HSA contribution question

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burgrat
Posts: 297
Joined: Sat Apr 24, 2010 11:38 am

HSA contribution question

Post by burgrat »

I recently left my job at the end of August and I kept my medical coverage through COBRA. I will be cancelling that coverage at the end of this month because the new plan that my previous employer is doing will significantly increase my premiums (they just completed open enrollment and my new premium will be about $125/mo more from now on). I am now an independent contractor and will be purchasing my own medical insurance and I have found a plan that I like and it is HSA compatible.

My question is if I purchase and begin this HSA-compatible insurance on November 1st, 2014 (and keep it through next year, and so on), can I make a full contribution to my HSA account for this year, 2014, even though I will only have the insurance for 2 months of this year?

I would like to make the largest contribution possible for this year to take advantage of the HSA plan.
Thanks!
mhalley
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Joined: Tue Nov 20, 2007 5:02 am

Re: HSA contribution question

Post by mhalley »

I just retired from my job, and switched over to an hsa plan for cobra and had the same question. After researching it, the answer is YES, but you have to keep a high deductible plan for 1 year. They don't want you to put your hsa money in, get the tax deduction, then switch to a non-hsa plan in the next couple of months. Out of curiosity, where did you decide to put your hsa account? After researching a while, I went with elilillyfcu. Still waiting for my transfer to clear so I can set up the brokerage account.
Mike
ps, you are lucky with the 125 a month. My insurance went from 500 to 1200 for just me and the wife. Switching to the hsa made it ONLY go to 980. (this includes dental and eye)
Spirit Rider
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Joined: Fri Mar 02, 2007 1:39 pm

Re: HSA contribution question

Post by Spirit Rider »

This is covered in IRS Publication 969.

There is something called the last month rule. If you are eligible (have a qualifying HDHP) on 12/1 of the year, you may make the maximum contribution for the year. However, you must continue coverage during the testing period until 12/31 of the following year.
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burgrat
Posts: 297
Joined: Sat Apr 24, 2010 11:38 am

Re: HSA contribution question

Post by burgrat »

mhalley wrote:I just retired from my job, and switched over to an hsa plan for cobra and had the same question. After researching it, the answer is YES, but you have to keep a high deductible plan for 1 year. They don't want you to put your hsa money in, get the tax deduction, then switch to a non-hsa plan in the next couple of months. Out of curiosity, where did you decide to put your hsa account? After researching a while, I went with elilillyfcu. Still waiting for my transfer to clear so I can set up the brokerage account.
Mike
ps, you are lucky with the 125 a month. My insurance went from 500 to 1200 for just me and the wife. Switching to the hsa made it ONLY go to 980. (this includes dental and eye)
Thanks for the info. I did also go with Eli Lilly FCU so that I could invest with Ameritrade. This was from a couple years back when I did have an HSA compatible plan at the time for several years. With ELFCU, I do know they charge a $3.00 monthly maintanence fee if the balance in the ELFCU account (not the Ameritrade investment acct) drops below $2,500. I personally have about $100 in the ELFCU part and around $13,000 in the Ameritrade account. I don't withdraw any for medical expenses, I simple hold for the receipts for future use (withdrawal) if needed. I guess my next contribution I could leave the $2,500 balance in ELFCU to avoid the fee, but $36/year isn't bad and I would rather have that invested for the long haul (I'm 45 and currently in good health, thank God!)
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