Tricky HDHP/HSA situation

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Iowa David
Posts: 91
Joined: Mon Dec 18, 2017 9:53 pm

Tricky HDHP/HSA situation

Post by Iowa David » Tue Mar 12, 2019 10:19 am

Here's the situation:
  • My children and I are currently under my wife's HDHP through her work
  • We have met our family out of pocket maximum deductible for 2019
  • I will be joining a new company in April and they offer a very good HDHP, including a company contribution to the HSA
  • I am interested in enrolling in the new HDHP (for either myself and potentially my children)
  • We would like to have two HDHPs in place so that my wife and I can each make contributions to each HSA to maximum the tax benefit
It's my understand per this IRS publication https://www.irs.gov/pub/irs-pdf/p969.pdf that I cannot be covered by two plans, however, starting a new job should be a qualifying event to remove myself from my wife's insurance plan.

Questions:

1. If I enroll in a new HDHP in April, I presume that I will be removed from my wife's health plan and the out of pocket costs will reset for my new insurance plan for this calendar year. Is this accurate?

2. If we elect to stay with my wife's HDHP this calendar year, but decide to remove myself or our children in 2020 - what happens if the 2020 open enrollment period for my wife and I's work don't match? In other words, what if her open enrollment for 2020 is Nov 15th-Nov 30th, but mine is Dec 15th-Dec 31st. Will there be a lapse in health insurance between periods?

3. We see the benefit of each of us contributing to an HSA - is there a more effective option that I am not considering?
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing

jebmke
Posts: 9867
Joined: Thu Apr 05, 2007 2:44 pm

Re: Tricky HDHP/HSA situation

Post by jebmke » Tue Mar 12, 2019 10:22 am

You can each contribute to an HSA if you are both covered by a qualifying HDHP plan. You are subject to the family limit but you can divide that limit up any way you want.

Having separate HDHP plans doesn't change the family limit or expand your ability to contribute.
When you discover that you are riding a dead horse, the best strategy is to dismount.

pasadena
Posts: 333
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Location: Washington State

Re: Tricky HDHP/HSA situation

Post by pasadena » Tue Mar 12, 2019 10:28 am

Iowa David wrote:
Tue Mar 12, 2019 10:19 am
2. If we elect to stay with my wife's HDHP this calendar year, but decide to remove myself or our children in 2020 - what happens if the 2020 open enrollment period for my wife and I's work don't match? In other words, what if her open enrollment for 2020 is Nov 15th-Nov 30th, but mine is Dec 15th-Dec 31st. Will there be a lapse in health insurance between periods?
Open enrollment is only for electing a new plan for the next year. The new plan starts on Jan 1st.
3. We see the benefit of each of us contributing to an HSA - is there a more effective option that I am not considering?
If you are both covered by a HDHP, your limit is $7,000, it doesn't matter how many HSA accounts you are contributing to - you can only go up to $7,000.

However it's usually beneficial to contribute through payroll to your employer's account, as these contributions are then exempt from FICA taxes. If you contribute on your own to an external account, then you will have to pay FICA taxes. So you each contribute through payroll to two different employer accounts (either half/half or whatever % you want) until you have reached $7,000 total. If you want to keep only one account to simplify, choose the best one and max it out from your or your wife paycheck.

cwied
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Joined: Tue Aug 14, 2012 11:35 pm

Re: Tricky HDHP/HSA situation

Post by cwied » Tue Mar 12, 2019 3:38 pm

pasadena wrote:
Tue Mar 12, 2019 10:28 am
Iowa David wrote:
Tue Mar 12, 2019 10:19 am
2. If we elect to stay with my wife's HDHP this calendar year, but decide to remove myself or our children in 2020 - what happens if the 2020 open enrollment period for my wife and I's work don't match? In other words, what if her open enrollment for 2020 is Nov 15th-Nov 30th, but mine is Dec 15th-Dec 31st. Will there be a lapse in health insurance between periods?
Open enrollment is only for electing a new plan for the next year. The new plan starts on Jan 1st.
To add to this, you don't need a qualifying event to drop coverage, only to enroll in new coverage outside of open enrollment. This means you usually wait until your new coverage begins before dropping the old coverage. As pointed out this doesn't matter in your scenario, but some plans begin in July rather than January. In that case you would keep your old coverage through June and transition onto the new plan in July. Open enrollement for July plans would typically be in May or June.

To answer question 1: some plans will give you credit for deductible spent on a previous plan. You should check if this is an option on your new plan and what the exact terms are.

nps
Posts: 714
Joined: Thu Dec 04, 2014 10:18 am

Re: Tricky HDHP/HSA situation

Post by nps » Tue Mar 12, 2019 7:25 pm

Today your wife can contribute $7000 max. If you also get an HDHP and at least one of you has family coverage, the two of you combined can contribute $7000 max. That includes employer contributions. There is really nothing to maximize by having two HSAs, unless you happen to both be 55 or over and can each make catch up contributions.

Have you considered moving all of you onto your new job's HDHP plan and dropping your wife's plan? In that case you could still contribute $7000 max, but wouldn't be paying for two insurance plans.

Topic Author
Iowa David
Posts: 91
Joined: Mon Dec 18, 2017 9:53 pm

Re: Tricky HDHP/HSA situation

Post by Iowa David » Tue Mar 12, 2019 8:07 pm

Thank you everyone!

A key point I left out was that the family out of pocket max was reached by a procedure I had performed. If I unenroll from the current family policy then it’s my understanding that the expense from that procedure will no longer count towards the family max out of pocket.

I think we’ll revisit then in 2020 when the coverages reset. Thanks again - I learned several new things, including the household max contribution to the HSA. I love this site.
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing

TropikThunder
Posts: 1866
Joined: Sun Apr 03, 2016 5:41 pm

Re: Tricky HDHP/HSA situation

Post by TropikThunder » Wed Mar 13, 2019 12:19 am

Iowa David wrote:
Tue Mar 12, 2019 10:19 am

It's my understand per this IRS publication https://www.irs.gov/pub/irs-pdf/p969.pdf that I cannot be covered by two plans, however, starting a new job should be a qualifying event to remove myself from my wife's insurance plan.
I’ve never interpreted the “other coverage” clause in HSA eligibility to mean you couldn’t have coverage from two HDHP’s. I believe it means you can’t have any medical coverage that provides a benefit before you reach your deductible (except for certain preventative care services as described in the HDHP policy). So, unless I’m wrong, you don’t have to remove yourself from your wife’s policy (and since she’ll be paying employee plus family anyway, it shouldn’t cost more to keep you on). That should solve the question of whether her plan has still met the deductible.

Topic Author
Iowa David
Posts: 91
Joined: Mon Dec 18, 2017 9:53 pm

Re: Tricky HDHP/HSA situation

Post by Iowa David » Wed Mar 13, 2019 7:43 am

TropikThunder wrote:
Wed Mar 13, 2019 12:19 am
Iowa David wrote:
Tue Mar 12, 2019 10:19 am

It's my understand per this IRS publication https://www.irs.gov/pub/irs-pdf/p969.pdf that I cannot be covered by two plans, however, starting a new job should be a qualifying event to remove myself from my wife's insurance plan.
I’ve never interpreted the “other coverage” clause in HSA eligibility to mean you couldn’t have coverage from two HDHP’s. I believe it means you can’t have any medical coverage that provides a benefit before you reach your deductible (except for certain preventative care services as described in the HDHP policy). So, unless I’m wrong, you don’t have to remove yourself from your wife’s policy (and since she’ll be paying employee plus family anyway, it shouldn’t cost more to keep you on). That should solve the question of whether her plan has still met the deductible.
Thanks TropikThunder - I'm going to research this further, but if this is the case then it should help simplify the situation.
"Just a 1 percent difference in expenses makes an 18 percent difference in returns when compounded over 20 years." The Boglehead's Guide to Investing

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