HSA contributions approaching age 65

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Horsefly
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HSA contributions approaching age 65

Post by Horsefly »

I tried looking for an answer to this question, but couldn't figure out what to look for. I apologize in advance if the answer has already been given.

The DW is about 5 months older than me. Her birthday is in October, and mine is in March. So she will turn 65 the year before I do. I currently have HDHP coverage for both of us. I contribute the max family + catch-up each year to my HSA ($8100 this year).

In the year she turns 65, she will move from my HDHP plan to Medicare. I will still be under the HDHP plan, I know that once on Medicare an individual can't contribute to an HSA.

For that one year, when my wife turns 65 in October, can I still contribute the family maximum (plus catch-up) for the year? Or will I have to cut back my contribution to the max for an individual plus catch-up?

I know there's something about delaying Medicare, but the company I retired from (who provides our current retiree HDHP) requires that we both enroll when we turn 65.
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FiveK
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Re: HSA contributions approaching age 65

Post by FiveK »

Horsefly wrote: Sat Jan 25, 2020 6:51 pm For that one year, when my wife turns 65 in October, can I still contribute the family maximum (plus catch-up) for the year? Or will I have to cut back my contribution to the max for an individual plus catch-up?
From https://www.irs.gov/pub/irs-pdf/p969.pdf:

- If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse’s coverage doesn’t cover you.

- Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual).
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

FiveK wrote: Sat Jan 25, 2020 7:25 pm
Horsefly wrote: Sat Jan 25, 2020 6:51 pm For that one year, when my wife turns 65 in October, can I still contribute the family maximum (plus catch-up) for the year? Or will I have to cut back my contribution to the max for an individual plus catch-up?
From https://www.irs.gov/pub/irs-pdf/p969.pdf:

- If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse’s coverage doesn’t cover you.

- Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual).
This is where it gets confusing.

The first quote:
If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse’s coverage doesn’t cover you.
Is really about whether or not I qualify for an HSA at all. It is just saying that if my spouse does not, I still can if I am under an HDHP if the spouses plan doesn't cover me. Not applicable.

The second quote:
Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual).
This section is really about the maximum annual deductible limits. I can't tell if it means for my question. :confused

Still, I appreciate the pointer. I had scanned the IRS doc a few times looking for my situation. I appreciate you looking as well.
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FiveK
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Re: HSA contributions approaching age 65

Post by FiveK »

Horsefly wrote: Sun Jan 26, 2020 12:17 am The first quote:
If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse’s coverage doesn’t cover you.
Is really about whether or not I qualify for an HSA at all. It is just saying that if my spouse does not, I still can if I am under an HDHP if the spouses plan doesn't cover me. Not applicable.
Whether or not you qualify seems applicable. If your spouse's coverage will not cover you and you are covered by an HDHP then you qualify.
The second quote:
Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual).
This section is really about the maximum annual deductible limits. I can't tell if it means for my question. :confused
If your policy covers your spouse even after spouse's Medicare starts then you have family HDHP coverage and may contribute the family maximum (minus whatever your spouse will contribute) for the year.
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

FiveK wrote: Sun Jan 26, 2020 12:30 am If your policy covers your spouse even after spouse's Medicare starts then you have family HDHP coverage and may contribute the family maximum (minus whatever your spouse will contribute) for the year.
Ok, lets run with this a bit. As far as I can tell, there is NO WAY that my policy will cover my spouse after my spouse's Medicare starts. I'm pretty certain of that. So what does that do? (Thanks for humoring me.)
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FiveK
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Re: HSA contributions approaching age 65

Post by FiveK »

Horsefly wrote: Sun Jan 26, 2020 12:36 am
FiveK wrote: Sun Jan 26, 2020 12:30 am If your policy covers your spouse even after spouse's Medicare starts then you have family HDHP coverage and may contribute the family maximum (minus whatever your spouse will contribute) for the year.
Ok, lets run with this a bit. As far as I can tell, there is NO WAY that my policy will cover my spouse after my spouse's Medicare starts. I'm pretty certain of that. So what does that do? (Thanks for humoring me.)
Makes you eligible for the single coverage HSA limit for those months.

See instructions for line 3 and the rest of Form 8889.
curmudgeon
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Re: HSA contributions approaching age 65

Post by curmudgeon »

Horsefly wrote: Sat Jan 25, 2020 6:51 pm The DW is about 5 months older than me. Her birthday is in October, and mine is in March. So she will turn 65 the year before I do. I currently have HDHP coverage for both of us. I contribute the max family + catch-up each year to my HSA ($8100 this year).

In the year she turns 65, she will move from my HDHP plan to Medicare. I will still be under the HDHP plan, I know that once on Medicare an individual can't contribute to an HSA.

For that one year, when my wife turns 65 in October, can I still contribute the family maximum (plus catch-up) for the year? Or will I have to cut back my contribution to the max for an individual plus catch-up?
Essentially, you end up with 9/12 of the family limit, plus 3/12 of the individual limit, plus 1 catch-up, plus 9/12 of her catch-up (if she has a separate HSA). Similar pro-ration for your contribution the next year. The 8889 form goes down into the weeds for this. If you were on an ACA plan, the forms can get really messy for this kind of stuff, but it sounds like you are on an employer retiree plan.
StealthRabbit
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Re: HSA contributions approaching age 65

Post by StealthRabbit »

Pro-ration is correct...as I understand it.

Only can contribute for the months eligible for HDHP / HSA (Spouse or self)

I have seen some references to spouse getting to set aside 100% of contribution / catch-up even if PT, but Tax-cut software would not calculate a full yr contribution with ANY part yr participation. So... I complied (as usual). I am not going to jail over a few hundred $$ mistake. I hear the HC is not that good in jail (so says my Primary care physician ("As tempting as it is... Don't go to jail for the free HC!")).
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Rob54keep
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Re: HSA contributions approaching age 65

Post by Rob54keep »

My understanding is if your wife turns 65(Oct) in 2020 and goes on Medicare and you are still 64 then:

You = ($3550+$1000) = $4550

Her = (9/12*3550+1000) = $3163 this assumes she has a separate HSA account

Total = $8713

Then when you are 65 (March) the following year, you can contribute to a HSA (2/12*$4550+$1000), obviously she cannot do any HSA.

Tax software will confirm this.
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

Thanks to everyone for the help. We don't have separate HSAs, but I pretty easily do the proration that @crumudgeon suggested.

Since all this happens three years from now, my next problem will be to remember this thread. :happy
Spirit Rider
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Re: HSA contributions approaching age 65

Post by Spirit Rider »

Horsefly wrote: Sun Jan 26, 2020 9:33 am Thanks to everyone for the help. We don't have separate HSAs, but I pretty easily do the proration that @crumudgeon suggested.

Since all this happens three years from now, my next problem will be to remember this thread. :happy
You have been leaving money on the table since your wife turned 55.

She should open an HSA account immediately. She can then make a $1000 catch-up contribution for 2019 and each year before she turns 65. Then a prorated catch-up contribution that year.
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

Spirit Rider wrote: Sun Jan 26, 2020 9:49 am
Horsefly wrote: Sun Jan 26, 2020 9:33 am Thanks to everyone for the help. We don't have separate HSAs, but I pretty easily do the proration that @crumudgeon suggested.

Since all this happens three years from now, my next problem will be to remember this thread. :happy
You have been leaving money on the table since your wife turned 55.

She should open an HSA account immediately. She can then make a $1000 catch-up contribution for 2019 and each year before she turns 65. Then a prorated catch-up contribution that year.
I've seen this idea discussed in other threads. Is this true if her only insurance is through me? I guess I had assumed that since I had the HDHP and she was under my coverage, we were supposed to do a family contribution to my HSA.

Not sure it matters a whole lot now. I've already done the family contribution plus catch-up for this year. By the end of 2020 she will be 63. Based on the proration that has been discussed here, it would only be another $1,750 we could contribute if I set up a separate HSA for her.

Still, I'm sorry I missed it. Wish you would have been standing next to me when I first opened the HSA!
Spirit Rider
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Re: HSA contributions approaching age 65

Post by Spirit Rider »

Under the rules for married people, the family HSA contribution limit can be allocated in any manner agreed. It is usually best for the spouse with an HDHP policy through their employer to contribute by salary reduction to save on FICA taxes.

Each spouse is eligible to make catch-up contributions, but they must be made to each spouses account. If she will be 63 at the end of 2020, that still allows her to make full 2019, 2020, 2021 and 9/12 2022 catch-up contributions.
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

Spirit Rider wrote: Sun Jan 26, 2020 10:07 am Under the rules for married people, the family HSA contribution limit can be allocated in any manner agreed. It is usually best for the spouse with an HDHP policy through their employer to contribute by salary reduction to save on FICA taxes.
DW and I are both retired (2013). We had both worked at the same company, me as a mid-level executive, and she as an engineer. Although we could have each chosen to take our own retiree medical coverage, mine was more subsidized by the company. It was much less expensive for me to have the family coverage (me, DW, and two daughters at that point). The extra cost we would have paid for her to have her own coverage would have dwarfed whatever benefit we got from her having her own HDHP and HSA.
Spirit Rider wrote: Sun Jan 26, 2020 10:07 am Each spouse is eligible to make catch-up contributions, but they must be made to each spouses account. If she will be 63 at the end of 2020, that still allows her to make full 2019, 2020, 2021 and 9/12 2022 catch-up contributions.
I'm not sure I understand.
  • 2019 - I already contributed max family + catch up. If she opens an HSA now, can I undo the 2019 contribution?
  • 2020 - Same as 2019. I did the contribution on 2-Jan-2020. Can I undo it?
  • 2021, 2022 - I think I agree on these, and that it would mean an extra $1,750 of HSA contributions if she had her own HSA.
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Re: HSA contributions approaching age 65

Post by Spirit Rider »

Horsefly wrote: Sun Jan 26, 2020 10:59 am
Spirit Rider wrote: Sun Jan 26, 2020 10:07 am Under the rules for married people, the family HSA contribution limit can be allocated in any manner agreed. It is usually best for the spouse with an HDHP policy through their employer to contribute by salary reduction to save on FICA taxes.
DW and I are both retired (2013). We had both worked at the same company, me as a mid-level executive, and she as an engineer. Although we could have each chosen to take our own retiree medical coverage, mine was more subsidized by the company. It was much less expensive for me to have the family coverage (me, DW, and two daughters at that point). The extra cost we would have paid for her to have her own coverage would have dwarfed whatever benefit we got from her having her own HDHP and HSA.
First, the fact that she is covered on your HDHP plan and has no other disqualifying coverage makes her an HSA eligible individual eligible to open an HSA account and make contributions. As I said in my previous reply, you can split the family contribution limit anyway the two of you agree, but it is best for you to make the full family contribution. However, she most definitely can open her own HSA account and make catch-up contributions. Second, if you still had at least one daughter covered on your HDHP plan, you could make the full family contribution until you turn 65.
Horsefly wrote: Sun Jan 26, 2020 10:59 am
Spirit Rider wrote: Sun Jan 26, 2020 10:07 am Each spouse is eligible to make catch-up contributions, but they must be made to each spouses account. If she will be 63 at the end of 2020, that still allows her to make full 2019, 2020, 2021 and 9/12 2022 catch-up contributions.
I'm not sure I understand.
  • 2019 - I already contributed max family + catch up. If she opens an HSA now, can I undo the 2019 contribution?
    • You don't have to change anything for 2019. She simply opens her own HSA account and makes her 2019 catch-up contribution by 4/15/2020. She can then make her own catch-up contributions for each subsequent year until she turns 65. If fact, she could make both 2019 and 2020 contributions now. She just needs to properly indicate the year they are for.
  • 2020 - Same as 2019. I did the contribution on 2-Jan-2020. Can I undo it?
    • Here again, no need. She just makes the contributions.
  • 2021, 2022 - I think I agree on these, and that it would mean an extra $1,750 of HSA contributions if she had her own HSA.
    • The total would be $3750, 2019 - 20121 = $3000 and 2022 = $750.
curmudgeon
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Re: HSA contributions approaching age 65

Post by curmudgeon »

Horsefly wrote: Sun Jan 26, 2020 10:59 am I'm not sure I understand.
  • 2019 - I already contributed max family + catch up. If she opens an HSA now, can I undo the 2019 contribution?
  • 2020 - Same as 2019. I did the contribution on 2-Jan-2020. Can I undo it?
  • 2021, 2022 - I think I agree on these, and that it would mean an extra $1,750 of HSA contributions if she had her own HSA.
You wouldn't be "undoing" any of your contributions, just doing her catch-up. Just open another HSA in her name (such as Fidelity), and add $1000 designated for 2019, another $1000 for 2020. Repeat in the future years.

When we first started doing this, HSA with investment options tended to have non-trivial fees. We kept mine as the main HSA, and opened my wife's at a local credit union. It only pays a minor amount of interest, but we use hers to reimburse our medical/dental expenses first, so it rarely has much of a balance.
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

Ok, thanks to both of you, I think I get it now. Sorry for being dense.

So I'll get a second HSA opened up for DW at Fidelity (that's where my HSA is, as well as virtually everything else), contribute $1,000 catch-up for 2019, $1,000 catch-up for 2020, and then continue forward until she turns 65.

Awesome! Another tax deduction! (albeit a small one)

Thanks again!

Edit to add: Gosh Fidelity makes this easy. The account is open, funded for both 2019 and 2020, and with me having limited authority on it (since I do all the Fidelity stuff for both of us).
Last edited by Horsefly on Sun Jan 26, 2020 12:17 pm, edited 1 time in total.
Spirit Rider
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Re: HSA contributions approaching age 65

Post by Spirit Rider »

One thing to keep in mind. If this is her first HSA account, she can only take tax-free distributions for qualified medical expenses with dates of service after the date of her first contribution.
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Horsefly
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Re: HSA contributions approaching age 65

Post by Horsefly »

Spirit Rider wrote: Sun Jan 26, 2020 12:09 pm One thing to keep in mind. If this is her first HSA account, she can only take tax-free distributions for qualified medical expenses with dates of service after the date of her first contribution.
Yep, got it. We're actually probably going to only use both of the HSAs to pay Medicare premiums after we are 65 (we're going to have an IRMAA problem, so this will ease the pain).
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