HSA contribution limit with mid-year plan change

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Topic Author
Rotarman
Posts: 124
Joined: Tue Apr 05, 2016 5:14 pm

HSA contribution limit with mid-year plan change

I'm trying to wrap my head around these confusing HSA contribution limits and having difficulty.
For the first 6 months of this year, I was on my spouse's HDHP; her employer contributed ~\$100/month and we contributed ~ \$450/month adding to \$583/month maximum (\$7000 yearly divided by 12 months).

On July 1, I switched over to my own HDHP and spouse remained on hers. Her work appears to have done the necessary calculations and her contributions have been automatically altered to maintain the yearly pro-rated maximum (\$5,250)
However I need to determine my yearly maximum. My understanding is that there are two ways to do this:
1. Pro-rate you contribution monthly: Months 1-6 = \$0 per month eligible, Months 7-12 = \$583 (3500/6) per month eligible. -> I get \$1750 in
2. Dec 1 year-end: Full \$3500 is eligible IF I remain in a HDHP from Dec 1, 2019 - Dec 1, 2020. I will be changing health plans in 2020, but I should be able to get into another HDHP. -> I get \$3500 in

If my understanding is correct, I should be putting \$3500/6 = \$1,167 per month in my HSA based on the #2 method. It seems weird because between my wife and I, we will have made >\$7,000 contributions to HSAs for 2019 though (\$5,250+\$3,500 = \$8,750).

mlipps
Posts: 1008
Joined: Thu Jun 21, 2012 9:35 am

Re: HSA contribution limit with mid-year plan change

Method 2 is incorrect. If you are both covered by an HSA you are subject to the family HSA contribution limit of \$7000 for 2019, regardless of who holds the coverage.

jabroni
Posts: 25
Joined: Thu May 23, 2019 4:10 pm

Re: HSA contribution limit with mid-year plan change

Rotarman wrote:
Thu Jul 11, 2019 12:56 pm
If my understanding is correct, I should be putting \$3500/6 = \$1,167 per month in my HSA based on the #2 method. It seems weird because between my wife and I, we will have made >\$7,000 contributions to HSAs for 2019 though (\$5,250+\$3,500 = \$8,750).
As a household, you can't contribute more than \$7k, even if you have separate plans.

1955Chevy
Posts: 44
Joined: Thu Jul 11, 2019 8:30 am
Location: Land of Milk and Honey

Re: HSA contribution limit with mid-year plan change

Just use the "last month rule" on both your HSA's to make sure that combined they = \$7k by the end of December.
"Investment success accrues not so much to the brilliant as to the disciplined." | Bernstein

TropikThunder
Posts: 2393
Joined: Sun Apr 03, 2016 5:41 pm

Re: HSA contribution limit with mid-year plan change

jabroni wrote:
Thu Jul 11, 2019 2:43 pm
Rotarman wrote:
Thu Jul 11, 2019 12:56 pm
If my understanding is correct, I should be putting \$3500/6 = \$1,167 per month in my HSA based on the #2 method. It seems weird because between my wife and I, we will have made >\$7,000 contributions to HSAs for 2019 though (\$5,250+\$3,500 = \$8,750).
As a household, you can't contribute more than \$7k, even if you have separate plans.
+1. The contribution limits are evaluated and pro-rated based on coverage as of the 1st of each month. If nothing had changed and the two of you stayed on her family HDHP, the total family contribution limit would be \$7,000. When coverage switched on July 1, the result is that now each of you are eligible for a pro-rated portion of the individual limit of \$3,500 [6 months each in this case, or \$1,750 each].

The two of you were eligible as a couple for [\$7,000/12 months x6] = \$3,500 for the first six months but she used it all. Then, each of you separately is eligible for [\$3,500/12 months x6] = \$1,750 for the last six months. It looks like she is on track to do just that, and you get to contribute your \$1,750. Grand total \$7,000.

TropikThunder
Posts: 2393
Joined: Sun Apr 03, 2016 5:41 pm

Re: HSA contribution limit with mid-year plan change

1955Chevy wrote:
Thu Jul 11, 2019 4:11 pm
Just use the "last month rule" on both your HSA's to make sure that combined they = \$7k by the end of December.
Last month rule doesn't apply here since OP was already an eligible individual for all of 2019. They could have been making the contributions into his HSA the whole time (except for her employer contribution).

Topic Author
Rotarman
Posts: 124
Joined: Tue Apr 05, 2016 5:14 pm

Re: HSA contribution limit with mid-year plan change

Thanks for clarifying, everyone! I will just put the 1,750 pro-rated amount into my HSA for 2019.