Excess HSA contribution for family

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Topic Author
ny10036
Posts: 29
Joined: Tue Apr 02, 2019 1:07 pm

Excess HSA contribution for family

Post by ny10036 »

Hi,

My family is dual income and I've had an HSA since last year and my wife switched to an HSA earlier this year. I made some bad assumptions regarding how much can be contributed to an HSA and just discovered we're in a bit of a pickle.

I have coverage only for myself and am on track to contribute the allowed 3600 limit for 2021. It is currently at 2900 contributed for the year.

My wife meanwhile has the kids on her plan and signed up to contribute the 7200 family limit. Her plan started June this year and she's contributed 3200 so far. And will have contributed about 6000 by the end of the year. So our family will likely end up contributing 9600 total to separate HSA accounts for this year.

It only occurred recently to me that this might be an issue and that I might be misunderstanding what a "family limit" is. And what I've found online seems to confirm it.

We are both at different megacorps so turning the knob off is involved. But the immediate plan is for me to switch to a different plan next year so that only my wife has an HSA.

I'm more focused on solutions for this year and possible tax implications. Our HSAs are both with fidelity and it does look like there's a form called "Fidelity HSA Return of Excess Contribution". Do we just file this before tax day next year and call it day? Should I just leave the excess there, pay whatever penalty for the year and forget about it?
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MP123
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Joined: Thu Feb 16, 2017 3:32 pm

Re: Excess HSA contribution for family

Post by MP123 »

ny10036 wrote: Wed Oct 13, 2021 9:37 am I'm more focused on solutions for this year and possible tax implications. Our HSAs are both with fidelity and it does look like there's a form called "Fidelity HSA Return of Excess Contribution". Do we just file this before tax day next year and call it day? Should I just leave the excess there, pay whatever penalty for the year and forget about it?
Yes, you can remove the excess and it's associated earnings by your tax deadline. It might be easier to just shut her contributions off before going over. If you leave the excess in the account past your tax date you'll owe 6% excise tax until it's removed, or until you use up the excess in place of regular contributions.

If either or both of you are over 55 you may have some more space with catchup contributions.
Topic Author
ny10036
Posts: 29
Joined: Tue Apr 02, 2019 1:07 pm

Re: Excess HSA contribution for family

Post by ny10036 »

MP123 wrote: Wed Oct 13, 2021 11:25 am Yes, you can remove the excess and it's associated earnings by your tax deadline.
Looks like this is the way, then.
clemrick
Posts: 342
Joined: Wed Sep 09, 2009 8:46 pm

Re: Excess HSA contribution for family

Post by clemrick »

Don't wait until the last minute to remove the excess contribution.

I am trying to do that now but due to GameStop stock transfers and registrations, Fidelity is backed up. I am going on week three of a one week process under normal circumstances. Maybe all the GameStop transferring will wind down by March, maybe something else will take its place. Who knows.
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theRoCK
Posts: 84
Joined: Wed Jul 29, 2020 5:40 pm

Re: Excess HSA contribution for family

Post by theRoCK »

ny10036 wrote: Wed Oct 13, 2021 9:37 am Hi,

My family is dual income and I've had an HSA since last year and my wife switched to an HSA earlier this year. I made some bad assumptions regarding how much can be contributed to an HSA and just discovered we're in a bit of a pickle.

I have coverage only for myself and am on track to contribute the allowed 3600 limit for 2021. It is currently at 2900 contributed for the year.

My wife meanwhile has the kids on her plan and signed up to contribute the 7200 family limit. Her plan started June this year and she's contributed 3200 so far. And will have contributed about 6000 by the end of the year. So our family will likely end up contributing 9600 total to separate HSA accounts for this year.

It only occurred recently to me that this might be an issue and that I might be misunderstanding what a "family limit" is. And what I've found online seems to confirm it.

We are both at different megacorps so turning the knob off is involved. But the immediate plan is for me to switch to a different plan next year so that only my wife has an HSA.

I'm more focused on solutions for this year and possible tax implications. Our HSAs are both with fidelity and it does look like there's a form called "Fidelity HSA Return of Excess Contribution". Do we just file this before tax day next year and call it day? Should I just leave the excess there, pay whatever penalty for the year and forget about it?
As mentioned earlier, shutting off the contributions on one and reducing the contributions on the other to meet the overall family limit might be a better option than doing the excess withdrawal later. Companies typically allow modifying your HSA contributions outside of the open enrollment period and throughout the year, so it should be possible to adjust them.

As for next year, there is no need to switch to a different plan, you can just turn off HSA contributions on yours while still on the same plan, unless the other plan is cheaper and/or has more benefits that you would like to avail.
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