HSA family max contribution lowered to $6850 for 2018 [and changed to $6900 again]

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Spirit Rider
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Wed Mar 07, 2018 8:05 pm

Chicago60 wrote:
Wed Mar 07, 2018 7:43 pm
I respectfully prefer my approach to yours.
Respectfully, read the thread for my posts and approach. I was just trying to help you avoid a larger cost than necessary.

My approach if there is a fee is to do nothing right now. Then next year when filing your tax return, simply pay the 6% excise tax ($50 x 6% = $3) and necessary tax filings and steps.

FrankLUSMC
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Re: HSA family max contribution lowered to $6850 for 2018

Post by FrankLUSMC » Wed Mar 07, 2018 8:16 pm

Just went to my Optum HSA account today and they still list 7900 (over 50) as the contribution limit. The changes may take some time.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by LadyGeek » Wed Mar 07, 2018 8:23 pm

The wiki has been updated for the 2018 contribution limits. See: Health savings account (Contribution limits)

Can an expert please review the revised text, especially for the employer contributions and related footnote? Pub 969 has changed since the last revision and I'm not sure if the footnotes reflect what's stated in the main text.

(Thanks to the reader who linked to this thread from the "Help Improve this page" feeback form found at the bottom of every wiki article. No login is required.)
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tinscale
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Re: HSA family max contribution lowered to $6850 for 2018

Post by tinscale » Wed Mar 07, 2018 8:41 pm

Pretty easy a couple of years ago to request a refund of excess contributions with Aetna's HSA. No fee then, don't know about now.

abner kravitz
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Re: HSA family max contribution lowered to $6850 for 2018

Post by abner kravitz » Wed Mar 07, 2018 9:13 pm

Spirit Rider wrote:
Wed Mar 07, 2018 6:23 pm
abner kravitz wrote:
Wed Mar 07, 2018 12:44 pm
I called my HSA provider (Fidelity) and they gave me a form to fill out. They will reverse the $50 excess (no charge) and they say it will be invisible to the IRS.
And what form did they give you to fill out?

I am not aware of any provision of the tax code that allows a custodian to return any contribution except as an excess contribution and earnings. They are certainly able to wave a charge or never have a charge in the first place.

However, to remain in IRS compliance they should have to also return the earnings and report them on your 2018 1099-SA Box 2 and in Box 3 Distribution code, Code 2 Excess contributions.

You might call them again and verify exactly how they are doing this.

Now, if your custodian will waive the fee like Fidelity appears willing to do and the tax on any earnings will be < $3. It might make sense for you do so sooner rather that later given that YTD is not likely to yield substantial earnings.

I would still suggest others wait rather that paying a substantial fee to remove a $50 excess contribution.
The form is one of their own labeled "Return of Excess Contributions - HSA". I have never had an issue with their guidance on stuff like this in the past, but I will double check. Thanks.

motorcyclesarecool
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Re: HSA maximum change

Post by motorcyclesarecool » Wed Mar 07, 2018 10:21 pm

Nate79 wrote:
Wed Mar 07, 2018 2:22 pm
Why couldn't the IRS just said $6,900 is close enough for government work and let it slip until next year. What a joke.
My guess it is civil servants working to the letter of the law. Never underestimate the power of a disgruntled bureaucracy.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

Spirit Rider
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Re: HSA maximum change

Post by Spirit Rider » Wed Mar 07, 2018 11:08 pm

motorcyclesarecool wrote:
Wed Mar 07, 2018 10:21 pm
Nate79 wrote:
Wed Mar 07, 2018 2:22 pm
Why couldn't the IRS just said $6,900 is close enough for government work and let it slip until next year. What a joke.
My guess it is civil servants working to the letter of the law. Never underestimate the power of a disgruntled bureaucracy.
How is following the law being disgruntled.

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eye.surgeon
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Re: HSA maximum change

Post by eye.surgeon » Wed Mar 07, 2018 11:35 pm

Spirit Rider wrote:
Wed Mar 07, 2018 11:08 pm
motorcyclesarecool wrote:
Wed Mar 07, 2018 10:21 pm
Nate79 wrote:
Wed Mar 07, 2018 2:22 pm
Why couldn't the IRS just said $6,900 is close enough for government work and let it slip until next year. What a joke.
My guess it is civil servants working to the letter of the law. Never underestimate the power of a disgruntled bureaucracy.
How is following the law being disgruntled.
If the law is applied retroactively to regulate actions taken before the law was changed.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

motorcyclesarecool
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Re: HSA maximum change

Post by motorcyclesarecool » Wed Mar 07, 2018 11:37 pm

Spirit Rider wrote:
Wed Mar 07, 2018 11:08 pm
How is following the law being disgruntled.
I don’t wish to get into an argument, but I will cite one example of disgruntled employees working to the letter:

http://articles.latimes.com/2000/aug/27/news/mn-11154

In multiple levels of government, I have found Yes, Minister to be very illustrative. My local library has all series of the show.

I believe that in all areas of government, in any country, where there is a will, there is an exception, exemption, exclusion, waiver, implementation memorandum, or precedent decision that will allow for a variance of $50 out of $6900 (less than one percent) for a single year to prevent well meaning individuals from unintentionally breaking the law through no fault of their own.

I am considering putting some salient points into a letter to Acting Commissioner Kautter. Does anyone have additional thoughts to add?
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

Spirit Rider
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Re: HSA maximum change

Post by Spirit Rider » Thu Mar 08, 2018 12:24 am

eye.surgeon wrote:
Wed Mar 07, 2018 11:35 pm
How is following the law being disgruntled.
If the law is applied retroactively to regulate actions taken before the law was changed.[/quote]
Sorry, but the law was passed and signed in 2017. We are talking about the 2018 limit. It was not applied retroactively.

What did happen was that the law was passed/signed so late that the IRS has been scrambling to apply the law. Quite naturally, they focused first on things that changed the for the 2017 tax filing year. The fact they just released 2018 limits based on the new chained CPI is not their fault.

I don't think it is appropriate to blame them for simply doing their job implementing the laws as written.

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Re: HSA maximum change

Post by tfb » Thu Mar 08, 2018 12:35 am

motorcyclesarecool wrote:
Wed Mar 07, 2018 11:37 pm
well meaning individuals from unintentionally breaking the law through no fault of their own.
HSA eligibility is month to month. When you contribute the annual maximum up front you decide to run ahead of yourself when you aren't eligible yet. You know there's always a possibility of excess contribution and you are ready to deal with it.
Harry Sit, taking a break from the forums.

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Re: HSA maximum change

Post by ivk5 » Thu Mar 08, 2018 1:23 am

tfb wrote:
Thu Mar 08, 2018 12:35 am
motorcyclesarecool wrote:
Wed Mar 07, 2018 11:37 pm
well meaning individuals from unintentionally breaking the law through no fault of their own.
HSA eligibility is month to month. When you contribute the annual maximum up front you decide to run ahead of yourself when you aren't eligible yet. You know there's always a possibility of excess contribution and you are ready to deal with it.
True but not so simple. I have been making monthly pro rata contributions through March, but expect to end eligible coverage this month, so not eligible for or planning to make future contributions that could be used to true up. I wasn't contributing "in advance" but still end up with a (small) excess contribution.

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HueyLD
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Re: HSA family max contribution lowered to $6850 for 2018

Post by HueyLD » Thu Mar 08, 2018 7:08 am

Spirit Rider wrote:
Wed Mar 07, 2018 8:05 pm
Chicago60 wrote:
Wed Mar 07, 2018 7:43 pm
I respectfully prefer my approach to yours.
Respectfully, read the thread for my posts and approach. I was just trying to help you avoid a larger cost than necessary.

My approach if there is a fee is to do nothing right now. Then next year when filing your tax return, simply pay the 6% excise tax ($50 x 6% = $3) and necessary tax filings and steps.
+1 again.

I guess it would be helpful if people would review the HSA tax reporting form 8889 and see how good Spirit Rider's advice is.

That's what I taught my students in the HSA class for tax preparers.

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Artsdoctor
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Re: HSA maximum change

Post by Artsdoctor » Thu Mar 08, 2018 10:08 am

tfb wrote:
Thu Mar 08, 2018 12:35 am
motorcyclesarecool wrote:
Wed Mar 07, 2018 11:37 pm
well meaning individuals from unintentionally breaking the law through no fault of their own.
HSA eligibility is month to month. When you contribute the annual maximum up front you decide to run ahead of yourself when you aren't eligible yet. You know there's always a possibility of excess contribution and you are ready to deal with it.
Yes. For the first several years of having our HSAs, I made the entire year's contribution right after January 1 and never had a problem.

Then, it became apparent to me that this has some risk involved. I started seeing more and more patients who had insurance plans changed in the middle of the year. I started seeing more people go from single to family or vice versa, I started noticing more divorces (and deaths, unfortunately), and now I realize that the law on January 1 can change at any point in the year.

About three years ago, I started making month-by-month contributions. It's more of a hassle, but I think it's less of a hassle than trying to correct overpayment although some people might find the opposite.

Oh123
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Oh123 » Thu Mar 08, 2018 10:52 am

I called HSAbank and they sent me the excess withdrawal form. Also, there is no fee to withdraw the 2018 HSA excess. My contributions were deducted from paycheck by the employer though it is not an employer-sponsored plan. My question is that apart from submitting an excess withdrawal from to HSABank, is there is anything I need to do with the employer? Thanks

MI_bogle
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Re: HSA family max contribution lowered to $6850 for 2018

Post by MI_bogle » Thu Mar 08, 2018 12:06 pm

Wow, thanks for the heads up. I set mine to max via payroll deductions over the course of the year.

Now I guess we'll see how my payroll bureaucracy handles it. Somehow I doubt it will be smooth. I bet they haven't even heard of it yet...

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Re: HSA family max contribution lowered to $6850 for 2018

Post by Darth Xanadu » Thu Mar 08, 2018 2:20 pm

I talked to my HR folks at Megacorp, they were aware, and working on a communication to participating employees. Their solution is to keep employer contribution as is, and reduce employee payroll contributions by [$50 divided by remaining pay periods].

I was half expecting them to simply say the company will just kick in $50 less than originally promised this year, haha.
"A courageous teacher, failure is."

Spirit Rider
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Thu Mar 08, 2018 4:43 pm

You should generally not run into this problem with steady HDHP plan/contributions to one employer throughout the year.

If your employer has half a clue. Just like 401k employee deferrals, the employer should stop contributions when based on their knowledge (employer contribution, HDHP plan and age) your limit has been reached. Employers have plenty of time to implement this reduction in limit.

This mostly applies to those who have already reached the limit.

lstone19
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Re: HSA family max contribution lowered to $6850 for 2018

Post by lstone19 » Thu Mar 08, 2018 5:02 pm

Spirit Rider wrote:
Thu Mar 08, 2018 4:43 pm
If your employer has half a clue. Just like 401k employee deferrals, the employer should stop contributions when based on their knowledge (employer contribution, HDHP plan and age) your limit has been reached. Employers have plenty of time to implement this reduction in limit.
That makes too much sense. Sadly, it appears both my employer in the past and my wife’s current employer (where our current HSA contributions come through) implemented the limit as a per paycheck limit. Don’t know if my wife’s employer also has an annual cap on it.

A couple of years ago, when our insurance was through my employer, they rounded my annual amount (the limit) to the nearest penny, which was a round up slightly. 12/31 check put me $0.08 over the limit - a contribution that was rejected by the HSA administrator. It took about a month to straighten out - correct amount to reach limit to HSA and $0.08 refunded to me on a later paycheck. But the W-2 was never corrected - 1st year showed employer HSA contributions $0.08 more than actual and the next years, due to the refund, $0.08 less than actual. Since the IRS, as best I know, rounds everything to the nearest dollar, nothing has come of it. BTW, this same employer properly did cap 401k deductions.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by ChrisC » Thu Mar 08, 2018 5:35 pm

FrankLUSMC wrote:
Wed Mar 07, 2018 8:16 pm
Just went to my Optum HSA account today and they still list 7900 (over 50) as the contribution limit. The changes may take some time.
They had the new limit on the website today for my Optum Bank HSA. I just sent in my excess contribution request on Optum's pre-printed form -- seems like a small inconvenience to me. In the past, we've asked for excess contributions back for other reasons (when we over-contributed before because of Medicare coverage overlay) without a major hassle.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Thu Mar 08, 2018 8:06 pm

"Sigh"

jj
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Re: HSA family max contribution lowered to $6850 for 2018

Post by jj » Thu Mar 08, 2018 8:47 pm

I absolutely have to give a shout out to Health Savings Administrators (healthsavings.com) they have dealt with my excess contribution immediately and efficiently - all within an hour this afternoon.

We are a couple both 55+ with a family HDHP for 2018, I contributed the full amount $8900 last month between our two HSA accounts. I received their email notifying me of the reduction to $8850. I emailed them asking how I could remove the offending $50 and within an hour I received an emailed docusign-type document where I authorized the removal of the $50 from my account (I left my spouse's alone). At that time they confirmed that their usual $25 fee would not apply in this instance. They will make the refund and any associated increase in value by check.

All taken care of, very efficiently. We'll see if it works as advertised but I was very impressed.
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

catchup
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Re: HSA family max contribution lowered to $6850 for 2018

Post by catchup » Thu Mar 08, 2018 8:57 pm

Message from my HSA explaining what pressures to follow:

Our records indicate that you’ve already contributed $6,900 to your HSA for 2018. To maintain compliance with the IRS, you must deduct $50 from your account to total $6,850 for the tax year. If you are 55 or older, the $1,000 catch-up contribution amount has not changed, allowing your limit to be $7,850.

CHANGE YOUR CONTRIBUTION AMOUNT
Complete and submit our Excess Contribution Removal Form by June 30, 2018 to have the excess removal fee waived
Complete and submit our Contribution Correction Form to reimburse your employer for any amount contributed through payroll deduction

seawolf21
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Re: HSA family max contribution lowered to $6850 for 2018

Post by seawolf21 » Thu Mar 08, 2018 11:13 pm

Select Account HSA is also no fee to remove excess.

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Drain
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Drain » Fri Mar 09, 2018 9:25 am

Kudos to PayFlex for promptly informing clients of the change.
Antikudos to HSA Bank for not doing the same.
Darin

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jhfenton
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Re: HSA family max contribution lowered to $6850 for 2018

Post by jhfenton » Fri Mar 09, 2018 9:53 am

Spirit Rider wrote:
Thu Mar 08, 2018 4:43 pm
You should generally not run into this problem with steady HDHP plan/contributions to one employer throughout the year.

If your employer has half a clue. Just like 401k employee deferrals, the employer should stop contributions when based on their knowledge (employer contribution, HDHP plan and age) your limit has been reached. Employers have plenty of time to implement this reduction in limit.

This mostly applies to those who have already reached the limit.
There is one difference. 401(k) limits are always individual limits. Unless you have a second job during the year, your limit is your limit and your employer has all the information it needs to calculate the contribution limit. The HSA family limit is a family limit. They could cap it at $6,900 (now $6,850) or $3,450, and mine does, but they can't easily take into account amounts a spouse's employer puts in or a spouse's HDHP coverage.

My employer actually had to override the $3,450 system limit for me to allow me to contribute $5,900 (now $5,850), because I have Self Only HDHP coverage, while my wife has Self + Kids HDHP coverage through her new employer. (Her employer puts in $1,000 per year.) My wife had no HSA previously, so we prefer to put as much money as possible in mine rather than pay two separate investments fees.

92irish
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Re: HSA family max contribution lowered to $6850 for 2018

Post by 92irish » Fri Mar 09, 2018 5:33 pm

What a pain! - I've already contributed my full $6,900.

Any further comments by me would violate multiple forum policies, including but not limited to, 1) obscenity, 2) all capital letters, 3) politics, and 4) non-actionable content. :x

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gasdoc
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Re: HSA family max contribution lowered to $6850 for 2018

Post by gasdoc » Sat Mar 10, 2018 9:35 am

Thanks for the heads up! I will contact Saturna on Monday, unless someone here has already contacted them? Thanks!

gasdoc

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gasdoc
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Re: HSA family max contribution lowered to $6850 for 2018

Post by gasdoc » Mon Mar 12, 2018 6:02 pm

Spoke to the Saturna rep today. They request a letter of instruction be submitted, and they will back out the $50 excess contribution with no charges.

gasdoc

jonathan2001
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Re: HSA family max contribution lowered to $6850 for 2018

Post by jonathan2001 » Thu Mar 15, 2018 12:32 am

I too am in the same boat -- though perhaps worse, from a hassle perspective.

I contributed via paycheck deductions the full $6900 to HealthEquity, and then did a non-trustee-to-trustee rollover to a HSA account we maintain at Saturna, and the promptly invested the entire amount. Given that I have nothing in cash I fear that I'm going to incur a $25 trading fee to liquidate $50 in assets. But as bad as that is ... then I'm faced with trying to get said funds back into HealthEquity so they can refund an excess contribution (probably charging an administrative fee) since they were the ones who recorded the initial contribution. What a headache.

My current plan is this -- best case: legislation revises this situation and it resolves itself later in 2018; worst case: I pay $3.xx (6% of $50 contribution plus associated earnings) penalty tax and fill out a few more forms in TurboTax next January, and then make sure when new 2019 HSA funds are deposited into HealthEquity they use those new $$ to return excess 2018 contribution. And then complain if they charge some administrative fee. :oops:

Spirit Rider
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Thu Mar 15, 2018 8:58 am

First, you do not need to have the excess contribution removed from the original HSA custodian. You can have it removed from any of your HSA accounts.

Second, given your specific transaction costs. The 6% excise tax is the better choice. Your HSA custodian knows nothing of this. It is between you and the IRS. You simply file a 2018 Form 5329 this year and pay the excise tax, next year you reduce your contribution by $50 and file a 2019 Form 5329 showing that..

Finally, I think it is highly likely that the IRS provides either 5329 penalty waivers or penalty free withdrawals.

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gasdoc
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Re: HSA family max contribution lowered to $6850 for 2018

Post by gasdoc » Thu Mar 15, 2018 9:17 am

Saturna processed the withdrawal without a fee, but I did get dinged as a $25 transaction because I was fully invested, and so I had to sell mutual fund shares. I did this rather than what Spritrider recommended only because at that point I was in deep enough that I just wanted to get it finished. If I were to start over, I would let it ride, as Spiritrider is recommending. Spiritrider is one very smart dude, and I thank him!

gasdoc

Hanksmoney
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Hanksmoney » Thu Mar 15, 2018 9:54 am

I posted this as a separate topic but didn't get any traction or answers - I thought it provides a new approach: (obviously not for people who maxed out 2017).
Hanksmoney wrote:
Wed Mar 14, 2018 10:20 am
I need some tax guidance.

The 2018 HSA max being lowered from $6900 to $6850 got me as I had already maxed it out through payroll (I'm having a baby, so :D :shock: :confused). I asked HSA Bank if I could shift some of the 2018 contribution back to Tax Year 2017, since I have $2950 remaining allowable 2017 contributions. I understand the last day to make 2017 contributions is April 17, 2018. They said I could - I just have to send a dated/signed email to them with the amount I wish to move back.

Here's where I need some help - I want to move *more* money back to 2017 than just the $50 to allow for new 2018 contributions. I've been attempting to read through the 1099-SA, 5498-SA, and Form 8889 without being sure of myself. I have not done my 2017 tax return yet and I can late file if needed. What's the best way to handle this tax-wise? Are there hidden additional taxes I'll be subject to?

HSA Contributions
2017 Contributions: $3800 -----> Remaining $2950
2018 Contributions: $6900 ------> Remaining (-$50)
Desired Adjustments: Shift $2950 from 2018 to 2017
So my plan is to shift the excess back to 2017, but I am asking about how to handle that tax wise with the 5498-SA.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Thu Mar 15, 2018 10:26 am

Hanksmoney wrote:
Thu Mar 15, 2018 9:54 am
So my plan is to shift the excess back to 2017, but I am asking about how to handle that tax wise with the 5498-SA.
Form 5498-SA tracks what was done. You complete your tax return based on what was done.

Since you have until the tax filing deadline (04/17/2018) to make 2017 HSA contribution. This will simply be reallocating $50 from the 2018 tax year to the 2017 tax year. For that matter, you could reallocate the full $2,950 to 2017. This would allow an additional $2,900 to be contributed for 2018.

Regardless of the amount you reallocated, the only change required would be for you to increase your HSA employer contribution on your 2017 Form 8889. This would result in that amount as an increased deduction for 2017.

Edited to reflect that these are employer contributions.
Last edited by Spirit Rider on Thu Mar 15, 2018 10:01 pm, edited 2 times in total.

armeliusc
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Re: HSA family max contribution lowered to $6850 for 2018

Post by armeliusc » Thu Mar 15, 2018 11:59 am

Thanks for the heads up. Checked my provide (Optum Bank), it says limit is $6850. But my elections / contribution is managed by ADP. Called ADP (their website sucks), they insisted the limit is (still) $6900 for family. After a bit back and forth, I just ask them to adjust my monthly contribution so that my 'target' this year is $6850. So not everyone is updated yet it seems.

Hanksmoney
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Hanksmoney » Thu Mar 15, 2018 12:27 pm

Spirit Rider wrote:
Thu Mar 15, 2018 10:26 am
Hanksmoney wrote:
Thu Mar 15, 2018 9:54 am
So my plan is to shift the excess back to 2017, but I am asking about how to handle that tax wise with the 5498-SA.
Form 5498-SA is not a concern, because it only tracks what year the contributions are actually made, not what tax year they are for.

Since you have until the tax filing deadline (04/17/2018) to make 2017 HSA contribution. This will simply be reallocating $50 from the 2018 tax year to the 2017 tax year. For that matter, you could reallocate the full $2,950 to 2017. This would allow an additional $2,900 to be contributed for 2018.

Regardless of the amount you reallocated, the only change required would be for you to increase your HSA contribution on your 2017 Form 8889. 7.
Thanks for the response - and handling my lack of accounting skills. My plan is to shift $2,950 of money I earned and contributed in 2018 back to 2017, where my 2018 total contribution money could be $9,800.

In box 3 of the 5498-SA it says "Total HSA contributions made in 2018 for 2017" - is that something I just include with my 2018 return?

I see box 2 of the 8889 says: "HSA contributions you made for 2017 (or those made on your behalf), including those made
from January 1, 2018, through April 17, 2018, that were for 2017. Do not include employer
contributions, contributions through a cafeteria plan, or rollovers (see instructions) . . .

I supposed the 8889 is what tells the IRS what to consider my total 2017 HSA contribution, even if it happened in 2018? Will any of this change change my taxable income? Technically, I'm paying less tax in 2018 bc $9,800 tax-free dollars was withheld from my paycheck.
Last edited by Hanksmoney on Fri Mar 16, 2018 2:17 pm, edited 1 time in total.

Spirit Rider
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Thu Mar 15, 2018 9:50 pm

Hanksmoney wrote:
Thu Mar 15, 2018 12:27 pm
Thanks for the response - and handling my lack of accounting skills. My plan is to shift $2,950 of money I earned and contributed in 2018 back to 2017, where my 2018 total contribution money could be $9,800.
That is a good plan. It will maximize your 2017 contributions and alleviate the 2018 excess contribution.
In box 3 of the 5498-SA it says "Total HSA contributions made in 2018 for 2017" - is that something I just include with my 2018 return?
The custodian is not required to send your 2017 5498-SA until May 31, 2018. The IRS also receives one. this is not reported on your 2018 return.
I see box 2 of the 8889 says: "HSA contributions you made for 2017 (or those made on your behalf), including those made from January 1, 2018, through April 17, 2018, that were for 2017. Do not include employer contributions, contributions through a cafeteria plan, nt or rollovers (see instructions) . . . I supposed the 8889 is what tells the IRS what to consider my total 2017 HSA contribution, even if it happened in 2018? Will any of this change change my taxable income?
Since these contributions that are being reallocated were made by payroll deduction "employer contributions", my previous statement was incorrect. They will actually get reported on Form 8889 Line 9 via the Employer Contribution Worksheet (4.), page 5 of the Form 8889 Instructions or the equivalent option in your tax software. This will not change your 2017 taxable income.
Technically, I'm paying less tax in 2018 bc $9,800 tax-free dollars was withheld from my paycheck.
This brings me to the most important point. I have been doing more research. HSA Bank also did not give you the correct answer, maybe they didn't realize the complete situation. A reallocation can only be initiated by the HSA account owner if they were direct contributions by you or on your behalf. Since they were "employer contributions" the reallocation must be initiated by the employer. So the employer knows to allow more contributions and report the entire $9800 on your 2018 W-2 Box 12 Code W. You will need to contact your employer to initiate this.

For reference here is the description from IRS Notice 98-4 Q&A 21.

Q-21. May employer contributions to employees’ HSAs made between January 1 and the date for filing the employee’s return, without extensions, be allocated to the prior year?
A-21. Yes. For employer contributions (including salary reduction contributions) made between January 1 and the date for filing the employees’ returns without extension, the employer must notify the HSA trustee or custodian if the contributions relate to the prior year. The employer must also inform the employee of the designation. However, the contributions designated as made for the prior year are still reported in box 12 with code W on the employees’ Form W-2 for the year in which the contributions are actually made.

markfaix
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Re: HSA family max contribution lowered to $6850 for 2018

Post by markfaix » Fri Mar 16, 2018 10:04 am

Spirit Rider wrote:
Wed Mar 07, 2018 11:28 am
Hold on. Do NOT rush to remove excess contributions:
  • I do not know of any HSA custodian who doesn't charge to remove excess contributions and their earnings, typically $20 - $25.
  • It is far less expensive to file form 5329 with your 2018 tax return and pay a $50 * 6% = $3 excise tax, stay $50 under the 2019 contribution limit and file a 2019 5329 to remove the carryover. By no later that the 1st month of 2019, you will know if this is a viable strategy.
  • And the no cost possibility, the IRS could issue guidance that anyone who over contributed in good faith could make a $50 "mistake of fact" withdrawal for this purpose and not have it considered a non-qualified withdrawal.
Spirit Rider

Thansk for your level headed advice.

I am the sole owner/employee of an S corp. The S corp makes contributions to the HSA on my behalf, and the HSA contribution is added to my W2 salary and deducted above the line on form 1040.

Would you be more likely to reverse the $50 excess contribution in my situation since there is a corporate level to the excess contribution? My custodian does not charge for reversal of excess contributions.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Fri Mar 16, 2018 10:44 am

My original reply was based on the premise that if it costs you $20 - $25 to remove the excess contributions. It would cost less to pay the $3 excise tax.

The custodians appear to be waiving the fee to remove this excess contribution. Unless you have other transaction costs. It is reasonable to take that route.

Excess contributions directly by the employer in excess of the total limit are one of the few cases where these contributions are considered an error and can be returned to the employer. If you or anyone else on your behalf made as little as $50 in direct contributions. That excess should be returned to you.

If so, the S-Corp should receive the returned excess contributions and earnings into the corporation's accounts. The returned contribution would just reduce the amount and it's reporting as compensation. The returned earnings would be income to the corporation.

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neurosphere
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Re: HSA family max contribution lowered to $6850 for 2018

Post by neurosphere » Fri Mar 16, 2018 11:08 am

I think the "Personal Finance Toolbox" spreadsheet still has the incorrect limit, if I'm looking at the current version? Anyone have an account at forum.mrmoneymustache.com to call attention to this fact?
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

nolesrule
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Re: HSA family max contribution lowered to $6850 for 2018

Post by nolesrule » Fri Mar 16, 2018 11:14 am

neurosphere wrote:
Fri Mar 16, 2018 11:08 am
I think the "Personal Finance Toolbox" spreadsheet still has the incorrect limit, if I'm looking at the current version? Anyone have an account at forum.mrmoneymustache.com to call attention to this fact?
According to the discussion thread, it was updated on March 12. Version 11.03

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neurosphere
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Re: HSA family max contribution lowered to $6850 for 2018

Post by neurosphere » Fri Mar 16, 2018 11:23 am

nolesrule wrote:
Fri Mar 16, 2018 11:14 am
neurosphere wrote:
Fri Mar 16, 2018 11:08 am
I think the "Personal Finance Toolbox" spreadsheet still has the incorrect limit, if I'm looking at the current version? Anyone have an account at forum.mrmoneymustache.com to call attention to this fact?
According to the discussion thread, it was updated on March 12. Version 11.03
thanks! I see now that it's fixed on the main page. Although, the "HDHP Analysis" tab still defaults to "$6900" for pre-tax contributions.

Hanksmoney
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Hanksmoney » Fri Mar 16, 2018 12:24 pm

Spirit Rider wrote:
Thu Mar 15, 2018 9:50 pm
Technically, I'm paying less tax in 2018 bc $9,800 tax-free dollars was withheld from my paycheck.
This brings me to the most important point. I have been doing more research. HSA Bank also did not give you the correct answer, maybe they didn't realize the complete situation. A reallocation can only be initiated by the HSA account owner if they were direct contributions by you or on your behalf. Since they were "employer contributions" the reallocation must be initiated by the employer. So the employer knows to allow more contributions and report the entire $9800 on your 2018 W-2 Box 12 Code W. You will need to contact your employer to initiate this.

For reference here is the description from IRS Notice 98-4 Q&A 21.

Q-21. May employer contributions to employees’ HSAs made between January 1 and the date for filing the employee’s return, without extensions, be allocated to the prior year?
A-21. Yes. For employer contributions (including salary reduction contributions) made between January 1 and the date for filing the employees’ returns without extension, the employer must notify the HSA trustee or custodian if the contributions relate to the prior year. The employer must also inform the employee of the designation. However, the contributions designated as made for the prior year are still reported in box 12 with code W on the employees’ Form W-2 for the year in which the contributions are actually made.
I appreciate all your work on this. If HSA Bank moves the money to 2017 with my letter, then does it matter?

Something I'm NOT sure how to accomplish is that my payroll doesn't allow over the $6850 contribution. I supposed I'd have to ask them to raise that limit so that I can have, ultimately, up to $9800 withheld from my pay.

I am understanding from your message and my research that the W2 Box 12 doesn't change since that's for the actual year contributions were made. My 2018 W2, Box 12 code W, would then have $9800. However, my 8889 Box 2 would only be what was for the HSA 2018 Tax year ($6850). Does that sound right?

Spirit Rider
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Spirit Rider » Fri Mar 16, 2018 1:23 pm

Hanksmoney wrote:
Fri Mar 16, 2018 12:24 pm
I appreciate all your work on this. If HSA Bank moves the money to 2017 with my letter, then does it matter?

Something I'm NOT sure how to accomplish is that my payroll doesn't allow over the $6850 contribution. I supposed I'd have to ask them to raise that limit so that I can have, ultimately, up to $9800 withheld from my pay.
If you only do this through HSA Bank, your employer will not know to reduce your 2018 contributions by $2,900. You will be unable to make the additional $2,850 in contributions by payroll deduction. However, you will still be able to do the directly.
I am understanding from your message and my research that the W2 Box 12 doesn't change since that's for the actual year contributions were made. My 2018 W2, Box 12 code W, would then have $9800. However, my 8889 Box 2 would only be what was for the HSA 2018 Tax year ($6850). Does that sound right?
Your W-2 Box 12 Code W will only be $9,800 if you notify your employer to reallocate $2,900 in 2018 contributions to 2017 and you make an additional $2,850 in 2018 contributions by payroll deduction. It will not be Form 8889 Box 2 those are for non-employer contributions. With the 2018 W-2 Box 12 Code W = $9,800, you will again use the Employer Contribution Worksheet (or tax software equivalent), page 5 of the 2018 Form 8889 Instructions. This time you will select option 2. Enter employer contributions made in 2018 for tax year 2017. Entering $2,900 will result in $6,900 properly being reported for 2018.

Let us know how this goes with your employer. Depending on their size they may never have done this before or even know about it. Also, if you have already requested this through HSA Bank, make sure you coordinate so the $2,900 doesn't get moved twice. Stranger things have happened.

Joel
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Re: HSA family max contribution lowered to $6850 for 2018

Post by Joel » Mon Mar 19, 2018 11:17 pm

I just want to thank everyone for this discussion. I would have never known had I not seen this here.
My investment policy statement: https://www.bogleheads.org/forum/viewtopic.php?t=190093

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ClevrChico
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Re: HSA family max contribution lowered to $6850 for 2018

Post by ClevrChico » Tue Mar 20, 2018 6:02 pm

Many thanks to OP! :sharebeer

I was able to reduce my 2018 HSA contribution at the MegaCorp benefits provider by $50, problem solved. It took all of five minutes with an online form. Both the HSA provider and HR had notices posted with "instructions to follow". Obviously it caught everyone by surprise. I bet they're loving life right now.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by BeneIRA » Wed Mar 21, 2018 6:37 am

If your employer has a benefits administrator managing benefits, it is possible the ongoing deduction has already been changed and it will be reflected down to the new limit over the next two pay periods. Enough time has passed that the better ones will have it updated by mid April at the latest. If you're curious, log onto your benefits portal to check your HSA goal amount, it may have already been updated.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by jhfenton » Wed Mar 21, 2018 7:12 am

BeneIRA wrote:
Wed Mar 21, 2018 6:37 am
If your employer has a benefits administrator managing benefits, it is possible the ongoing deduction has already been changed and it will be reflected down to the new limit over the next two pay periods. Enough time has passed that the better ones will have it updated by mid April at the latest. If you're curious, log onto your benefits portal to check your HSA goal amount, it may have already been updated.
+1 My employer sent out an email last week advising everyone of the change. They said that anyone who had elected the $6,900 family max would automatically have their amount adjusted to $6,850. But if you left room for the company wellness benefit (up to $1,000) and/or, as in my case, left room for my wife's employer contributing $1,000 to her HSA, you would need to request an adjustment.

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Re: HSA family max contribution lowered to $6850 for 2018

Post by Easy Rhino » Wed Mar 21, 2018 12:36 pm

Thanks for the heads up bogleheads! nothing yet from my employer's payroll department about this. so hopefully I'll just be able to adjust my withholding to fit the new limit.

the HSA custodian (UMB bank) has a little splash on their login screen... but I don't often log into that account for any reason.

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PaddyMac
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IRS reduces HSA max for 2018

Post by PaddyMac » Tue Mar 27, 2018 1:17 pm

[Thread merged into here, see below (next page) --admin LadyGeek]

Not sure if this was posted earlier. If so, sorry for duplicate post.

We have our HSA with HSA Authority and they just informed us that the IRS reduced the limit for 2018 contributions by $50. (Of course, this would be the year that we max'd it out early so we could take out cash for a large medical bill...)

IRS Announces Changes to 2018 HSA Contribution Limits
On Monday, March 5, 2018, the IRS announced that the previously released maximum family contribution limit to a Health Savings Account (“HSA”) is reduced from $6,900 to $6,850 in 2018. This change applies immediately and any family contribution to an HSA in 2018 over $6,850 could be subject to taxes and penalties.

The individual contribution limit of $3,450 and the "55 and over" catch-up of $1,000 remain the same.

This change is a result of a provision in H.R. 1 (“Tax Reform”) that changed the way that inflation-related increases are calculated.

For more information please see page 17 (Section 400) of Bulletin No. 2018-10.

Potential Action Steps:

If you have elected more than the new $6,850 family limit to be deposited to your HSA through payroll deductions and/or employer contributions, contact your employer to adjust your 2018 HSA contribution election.
If you have already exceeded the new limit through payroll deduction and/or employer contributions, contact your employer.
If you have already exceeded the new limit due to deposits made yourself (not through payroll), contact HSA Operations at HSASupport@oldnational.com or 866-685-1064.

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