Switching from HDHP to PPO mid-Year, Can I max out HSA?

[Dezrah]

There’s a possibility I might switch jobs within the calendar year.  We are currently covered for health insurance under my employer’s HDHP.  One of my current benefits is my employer contributes $2,600 annual ($216.67 once a month) to our HSA.  I withhold an additional $164.58 per paycheck to max-out the account by the end of the year.

My prospective job would switch us to a PPO plan which I understand would make us ineligible to continue contributions to our HSA.  However, we are allowed to keep and use our HSA if we wish.

What I would like to do is make a lump sum contribution (about $2,400 depending on exactly when I quit) to the HSA before I quit my job so that the account is maxed out for 2014.  I will mostly let the account sit in investments unless we had a really major medical bill that would otherwise compel us to go into debt.

Is there any legal, tax-related, or pragmatic reason why this wouldn’t work?  It feels like I’m taking advantage of a loophole in the law that surely would be closed if possible, but I can’t find anything online that says my plan wouldn’t work.

Thank you for your help.

[NumberCruncher]

I see no reason why you can't front load HSA contributions, BUT you probably want some details on what it would mean to keep your HSA. I'm going to guess there's a monthly fee just to maintain the account (something like $3/mo), so it might not make sense to keep it.

[Freedom2016]

What are your deductibles going to be with the PPO?

I ask because we have a PPO with high deductibles, making us HSA-eligible. So first thing to check is whether you might still be in a HSA-eligible plan after the switch...

[Dezrah]

Contribution limits are pro-rated based on the number of months you have a qualifying health plan.  There will be tax penalties if you contribute more than allowed.  A couple sources:

http://www.hsabank.com/hsabank/education/irs-limits-and-guidelines

https://www.optumbank.com/using-your-health-savings-account/contributions-deposits/contribution-limits/

That first link answered my question perfectly.  It looks like I can more or less relax and let the auto-contributions continue, but I won't be able to front load.

I see no reason why you can't front load HSA contributions, BUT you probably want some details on what it would mean to keep your HSA. I'm going to guess there's a monthly fee just to maintain the account (something like $3/mo), so it might not make sense to keep it.

The HSA checking is charged $3.50 if the total is less than $1,000.  This is currently covered by my employer but I have always been in the habit of keeping about $1,200.

The HSA investments are charged $2.90 per month regardless of the balance.  Right now we have about $6,800 in this account and it will probably hover around that if we can no longer contribute.  As a percentage, this is kind of like a net ER of .75 (.51 from the bank fees and .24 from the fund fees).  That's not great, but not terrible.

I will have to think about these fees and whether I can improve on them or just make it our goal to cash out the accounts for medical expenses sooner than later.

What are your deductibles going to be with the PPO?

I ask because we have a PPO with high deductibles, making us HSA-eligible. So first thing to check is whether you might still be in a HSA-eligible plan after the switch...

I don't know yet.  I don't yet have a formal offer but I'm highly optimistic at this point and planning my exit strategy.  I will ask as soon as it's appropriate.


Thank you all for your help.