Allowable HSA Contribution With Only 10 Months HDHP Coverage

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frugalNOTcheap
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Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by frugalNOTcheap » Sat Nov 16, 2019 11:49 pm

I had HDHP medical coverage thru COBRA for the first 10 months of the year and contributed the maximum to an HSA. For November and December I will have an ACA compliant, but non-HDHP compliant, coverage. My question is whether I have over-contributed to the HSA based on not having an HDHP for the last two months of this year, and if so what options do I have. Since this was COBRA coverage there was no employer contribution, it was fully self-funded.
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JBTX
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Re: Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by JBTX » Sun Nov 17, 2019 12:21 am

You may contribute 10/12 of the maximum. You have over contributed 2 months. Those 2 months worth will be taxable and incur 10% penalty. There may be a way to reverse the over contributions since we are still in 2019.

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frugalNOTcheap
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Re: Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by frugalNOTcheap » Sun Nov 17, 2019 12:30 am

Thanks JBTX, digging a little deeper that's what I found as well. I'll contact the HSA plan administrator and see if there's a way to back out part of my contribution.
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frugalNOTcheap
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Re: Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by frugalNOTcheap » Sun Nov 17, 2019 12:39 am

An additional search indicates that excess contributions can with withdrawn any time up to when taxes are filed, and no tax penalty would be imposed. The plan administrator calculates the earnings on the withdrawn amount and it is reported as other income on the tax return.
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Spirit Rider
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Re: Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by Spirit Rider » Sun Nov 17, 2019 12:40 am

The OP has until their tax filing deadline (4/15/2020) including extensions (10/15/2020) to remove the 2019 excess contributions and earnings. However, the sooner the better. It will likely reduce earnings.

If they fail to do so, there is a six (6) percent excise tax due with their tax return. This not advisable in this case, because the 6% will be due every year until removed or reconciled with future available HSA contribution space.

Turneja6535
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Re: Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by Turneja6535 » Sun Nov 17, 2019 5:42 pm

How is an employer contribution treated? I put in 1/12 in each month minus the employer contribution to get to the max. If I were to quit say after 6 months, the combination of the two would be over 6/12 of the max. Are their contributions included in factoring this?

RubyTuesday
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Re: Allowable HSA Contribution With Only 10 Months HDHP Coverage

Post by RubyTuesday » Sun Nov 17, 2019 6:03 pm

Turneja6535 wrote:
Sun Nov 17, 2019 5:42 pm
How is an employer contribution treated? I put in 1/12 in each month minus the employer contribution to get to the max. If I were to quit say after 6 months, the combination of the two would be over 6/12 of the max. Are their contributions included in factoring this?
Yes, it doesn’t matter who makes the contribution.

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