,850 on 3/5/18. They then increased it back to $6,900 on April 26th, 2018. What a time to be alive!

2018-HSA-family-coverage-contribution-limit-change-IRS-mistake-apology

As you can see, self-only HSA’s have the contribution limit increased by $50 for 2018. In addition, the family HSA contribution limit has increased by ~~$150~~ ~~$100~~ $150 over 2017, which may be a record increase. These are important as this governs the deduction your HSA allows, allowing you to save more in taxes. It is interesting that both self-only and family contribution limits increased in 2018. For the past few years, only one would increase while the other stayed constant, and the pattern would reverse the following year. But perhaps something has changed as both receive an increase in 2018. Not surprisingly, the age 55+ catch up contribution remains flat at an additional $1,000.

2018 HDHP Limits

Below are the 2018 HDHP deductible limits as well as out of pocket maximums that determine whether or not your plan is an High Deductible Health Plan, and thus, whether or not you can contribute to a Health Savings Account.

	2015	2016	2017	2018
Self-Only Min Deductible	$1,300	$1,300	$1,300	$1,350
Self-Only OOP Max	$6,450	$6,550	$6,550	$6,650
Family Min Deductible	$2,600	$2,600	$2,600	$2,700
Family OOP max	$12,900	$13,100	$13,100	$13,300

2018 sees both the self-only and family minimum deductible tick up by $50 and $100, respectively. This is a negative for HSA’s as the higher required deductible reduces the number of insurance plans that qualify for HSA’s, with some Obamacare plans falling just below this threshold. Offsetting this somewhat is a family out of pocket maximum increases $200 to $13,300, which is positive as this higher maximum includes more health insurance plans as HDHP’s. However, the minimum deductible is weighted more heavily and thus a net negative as more plans are weeded out due to a deductible on the margin than hitting up against the out of pocket maximum.

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Can Spouses Have Both an HSA and FSA?

This question was submitted by HSA Edge reader Eugenia. Feel free to submit your question today to evan@hsaedge.com.

My husband and I have different employers, and we would like to use an HSA and FSA. This November is an open enrollment for Health Insurance for 2018 and my husband plans to enroll in an HDHP Plan with self only coverage. Since my employer does not offer an HDHP, I will enroll myself and my son a PPO plan. Can we have both FSA medical and HSA? Since my husband’s insurance is self only coverage and my insurance is self and child only coverage. And how can my husband open the Health Savings Account?

You are correct in questioning the same year FSA and HSA contribution. Unfortunately, the IRS has deemed that FSA coverage extends tax benefits to family members as well. This is because an FSA holder can deduct medical expenses that occur for themselves, their spouse, and their dependents. This also applies inversely for HSA’s since they can deduct expenses for their family. This combination of two tax advantaged programs is a no-no as it violates the “No Other Health Coverage” clause of the HSA. (see Qualifying for an HSA).

Do note that there are some types of Flexible Spending Accounts that are compatible with HSA’s, such as Limited Purpose FSA’s and Post Deductible FSA’s. However, these are not as common as your regular FSA’s and they must be explicitly stated as such. Thus, it is up to the family to choose the HSA or FSA to avoid double coverage. You cannot have both. In making a decision, see this article regarding Choosing between an HSA and FSA.

As for opening an HSA, as long as your husband has a qualifying High Deductible Health Plan, he can open an HSA at whatever financial institution he wants. Here is a similar situation involving Opening an HSA when Your Employer does not Offer One. It is pretty easy. I suggest comparing banks that offer the lowest fees and best investment options to make a choice.

When it comes to contributing to the HSA, your husband can directly contribute to his HSA instead of taking salary deductions. This will be done with post-tax dollars, so he just writes a check to the Health Savings Account. Come tax time, when you file Form 8889, it will reduce your taxable income by the contribution amount, making those contributions tax free. However, do note that there is one disadvantage of contributing directly to the HSA, which is additional Social Security / Medicare taxes are paid. If you withhold the contributions from your paycheck, you never pay those extra taxes. If you contribute the post-tax money, you will have paid those taxes, but only get back the federal income tax you paid. It might not matter.

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