2022 HSA Overfunded by $3 - Next Steps

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
RandomGuyOnInternet
Posts: 35
Joined: Fri Nov 13, 2020 7:47 pm

2022 HSA Overfunded by $3 - Next Steps

Post by RandomGuyOnInternet »

Bogleheads,

I mistakenly increased by HSA contribution amount one pay period too early in late 2022 to meet the higher 2023 limits. This resulted in me increasing my contribution amount for my last 2022 contribution. Consequently, I contributed $7303 to the HSA in 2022. The funds are still in my cash account. Appreciate advice on how I can rectify this situation. Thanks.

RandomGuy
Makefile
Posts: 2417
Joined: Fri Apr 22, 2016 11:03 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by Makefile »

On 2022 Form 5329, you will be charged a 6% penalty on $3 which rounds to zero.

For 2023, contribute $3 short of the annual limit. You will file another 2023 Form 5329 on which the 2022 over-contribution and 2023 under-contribution will cancel out for all future years.

Alternatively, you could try and have the HSA provider return the $3 as an overcontribution, but it likely comes with a $25 or $50 processing fee.
Topic Author
RandomGuyOnInternet
Posts: 35
Joined: Fri Nov 13, 2020 7:47 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by RandomGuyOnInternet »

Makefile,

Great advice. Thank you.

RandomGuy
rivercrosser
Posts: 276
Joined: Thu Oct 31, 2019 3:48 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by rivercrosser »

When I retired and later on went on medicare my company put the usual yearly amount in my HSA. It was $121.00 more than I was eligible for. Called Optum and they steered me towards the right form. Didn't charge me anything. They also sent a form at tax time to report the $121.00 plus a few cents interest on my taxes.
nalor511
Posts: 3609
Joined: Mon Jul 27, 2015 1:00 am

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by nalor511 »

I've never heard of a fee for removal of excess contribution. But shorting next year's contribution by $3 is easy
rivercrosser
Posts: 276
Joined: Thu Oct 31, 2019 3:48 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by rivercrosser »

nalor511 wrote: Wed Jan 18, 2023 8:05 pm I've never heard of a fee for removal of excess contribution. But shorting next year's contribution by $3 is easy
Yeah, shouldn't be a problem. I had to remove my excess contribution because I was no longer eligible to contribute.
Topic Author
RandomGuyOnInternet
Posts: 35
Joined: Fri Nov 13, 2020 7:47 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by RandomGuyOnInternet »

I can confirm that HSA bank charges a $25 administration fee for removal of excess contributions.

RandomGuy
AnEngineer
Posts: 2013
Joined: Sat Jun 27, 2020 4:05 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by AnEngineer »

RandomGuyOnInternet wrote: Thu Jan 19, 2023 12:54 pm I can confirm that HSA bank charges a $25 administration fee for removal of excess contributions.

RandomGuy
Maybe take this as an opportunity to switch to a better HSA provider.
Weathering
Posts: 629
Joined: Sun Oct 15, 2017 4:20 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by Weathering »

HSA bank sent me a letter due to overcontribution. Recommended I either withdraw it (form #1) or have them add it to 2023 contributions (form#2).
I’ll be sending in form#2
Makefile
Posts: 2417
Joined: Fri Apr 22, 2016 11:03 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by Makefile »

AnEngineer wrote: Thu Jan 19, 2023 8:54 pm
RandomGuyOnInternet wrote: Thu Jan 19, 2023 12:54 pm I can confirm that HSA bank charges a $25 administration fee for removal of excess contributions.

RandomGuy
Maybe take this as an opportunity to switch to a better HSA provider.
Since the OP mentions pay periods, this is likely an employer-bundled HSA and the OP saved $105.85 last year in Medicare tax (or $171.55 if subject to Additional Medicare Tax) by using it.
AnEngineer
Posts: 2013
Joined: Sat Jun 27, 2020 4:05 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by AnEngineer »

Makefile wrote: Thu Jan 19, 2023 9:22 pm
AnEngineer wrote: Thu Jan 19, 2023 8:54 pm
RandomGuyOnInternet wrote: Thu Jan 19, 2023 12:54 pm I can confirm that HSA bank charges a $25 administration fee for removal of excess contributions.

RandomGuy
Maybe take this as an opportunity to switch to a better HSA provider.
Since the OP mentions pay periods, this is likely an employer-bundled HSA and the OP saved $105.85 last year in Medicare tax (or $171.55 if subject to Additional Medicare Tax) by using it.
You can still transfer the funds and withdraw the excess from there. While you may want to contribute via payroll, there's no need to keep the funds there.
Makefile
Posts: 2417
Joined: Fri Apr 22, 2016 11:03 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by Makefile »

AnEngineer wrote: Thu Jan 19, 2023 10:09 pm
Makefile wrote: Thu Jan 19, 2023 9:22 pm
AnEngineer wrote: Thu Jan 19, 2023 8:54 pm
RandomGuyOnInternet wrote: Thu Jan 19, 2023 12:54 pm I can confirm that HSA bank charges a $25 administration fee for removal of excess contributions.

RandomGuy
Maybe take this as an opportunity to switch to a better HSA provider.
Since the OP mentions pay periods, this is likely an employer-bundled HSA and the OP saved $105.85 last year in Medicare tax (or $171.55 if subject to Additional Medicare Tax) by using it.
You can still transfer the funds and withdraw the excess from there. While you may want to contribute via payroll, there's no need to keep the funds there.
I agree, and that's what I do, although I do it as a once per 12 months indirect rollover, as trustee-to-trustee transfers out get docked with a fee too.
400401402
Posts: 77
Joined: Sun May 31, 2020 6:46 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by 400401402 »

The 6% penalty is levied each year the excess contribution remains in HSA. So this excess contribution of $3 needs to be withdrawn. I don;t believe contributing $3 less next year will correct this mistake.

Please don't consider this a legal/financial advice.
User avatar
whodidntante
Posts: 12032
Joined: Thu Jan 21, 2016 10:11 pm
Location: outside the echo chamber

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by whodidntante »

400401402 wrote: Thu Jan 19, 2023 10:15 pm The 6% penalty is levied each year the excess contribution remains in HSA. So this excess contribution of $3 needs to be withdrawn. I don;t believe contributing $3 less next year will correct this mistake.

Please don't consider this a legal/financial advice.
We'd have all been sued by now if people took our posts as professional comments. Hmmm. Wonder if this dune buggy forum software will let me add a three page legal disclaimer as my signature? One line is fine because my keyboard has a semi colon key.
AnEngineer
Posts: 2013
Joined: Sat Jun 27, 2020 4:05 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by AnEngineer »

400401402 wrote: Thu Jan 19, 2023 10:15 pm The 6% penalty is levied each year the excess contribution remains in HSA. So this excess contribution of $3 needs to be withdrawn. I don;t believe contributing $3 less next year will correct this mistake.
Reducing the following year's contribution doesn't avoid the initial 6% excise tax, but as i recall it does keep that tax from being assessed year after year, as an alternative to withdrawing the excess contribution.
spankasmurf
Posts: 51
Joined: Mon Jun 22, 2009 6:23 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by spankasmurf »

AnEngineer wrote: Fri Jan 20, 2023 7:00 am
400401402 wrote: Thu Jan 19, 2023 10:15 pm The 6% penalty is levied each year the excess contribution remains in HSA. So this excess contribution of $3 needs to be withdrawn. I don;t believe contributing $3 less next year will correct this mistake.
Reducing the following year's contribution doesn't avoid the initial 6% excise tax, but as i recall it does keep that tax from being assessed year after year, as an alternative to withdrawing the excess contribution.
Personal experience - this is correct.
passive101
Posts: 365
Joined: Tue May 05, 2020 2:47 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by passive101 »

I recently did this by $200ish dollars. I called Fidelity and since it was still in the cash account they simply moved it on their end to the 2023 year. I won’t have to fill out any forms of any kind. I’d call them directly and tell them about it. Maybe they can also do the same thing and just move those $3 to 2023 and avoid any headaches.
TropikThunder
Posts: 3797
Joined: Sun Apr 03, 2016 5:41 pm

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by TropikThunder »

400401402 wrote: Thu Jan 19, 2023 10:15 pm The 6% penalty is levied each year the excess contribution remains in HSA. So this excess contribution of $3 needs to be withdrawn.
The penalty is $0, so I don’t really see much urgency.
Contador314
Posts: 92
Joined: Fri Jul 10, 2020 5:11 am
Location: Chicago

Re: 2022 HSA Overfunded by $3 - Next Steps

Post by Contador314 »

RandomGuyOnInternet wrote: Thu Jan 19, 2023 12:54 pm I can confirm that HSA bank charges a $25 administration fee for removal of excess contributions.

RandomGuy
If all your contributions were through payroll I would ask your employer to fix it. They can remove the funds and classify it as a correction(it happened to me by error one year - very frustrating). You wont be charged, maybe your employer will. I would say thats on them however, as they should have capped your max contribution. Ive done payroll for years and that is easy to set up and not asking much of your employer.

If you made contributions outside of payroll they would have no way of knowing, so that would be on you.
Post Reply