HSA contribution max per pay period

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noco-hawkeye
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HSA contribution max per pay period

Post by noco-hawkeye » Fri Nov 04, 2016 12:38 pm

I am looking at moving to an HSA next year and had a question for those that might know....

Can I setup something like 2k$ of contributions for January, and try to max out my HSA early in the year? Is this commonly available, or are there limits? Perhaps this varies by plan, but I'd like to know what others have experienced, and can't seem to find an answer otherwise.

I could see some high expenses early in the year, and would rather have money in my HSA asap.

j0nnyg1984
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Re: HSA contribution max per pay period

Post by j0nnyg1984 » Fri Nov 04, 2016 1:21 pm

You would have to check with your employer to see if that is available. My employer doesn't offer that - the contributions come out equally over each pay period.

You could contribute to an HSA on your own, using post tax dollars, and you would receive a large credit on your next year taxes, but you will lose the benefit of not paying the payroll taxes - only the income taxes would be credited. Not worth it IMHO

LivinOnLakeTime
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Re: HSA contribution max per pay period

Post by LivinOnLakeTime » Fri Nov 04, 2016 1:48 pm

I did the same with my open enrollment today. Given I´m retiring next Feb, I set my monthly contribution at the yearly max of $7750 so that in Jan my yearly max for 2017 will be withdrawn from my salary.

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Hub
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Re: HSA contribution max per pay period

Post by Hub » Fri Nov 04, 2016 1:57 pm

My wife's employer had the monthly contribution maxed at the annual maximum divided by 12 no matter what month you started contributing to it. Particularly annoying.

mikep
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Re: HSA contribution max per pay period

Post by mikep » Fri Nov 04, 2016 2:14 pm

Hub wrote:My wife's employer had the monthly contribution maxed at the annual maximum divided by 12 no matter what month you started contributing to it. Particularly annoying.
That's probably the same at all employers, if someone switches out of HDHP plan mid year, the HSA contributions are limited to the annual amount / 12, so that would be a big hassle for employers to unwind.

zeeke42
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Re: HSA contribution max per pay period

Post by zeeke42 » Fri Nov 04, 2016 2:16 pm

j0nnyg1984 wrote:You would have to check with your employer to see if that is available. My employer doesn't offer that - the contributions come out equally over each pay period.

You could contribute to an HSA on your own, using post tax dollars, and you would receive a large credit on your next year taxes, but you will lose the benefit of not paying the payroll taxes - only the income taxes would be credited. Not worth it IMHO
This has a much smaller impact if you're over the SS wage cap though.

Our plan, the company makes their contribution as a lump sum in January since last year. Before that it was split evenly. (The company makes an HSA contribution to incentivize employees to move to the HDHP option.) We've always been able to adjust the HSA contribution amount on the HSA provider website at any time, though depending when you do it in the cycle, it might not go into effect until the following paycheck.

Spirit Rider
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Re: HSA contribution max per pay period

Post by Spirit Rider » Fri Nov 04, 2016 2:24 pm

mikep wrote:
Hub wrote:My wife's employer had the monthly contribution maxed at the annual maximum divided by 12 no matter what month you started contributing to it. Particularly annoying.
That's probably the same at all employers, if someone switches out of HDHP plan mid year, the HSA contributions are limited to the annual amount / 12, so that would be a big hassle for employers to unwind.
The employeR has nothing to unwind for employeE contributions, it is the employeE who has to remove the excess contribution and claim the income.

This might be a reason for employers to not make their entire contribution upfront, because if the employee leaves early they can not recover that money, but it has nothing to do with employee contributions.

an_asker
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Re: HSA contribution max per pay period

Post by an_asker » Fri Nov 04, 2016 2:35 pm

noco-hawkeye wrote:[...]I could see some high expenses early in the year, and would rather have money in my HSA asap.
From the above, it appears that you have the money or will have it (one or the other) by the time you get hit with those high expenses. If you are wanting to withdraw it from HSA, you can withdraw it each paycheck for the rest of the year.

Note that HSA is not like FSA (use it or lose it); moreover, if you have not had HSA for a while, if you have to change jobs mid-year, you might not even be eligible to have the year-max of HSA for the year (I keep mixing up what exactly the law says, but you might want to read up on it if you plan to move to a job that does not offer HSA).

TLDR: I fail to see what you stand to gain by contributing up front rather than contributing uniformly throughout the year (assuming you have the finances to pay for your expenses up front).

an_asker
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Re: HSA contribution max per pay period

Post by an_asker » Fri Nov 04, 2016 2:37 pm

Spirit Rider wrote:[...]The employeR has nothing to unwind for employeE contributions, it is the employeE who has to remove the excess contribution and claim the income.[...]
I wish all employers were like this. Unfortunately for us, that is not the case! :oops:

Spirit Rider
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Re: HSA contribution max per pay period

Post by Spirit Rider » Fri Nov 04, 2016 2:45 pm

One reason for front loading contributions is because the earnings are tax deferred and quite possibly ultimately tax-free.

livesoft
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Re: HSA contribution max per pay period

Post by livesoft » Fri Nov 04, 2016 3:07 pm

LivinOnLakeTime wrote:I did the same with my open enrollment today. Given I´m retiring next Feb, I set my monthly contribution at the yearly max of $7750 so that in Jan my yearly max for 2017 will be withdrawn from my salary.
That works if you still are in an HDHP that is HSA elibigle for all of 2017. Otherwise, you may not be eligible to contribute the max annual to your HSA.

The reason is that HSA's are not like IRAs. HSAs require monthly eligibility and the max allowed annual contribution is pro-rated by the number of eligibility months. This is all pretty well described in the IRS forms, instructions, and publications on HSAs.

I retired mid-year, switched health plans, and had to get a corrective distribution of my excess HSA contributions.
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an_asker
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Re: HSA contribution max per pay period

Post by an_asker » Fri Nov 04, 2016 3:31 pm

Spirit Rider wrote:One reason for front loading contributions is because the earnings are tax deferred and quite possibly ultimately tax-free.
From the original post, it appeared that the OP wanted to withdraw the money from the HSA asap.
I could see some high expenses early in the year, and would rather have money in my HSA asap.

noco-hawkeye
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Re: HSA contribution max per pay period

Post by noco-hawkeye » Fri Nov 04, 2016 4:42 pm

an_asker wrote:
Spirit Rider wrote:One reason for front loading contributions is because the earnings are tax deferred and quite possibly ultimately tax-free.
From the original post, it appeared that the OP wanted to withdraw the money from the HSA asap.
I could see some high expenses early in the year, and would rather have money in my HSA asap.
First - thanks for all the feedback, it is very helpful for this new (to me) world of HSA stuff.

My situation is that I will hit my HSA max out of pocket expenses (without trying very hard). So if my contributions come out equally through the year, it means most of my out of pocket expenses will come early on - and some of that will be in excess of my HSA balance. So therefore, I am essentially giving my HSA a loan with my out of pocket spending.

I think my max employee responsibility is something like 5k from my pocket, and the HSA max for a family is 6500 - and my 5k that I am responsible for will be reached in the first 6 months (when my HSA would only have 3250 of expenses to cover). Eventually I will be reimbursed, as I understand it, and it won't make a huge difference in the long run. However, I would just rather contribute as much as possible up front and cover everything with HSA dollars right away.

*3!4!/5!
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Re: HSA contribution max per pay period

Post by *3!4!/5! » Fri Nov 04, 2016 10:53 pm

It depends on employer, and how they have it set up, so you should ask them. At mine you can contribute any amount, any paycheck. (Same for retirement accounts.)
LivinOnLakeTime wrote:I did the same with my open enrollment today. Given I´m retiring next Feb, I set my monthly contribution at the yearly max of $7750 so that in Jan my yearly max for 2017 will be withdrawn from my salary.
Will you have an HDHP all year?
an_asker wrote:I fail to see what you stand to gain by contributing up front rather than contributing uniformly throughout the year (assuming you have the finances to pay for your expenses up front).
If you have transaction fees to invest, you'd prefer to do it once yearly rather than monthly.

If you are transferring to a better HSA custodian, you'd prefer to do it once yearly rather than monthly.

If, like the OP, you are passing funds through the HSA for the tax advantage for medical expenses, you may prefer to get the funds through earlier.

There are lots of reasons to want to front-load contributions (except for risk of over contributing if HDHP coverage doesn't last all year.

edge
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Re: HSA contribution max per pay period

Post by edge » Fri Nov 04, 2016 11:35 pm

I max it out on the first paycheck of the year.

danaht
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Re: HSA contribution max per pay period

Post by danaht » Fri Nov 04, 2016 11:51 pm

I usually max out my HSA contribution at the beginning of the year (I contribute all $3350 in January). But in 2017, I need to be extra careful with contributions. If my current HSA qualified high deductible health insurance gets canceled during 2017 - there are no other plans available in the individual market place in my area (Texas) that are HSA compliant. That means I would no longer qualify to make HSA contributions. So my plan for 2017 is to contribute $279 to my HSA per month. That way if my health insurance gets canceled - I won't have to deal with taking out any excess contributions. Note: this is only an issue in some parts of the country where there are very limited number of choices in plans. (Ie Arizona, Texas, etc.). If you live in CA and your health insurance gets canceled - you should have no problem finding another HSA plan. I am hoping that we start getting more competition (and options) in the market place soon - this is not a good situation for a lot of people who rely on buying individual insurance.
Last edited by danaht on Sat Nov 05, 2016 12:03 am, edited 1 time in total.

an_asker
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Re: HSA contribution max per pay period

Post by an_asker » Sat Nov 05, 2016 1:45 pm

*3!4!/5! wrote:[...]
an_asker wrote:I fail to see what you stand to gain by contributing up front rather than contributing uniformly throughout the year (assuming you have the finances to pay for your expenses up front).
If you have transaction fees to invest, you'd prefer to do it once yearly rather than monthly.

If you are transferring to a better HSA custodian, you'd prefer to do it once yearly rather than monthly.

If, like the OP, you are passing funds through the HSA for the tax advantage for medical expenses, you may prefer to get the funds through earlier.

There are lots of reasons to want to front-load contributions (except for risk of over contributing if HDHP coverage doesn't last all year.
1. Yes, that is a possible reason, but OP didn't refer to investing his/her money, let alone complain about transaction fees.

2. While it is preferable, again OP did not mention wanting to transfer the money; rather, he/she expressed the need to get the money right back out.

3. This is the only pro would be a one-time withdrawal instead of multiple withdrawals, and - imo - this is outweighed by the risk in case of a mid-year job change (voluntary or involuntary).

BTW, I did realize that options 1 and 2 could be factors, just not for OP ... :sharebeer

an_asker
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Re: HSA contribution max per pay period

Post by an_asker » Sat Nov 05, 2016 2:06 pm

noco-hawkeye wrote:
an_asker wrote:
Spirit Rider wrote:One reason for front loading contributions is because the earnings are tax deferred and quite possibly ultimately tax-free.
From the original post, it appeared that the OP wanted to withdraw the money from the HSA asap.
I could see some high expenses early in the year, and would rather have money in my HSA asap.
First - thanks for all the feedback, it is very helpful for this new (to me) world of HSA stuff.

My situation is that I will hit my HSA max out of pocket expenses (without trying very hard). So if my contributions come out equally through the year, it means most of my out of pocket expenses will come early on - and some of that will be in excess of my HSA balance. So therefore, I am essentially giving my HSA a loan with my out of pocket spending.

I think my max employee responsibility is something like 5k from my pocket, and the HSA max for a family is 6500 - and my 5k that I am responsible for will be reached in the first 6 months (when my HSA would only have 3250 of expenses to cover). Eventually I will be reimbursed, as I understand it, and it won't make a huge difference in the long run. However, I would just rather contribute as much as possible up front and cover everything with HSA dollars right away.
Most folks on this forum use the HSA as an extension of the Roths to their tax-advantaged space. So, if you have the money to spare, you might be better of contributing to the HSA and leaving the money sitting there. The money is similar to the Roth IRA, with the major exception that money should be used for medical expenses - and once you have set it up, it can be used anytime in the future.

You need to read up more about HSA. You are not lending the HSA any money. Besides, it is YOUR HSA. You can withdraw the money the day after (the portion of) your paycheck gets deposited into it. No questions asked. [of course, you would need to be prepared to back up your withdrawals, should you be questioned down the line]

Hypothetical sitation:

Jan 1: HSA is set up (as part of your enrollment)
Jan 1: Medical expenses of $6,000 (paid out of pocket)

Situation 1
Jan 5: $6,000 from paycheck deposited into HSA
Jan 6: You withdraw the entire $6,000 to reimburse yourself

Situation 2 (I'm simplifying it to $500 contributions to HSA per month)
Jan 5: $500 from paycheck deposited into HSA
Jan 6: You withdraw the entire $500 to reimburse yourself

Feb 5: $500 from paycheck deposited into HSA
Feb 6: You withdraw the entire $500 to reimburse yourself

.
.
.

Dec 5: $500 from paycheck deposited into HSA
Dec 6: You withdraw the entire $500 to reimburse yourself

So, as you can see, there is not really any "loan" to HSA. Yes, you do save yourself from having to withdraw $500 each month. The money that you paid up front is coming from your pocket one way or the other. But, let me repeat, most (vocal) Bogleheads don't withdraw from HSA at this time.

*3!4!/5!
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Re: HSA contribution max per pay period

Post by *3!4!/5! » Sat Nov 05, 2016 2:52 pm

@an_asker, requesting withdrawals is a hassle, requiring you to go through several online pages, providing financial and medical information. It's definitely not "No questions asked". At least this is the case with HealthEquity HSA, which seems to be one of the major players. You will save significant time and effort by having to do these things yearly rather than monthly.

savemorelivebetter
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Re: HSA contribution max per pay period

Post by savemorelivebetter » Sat Nov 05, 2016 3:42 pm

noco-hawkeye wrote:
an_asker wrote:
Spirit Rider wrote:One reason for front loading contributions is because the earnings are tax deferred and quite possibly ultimately tax-free.
From the original post, it appeared that the OP wanted to withdraw the money from the HSA asap.
I could see some high expenses early in the year, and would rather have money in my HSA asap.
First - thanks for all the feedback, it is very helpful for this new (to me) world of HSA stuff.

My situation is that I will hit my HSA max out of pocket expenses (without trying very hard). So if my contributions come out equally through the year, it means most of my out of pocket expenses will come early on - and some of that will be in excess of my HSA balance. So therefore, I am essentially giving my HSA a loan with my out of pocket spending.

I think my max employee responsibility is something like 5k from my pocket, and the HSA max for a family is 6500 - and my 5k that I am responsible for will be reached in the first 6 months (when my HSA would only have 3250 of expenses to cover). Eventually I will be reimbursed, as I understand it, and it won't make a huge difference in the long run. However, I would just rather contribute as much as possible up front and cover everything with HSA dollars right away.

You want to make sure that your employer/insurance ompany does not kick in any contribution to the HSA. If you maximize your contribution in the first month, then you may miss out on this. I contributed the maximum to my HSA in the first 3 months of the year. Fortunately, my insurance company kept adding $125 a month without realizing that I had maxed our. Eventually, HSA bank contacted me to say I have exceed the IRS mandated maximum. I had to withdraw money and interest earned from the HSA. Minor hassle but at least I did not lose free money from the insurance company.

Spirit Rider
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Re: HSA contribution max per pay period

Post by Spirit Rider » Sat Nov 05, 2016 4:02 pm

*3!4!/5! wrote:@an_asker, requesting withdrawals is a hassle, requiring you to go through several online pages, providing financial and medical information. It's definitely not "No questions asked". At least this is the case with HealthEquity HSA, which seems to be one of the major players. You will save significant time and effort by having to do these things yearly rather than monthly.
Let me get this straight. Because, you have to go thru several online screens pages to make a withdrawal, that is a reason not to make withdrawals :?

Not to mention, that you are making an anecdotal point that does not apply to more than 90% of HSA participants. HealthEquity has < 10% of the HSA market.

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Re: HSA contribution max per pay period

Post by *3!4!/5! » Sat Nov 05, 2016 5:22 pm

Spirit Rider wrote:
*3!4!/5! wrote:@an_asker, requesting withdrawals is a hassle, requiring you to go through several online pages, providing financial and medical information. It's definitely not "No questions asked". At least this is the case with HealthEquity HSA, which seems to be one of the major players. You will save significant time and effort by having to do these things yearly rather than monthly.
Let me get this straight. Because, you have to go thru several online screens pages to make a withdrawal, that is a reason not to make withdrawals :?

Not to mention, that you are making an anecdotal point that does not apply to more than 90% of HSA participants. HealthEquity has < 10% of the HSA market.
Some basic logic: The statement "X is sometimes false" is logically the same as "It is not the case that X is always true".

Spirit Rider
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Re: HSA contribution max per pay period

Post by Spirit Rider » Sat Nov 05, 2016 5:58 pm

*3!4!/5! wrote:
Spirit Rider wrote:
*3!4!/5! wrote:@an_asker, requesting withdrawals is a hassle, requiring you to go through several online pages, providing financial and medical information. It's definitely not "No questions asked". At least this is the case with HealthEquity HSA, which seems to be one of the major players. You will save significant time and effort by having to do these things yearly rather than monthly.
Let me get this straight. Because, you have to go thru several online screens pages to make a withdrawal, that is a reason not to make withdrawals :?

Not to mention, that you are making an anecdotal point that does not apply to more than 90% of HSA participants. HealthEquity has < 10% of the HSA market.
Some basic logic: The statement "X is sometimes false" is logically the same as "It is not the case that X is always true".
You made an explicit statement that; "withdrawals are a hassle". Which was in itself contradicted by what you define as a "hassle", the need to go thru some online pages to make a withdrawal.

The purpose of this thread and this forum is to provide actionable information. It was my duty to provide factual information that exposed the logical fallacy of your post.

The reality is that the vast majority of HSA holders do not even have to undertake the trivial steps your describe.

Which getting back to the actionable point, which is that the strategies exposed in this thread are all worth of consideration and your post was essentially a red herring and not material to the discussion.

*3!4!/5!
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Re: HSA contribution max per pay period

Post by *3!4!/5! » Sat Nov 05, 2016 6:27 pm

I don't see what's so hard to understand about this. For SOME people, being forced to contribute to any HSA in equal monthly installments, rather than however they choose, including possibly a single lump sum, is a real hassle.

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