Will I be penalized for contributing to my HSA?
I am trying to find out if I'm going to be okay and not penalized for contributing the maximum family amount into my HSA account in 2023. My husband is on my HDHP and will continue to be on it after he applies for SS in July 2024.
Best Answer
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Hello, nko!
That is a great question. Generally, if you are covered under an HDHP for all of 2023, you can make the maximum HSA contribution for the year.
Your contributions for 2024 will be limited if your husband obtains Medicare coverage in 2024.
For more information on the amount of contributions you can make, see page 5 of Publication 969.
Answers
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Thank you. I do plan to only contribute the individual maximum for 2024. And he is waiting until July so that the lookback 6 months will not go back into 2023. I wish they had this example in pub 969. Both he and I will still be on the HDHP for 2024, but he will also have medicare part A.
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nko,
It is certainly complicated.
To confirm, it sounds like from Jan to June next year, you will be covered under a family HDHP. Then, starting in July, you will still be covered under a family HDHP, but your spouse will have Medicare Part A. Do I have that correct?
If so, in total, you will still be able to contribute the family of maximum $8,300 for 2024, not considering any catch-up contributions. However, your spouse's individual limit will be $0. When you file the 2024 return, you can allocate half of the family contribution limit to your spouse.
What I recommend is logging into FreeTaxUSA in December of 2024. At this time, our 2024 software will have been released. Enter your contribution and coverage information. At that time, if you can make more contributions than you previously thought, you will still have time to make those contributions.
ADDING FOR CLARIFICATION:
Apologies for the confusion! The 6-month lookback rule due to Medicare coverage is not something I have dealt with before. I appreciate the correction below! Due to the 6-month lookback rule with Medicare, your spouse would be ineligible to contribute at all for 2024. However, if you maintain the family coverage throughout 2024, you can still contribute the family maximum to your HSA. This is true even if your spouse is covered under the same family plan and Medicare.
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I thought that since he will have Medicare part A when he is on SS (in July, but they will go back to Jan 2024) that I could only contribute the individual maximum since Medicare part A is considered a non-HDHP plan. We will both be on my employer plan all year (as long as I'm still working, which is the plan). I thought that because he will have Medicare Part A, I could not contribute the family maximum. (He is 69 and I'm 66, so I would also contribute the catch-up) I'm getting a lot of differing opinions and the IRS doesn't show this example in their pub 969. I wonder if the actual regs address this situation.
I could not make a large contribution in Dec 2024 since it would need to come out of my pay and I don't make that much in a month to cover that difference.
Thanks,
Nancy
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That's why we thought he should apply for SS in July, so if they look back 6 months, it would be January and I would be contributing only the individual amount to my HSA, not the family amount. Does that sound like I would not have to worry about a penalty for 2023 then?
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If you wait until July 2024, then your 2023 contribution limit shouldn't be affected at all.
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Also, he will still by in my HDHP plan and on Medicare part A only, (until I retire and we both go on Medicare part A AND part B in a few years) but I think that is what would not allow me to put the family maximum into my HSA in 2024.
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That is correct. Once your husband is covered by Medicare, he is no longer eligible for HSA contributions. You could still use the HSA for any medical expenses, but your contribution to the HSA is limited after July 2024.
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He can be covered by my HDHP plan, and he will only have Medicare part A, but that will still limit me to the individual amount for 2024. It is a creditable plan so we will be able to get Medicare part B when I retire in a couple of years.
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I have seen that, but I don't trust anything that isn't from the IRS. I've been reading their regs and unfortunately, the IRS doesn't care enough about us to give a direct interpretation. They just want to make everything so complicated! Can you find it in the regs? It is very legalese and not meant for regular people which is wrong. It should be understandable to everyone! 26 USC 223: Health savings accounts
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I sincerely apologize that this has been so confusing to get resolved. We have dug a little deeper & concluded that, based on the IRS guidance available, you would still be considered covered by a family policy and, therefore, eligible for the family HSA contribution limit for 2024. Here are the references we located in IRS Publication 969:
Pg 4: "Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual)."
Based on this information, you would still be considered to have family coverage, even after your husband is covered by Medicare.
Pg 5: "If you (and your spouse, if you have family coverage) have HDHP coverage, you can’t generally have any other health coverage. However, you can still be an eligible individual even if your spouse has non-HDHP coverage, provided you aren’t covered by that plan."
You could still be considered an eligible individual even though her husband wouldn't be considered an eligible individual.
Several employer guides address your specific situation & also state that you would be eligible for family coverage.
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Thank you. However, my employer will not allow me to contribute the family maximum to my HSA since they are aware that my husband will be going on SS and Medicare part A in July or Aug 2024.
Their form contains this paragraph:
In order to make contributions to the HSA, the employee must be enrolled in the (employerXXX) HDHP for the entire duration in which HSA contributions are made. The employee (and family members, if also enrolled in the HDHP) cannot be covered by another group health plan, including a flexible spending account, Medicare or Medicaid, and cannot be claimed as a dependent on another individual’s tax return. The employee must also have completed an application by the HSA vendor used by (employerXXX) in advance of the execution of this Agreement and will be responsible for any account maintenance fees charged by the HSA vendor.
So, I am only able to contribute the individual maximum for 2024.
Thanks anyway.
