Switching (mid-year) from HSA qualifying plan to non-qualifying?

[Soobs]

I'm considering moving my family over to a HSA qualifying employer HDHP PPO plan next year and doing a lump sum to max out the annual limit early in the new year. There is a possibility of a job change mid-year that could lead to me losing the option for an HSA qualifying medical plan entirely. If I switch to a regular low deductible PPO mid-year does this cause an issue for what I contributed to the HSA previous within the same year? I'm just not sure if that would lead to a pro-rated annual HSA contribution limit? Thanks.

[Mattman25]

IRS Publication 969:

Qualifying for an HSA Contribution
To be an eligible individual and qualify for an HSA contribution, you must meet the following requirements.

- You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
- You have no other health coverage except what is permitted under Other health coverage, later.
- You aren’t enrolled in Medicare.
- You can’t be claimed as a dependent on someone else’s 2022 tax return.

Tip: Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers).

If you don't have HDHP coverage on December 1st, it sounds like you will only be able to contribute during the months you were covered by HDHP. But I don't see why you can't max it out during those months you were covered, and then just not contribute anymore for the rest of the year? Edit: this article says the maximum contribution limit is prorated: https://hsastore.com/learn-hsa-contribu ... -hdhp.html

[Longdog]

I'm considering moving my family over to a HSA qualifying employer HDHP PPO plan next year and doing a lump sum to max out the annual limit early in the new year. There is a possibility of a job change mid-year that could lead to me losing the option for an HSA qualifying medical plan entirely. If I switch to a regular low deductible PPO mid-year does this cause an issue for what I contributed to the HSA previous within the same year? I'm just not sure if that would lead to a pro-rated annual HSA contribution limit? Thanks.

I wouldn't front-load the contributions if there's a possibility that the coverage could end prior to year-end.

[MP123]

You would need to pro-rate the contribution for months of eligibility, regardless of when you actually make it. This could lead to you needing to remove an excess contribution if you make a maximum contribution early in the year and lose eligibility.

Making the contribution through payroll is good because it escapes FICA, but you could also contribute later in the year (up to April 15th of the following year) with after-tax money and take a deduction once you know how many months you were eligible for.