HSA woes, former employer keeps contributing

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livesoft
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HSA woes, former employer keeps contributing

Post by livesoft »

My former employer keeps contributing to my HSA even though I have changed health insurance and I no longer have an HDHP. I informed them of the issue more than a month ago, but they continue to make the bi-monthly contribution as if I was still employed.

My impression is that if this is not fixed, then I will owe some penalties for over contribution. Is that correct? Or should I just let this go and not worry about it?

Folks who have read the IRS publication 969 on HSAs know that this penalty thing can be confusing even for someone who studies the publication for hours and hours.
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gvsucavie03
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Re: HSA woes, former employer keeps contributing

Post by gvsucavie03 »

Definitely wouldn't touch the funds. A similar scenario is if your employer significantly overpaid you by mistake (beyond contractual pay/bonuses).
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slow n steady
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Re: HSA woes, former employer keeps contributing

Post by slow n steady »

I did a quick read through of the pertinent parts of Pub 969 and it is confusing. On page 7 under excess contributions, it appears that you will be fine as long as the employer takes out all of the extra money. But then there is a large caution sign that affects you because you are no longer on a HDHP.

I'm sure you read through all of the same stuff. I personally would keep pestering my employer to stop and remove the excess funds. You could ask your payroll department what your W-2 will look like. They should have a pretty good idea if you aren't going to be making any more money there this year. If that looks good, your only worry would be what your HSA sends to the IRS.

I'm guessing there aren't very many people with this exact problem, so they don't want to respond with incorrect info. I figured I would toss my 2 cents in.
letsgobobby
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Re: HSA woes, former employer keeps contributing

Post by letsgobobby »

You can withdraw excess contributions and their earnings from your HSA by the end of the year with no penalty. Your HSA administrator may charge you a small fee to do that. But you gotta get your employer to stop sending in contributions!
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livesoft
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Re: HSA woes, former employer keeps contributing

Post by livesoft »

Oh, I dunno. If they keep paying in, and I keep withdrawing every year, it could be a nice little "bond".
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gvsucavie03
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Re: HSA woes, former employer keeps contributing

Post by gvsucavie03 »

But won't they want this money back at some point?
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livesoft
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Re: HSA woes, former employer keeps contributing

Post by livesoft »

I suppose so, but by that point I should have tripled the money with m RBD investing acumen and can keep the profits.

Anyways, I'll keep hounding them, but I am not as worried as before since I can just take the money out and pay a fee and charge them the fee if they ask for their money back.
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stlutz
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Re: HSA woes, former employer keeps contributing

Post by stlutz »

Have you tried asking the HSA custodian if they can essentially refuse the contributions?
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Don Christy
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Re: HSA woes, former employer keeps contributing

Post by Don Christy »

Could you transfer to another custodian and close the account?
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livesoft
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Re: HSA woes, former employer keeps contributing

Post by livesoft »

Thanks for the additional comments.

I do not wish to switch custodians. My current custodian charges me no fees* and lets me invest, so I like that.
*Except when I ask them to do something out of the ordinary such as refusing contributions. :)

Anyways, I know the my HR folks quite well, so I'll just keep pestering them about this.

I am now wondering if the $1,000 over-55 contribution has to get pro-rated or not … back to reading the instructions or as my daughter would say, "Ugh!"
And the answer is: Yes, the $1,000 is pro-rated.
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Leeraar
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Re: HSA woes, former employer keeps contributing

Post by Leeraar »

You might check how long you need to be in an HDHP. It may be the contributions are OK, even though you were not in the HDHP for all of the (fiscal or tax) year.

I had a similar issue when I retired with a cafeteria plan. I was contributing (say) $300 per month to the plan by payroll deduction. Even though I left during the year and did not make all the contributions, I was able to claim the full $3600 in health care reimbursements, even for costs incurred after I retired, through March of the following year.

Really. I checked with both my employer and with the company that administered the reimbursements, they told me that is the way it works.

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Topic Author
livesoft
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Re: HSA woes, former employer keeps contributing

Post by livesoft »

Thanks. I spent an hour looking at 5 things this morning: Pub 969, Form 8889, instructions to Form 8889, my 2013 Form 8889, and the transactions in my HSA. I'm all set on what I need to do. It will probably cost me at least a $25 fee, but at least I know how to fill out the forms.

Interestingly, even after my employer withdraws their excess contributions, I will have some of my own that I will have to withdraw. That income will go down as "Other income" on which I will not have to pay SS/medicare taxes. If I had not made those excess contributions from my paychecks, I would have had to pay SS/medicare taxes on them. So … I wonder if there is a nice loophole for folks to way over contribute to their HSAs and just get the excess contribution withdrawn before penalties need to be assessed? :twisted: Of course this would only apply to folks like me who have wages under the SS limit.
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