HSA for 11.5 months

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abc...xyz
Posts: 14
Joined: Thu Aug 20, 2015 3:45 pm

HSA for 11.5 months

Post by abc...xyz » Wed Dec 05, 2018 2:12 pm

My COBRA insurance eligibility ends Jan 31 of 2019 so I’ve decided to not enroll in COBRA for January and instead have enrolled in an ACA HDHP compliant plan that would start Jan 1 of 2019. I’ll be turning 65 in mid-December 2019 thus the 11.5 months of eligibility for funding a HSA. I’ve tried researching this online and reading the IRS publications, but can’t determine a definitive answer to my situation. It's all making my head hurt. :?

I’ve read the ‘last-month rule’ that states “if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year.” There also appears to be a ‘testing period that states “If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month (for example, December 1, 2017, through December 31, 2018).”

So this has me confused as to whether I can contribute to the HSA for the entire year of 2019 because I was eligible at the start of December 2019 even though I would become ineligible mid-December because of going onto Medicare, or if my eligibility would only be for 11 or 11.5 months.

Thanks in advance for advice on my HSA eligibility for 2019! :beer

Big Dog
Posts: 920
Joined: Mon Sep 07, 2015 4:12 pm

Re: HSA for 11.5 months

Post by Big Dog » Wed Dec 05, 2018 2:21 pm

It's my understanding that you have 11 months of HSA as Medicare will start the first of the month that you turn 65 (assuming you apply on time).

Spirit Rider
Posts: 9173
Joined: Fri Mar 02, 2007 2:39 pm

Re: HSA for 11.5 months

Post by Spirit Rider » Wed Dec 05, 2018 3:13 pm

Big Dog wrote:
Wed Dec 05, 2018 2:21 pm
It's my understanding that you have 11 months of HSA as Medicare will start the first of the month that you turn 65 (assuming you apply on time).
@Big Dog is correct.

While you are correct that HSA eligibility is based on the 1st of the month, but SS and Medicare will be effec on 12/1 if you enroll for December.

abc...xyz
Posts: 14
Joined: Thu Aug 20, 2015 3:45 pm

Re: HSA for 11.5 months

Post by abc...xyz » Wed Dec 05, 2018 5:01 pm

Thanks Big Dog and Spirit Rider for your prompt replies!

A follow up question…

Enrolling in a self-only HSA and being over 55 the normal yearly contribution limit would $4500 for 2019, so in my case of 11 months of HSA eligibility my contribution limit would be $4500 / 12 * 11 = $4125?

Spirit Rider
Posts: 9173
Joined: Fri Mar 02, 2007 2:39 pm

Re: HSA for 11.5 months

Post by Spirit Rider » Wed Dec 05, 2018 6:56 pm

Correct, both the base maximum and catch-up maximum contributions are prorated.

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