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05-15-2017 11:31 PM
How much (if anything) can I contribute to my HSA for 2017?
Our family of four will have qualifying HDHP family coverage every month of 2017, and I am over 55, so the normal max would be $6,750 + $1,000 = $7,750. However, since I was unemployed in the early part of the year, all four of us also had Medicaid coverage, under a Washington state program called the Premium Payment Program, under which the state reimburses most (not all) of the premiums for private health insurance (a COBRA plan) and provides Medicaid coverage as secondary insurance. We had such coverage for January-April. The HSA rules say that as long as you have secondary coverage you don't qualify to contribute to the HSA. Then I got a new job, elected to keep the COBRA and opted out of the new employer's medical plan, and because of the income from my new job, my wife and I no longer are eligible for or covered by Medicaid as of May 1. Our two kids, however, get to keep Medicaid and participate in the PPP through November, since Washington's law allows kids to stay on Medicaid once they are on it for 12 months since they started, even after their parents' income goes up above the cutoff. None of us will have secondary Medicaid coverage as of December 1. For 2018 we'll need to change plans as the COBRA eligibility will expire, and will probably choose another family coverage HDHP but won't decide until open enrollment time at the end of 2017.
So here are some potential answers I've considered:
1. Since my wife and I won't have secondary insurance for the latter 8 months, and two people constitutes family coverage, can we contribute 8/12ths of $7,750 = $5,166.67, essentially ignoring the fact the kids have secondary coverage through November?
2. Since at least some of us will have secondary insurance for 11 of the 12 months, does that disqualify the family for those 11 months, so we are only eligible for the month of December, such that we can only contribute 1/12th of $7,750 = $645.83?
3. Under the last month rule, since none of us will have secondary coverage as of December 1, can we contribute the whole $7,750 as long as we choose and keep a HDHP for all of 2018?
Thanks for any guidance in this scenario.
Solved! Go to Solution.
05-16-2017 03:09 PM
Welcome to the H&R Block community.
The easiest way to look at this is that so long as you have a high-deductible health plan and meet the HSA requirements for the month of December you are eligible for the entire year under the last month rule. However, you must remain eligible to contribute for the 12 months following December or your contributions will become excess contributions. This means you must not only have the HSA account but also a high-deductible health plan for the 12 months of 2018. So under the last month rule, assuming that the above applies to you, you can contribute the maximum allowed which is $7,750 since you're age 55 or older.
If you go based on eligibility throughout the year then so long as you (1) have a high-deductible health plan, and (2) have an HSA account, and (3) do not have other insurance coverage, you can contribute to an HSA the maximum amount allowed / 12 multiplied by the number of months for which you were eligible. So if you and your wife did not have other coverage but meet all of the requirements for an HSA from May through December then based on eligibility throughout the year you could contribute $4,251 for those 7 months.
Either way works, but if you think you will remain eligible to contribute through December 31st, 2018 then I would go with the last month rule as that will allow you to contribute more for 2017.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)