Can I contribute to my HSA for 2018?

[35andFI]

Hello fellow mustachians!

This is my first post here. Looking forward to collaborating with all of you!

I live and work in the USA.

I had a HRA for a few years before learning about how great HSAs are.
During the open enrollment for 2019, I switched from a HRA to a HSA.
With the help of my employer, I set up an account with HSA Bank (who my employer will be contributing to and paying the fees for).

So now I have an HSA Bank account and will be maxing it out with pre-tax money automatically coming out of my paycheck in 2019.

My question is whether or not I can max it out for 2018 as well even though I won’t have the HSA insurance plan until 1/1/2019.
It is my understanding that the HRA is still a HDHP and so I should be eligible to contribute to my HSA Bank account.
I understand that if I am “allowed/eligible” to do this, I will be putting in after tax money and then claiming the contribution on my 2018 taxes.

Can I max my 2018 contribution into my HSA Bank account (and claim it on taxes) even though I will have an HRA until 2019?

[MDM]

63falcondude, welcome to the forum.

My question is whether or not I can max it out for 2018 as well even though I won’t have the HSA insurance plan until 1/1/2019.

No.  No HDHP in 2018 = No HSA in 2018.

It is my understanding that the HRA is still a HDHP and so I should be eligible to contribute to my HSA Bank account.

Unfortunately that is a misunderstanding.  An HDHP is a type of insurance plan, while an HRA is an employer-funded plan that reimburses employees for medical expenses not covered by company-sponsored insurance.

[35andFI]

Thank you MDM! I’m happy that I asked before putting the money in.

Since the HRA plan had the same deductible as the HSA plan, I figured that the HRA plan would be considered a HDHP but I guess that isn’t the case.

I hope that I didn’t screw anything up by linking my bank account. It wasn’t allowing me to do so online so I had to call to get them to do it on their end.

I guess I’ll have to wait and see until after my first 2019 paycheck.

Thanks again.

[use2betrix]

Yeah - only if your HDHP plan became active in 2018.

I switched to a HDHP plan that came into effect November 1, 2018. As such, I put $6,900 in this month, then am putting $7000 in Jan/Feb of next year.

[35andFI]

Yeah - only if your HDHP plan became active in 2018.

Thanks for the reply!

I think my confusion came from thinking that a HRA plan with a high deductible was a HDHP... I’m sure you can see the logic there.

I switched to a HDHP plan that came into effect November 1, 2018. As such, I put $6,900 in this month, then am putting $7000 in Jan/Feb of next year.

Just be aware of the Last Month rule incase you are not already.
If you lose HDHP coverage next year (specifically during the 1st of any month in 2019), you will have to pay income tax + a 10% penalty on that $6,900.

[MDM]

Since the HRA plan had the same deductible as the HSA plan, I figured that the HRA plan would be considered a HDHP but I guess that isn’t the case.

May be just typos or similar, but if not you may need to brush up on the buzzwords.  A High Deductible Health Plan (HDHP) is insurance. 

Neither a Health Savings Account (HSA) nor a Health Reimbursement Account (aka Arrangement) (HRA) is insurance.

See Pub. 969 for more.

[35andFI]

MDM, maybe I am mistyping or using incorrect lingo somewhere.

When I sign up for insurance during open enrollment, we are given 3 options for medical:
1) PPO
2) HRA
3) HSA

PPO has a higher premium and a lower deductible.
HRA and HSA have lower premiums and a high deductible.

[35andFI]

I wonder if that means that I’ve had a HDHP all along and am just switching the Account from Health Reimbursement to Health Savings.

If this is the case, then that would bring me back to my original question.

[MDM]

MDM, maybe I am mistyping or using incorrect lingo somewhere.

When I sign up for insurance during open enrollment, we are given 3 options for medical:
1) PPO
2) HRA
3) HSA

PPO has a higher premium and a lower deductible.
HRA and HSA have lower premiums and a high deductible.

I wonder if that means that I’ve had a HDHP all along and am just switching the Account from Health Reimbursement to Health Savings.

If this is the case, then that would bring me back to my original question.

And until you know what insurance you have now and will have in 2019, you can only guess.  Appears your benefits department hasn't done you any favors by referring to PPO/HRA/HSA as if they are three versions of the same thing.

They aren't, at least as the terms are usually defined. 

Publication 969 is relatively readable for an IRS publication - it's probably worth your time to read the parts applicable to you so you can question your benefits department with more knowledge.

[35andFI]

I just looked at my company website that lists the available plans.

We have EPO (not PPO like I said earlier), HRA, and HSA.

The EPO plan has a deductible of $500/individual or $1,000/family.
The HRA and HSA plans both have a deductible of $1,500/individual or $3,000/family.

One thing that I notice is that the HSA plan says “Qualified High Deductible Health Plan” while the HRA does not even though they have the same deductible.

I have the HRA Plan now and will have the HSA Plan in 2019.

Also, thanks for posting the link to that. I did read it earlier today when looking for this answer.

[MDM]

The HRA and HSA plans both have a deductible of $1,500/individual or $3,000/family.

One thing that I notice is that the HSA plan says “Qualified High Deductible Health Plan” while the HRA does not even though they have the same deductible.

Again, that's a terrible website because an HSA does not have a deductible.  But you're just the messenger. ;)

Also, a $1500 individual deductible within a family plan disqualifies that plan as an HDHP.  If the family plan has only the $3000 deductible (with no separate individual deductible) then it qualifies, at least as far as deductibles are concerned.

[StetsTerhune]

Yeah - only if your HDHP plan became active in 2018.

I switched to a HDHP plan that came into effect November 1, 2018. As such, I put $6,900 in this month, then am putting $7000 in Jan/Feb of next year.

I'm too lazy to find a source right now, but I'm quite certain that the limit on HSA contributions is by month. If you only have an eligible plan for 2 months in 2018, your limit is not $6900, but rather $6900*(2/12).

[Brother Esau]

Yeah - only if your HDHP plan became active in 2018.

I switched to a HDHP plan that came into effect November 1, 2018. As such, I put $6,900 in this month, then am putting $7000 in Jan/Feb of next year.

I'm too lazy to find a source right now, but I'm quite certain that the limit on HSA contributions is by month. If you only have an eligible plan for 2 months in 2018, your limit is not $6900, but rather $6900*(2/12).

There is an IRS "testing period". As long as you remain with the coverage for all of 2019, the monthly breakdown does not apply and you can deduct the full amount for 2018.

[35andFI]

Again, that's a terrible website because an HSA does not have a deductible.  But you're just the messenger. ;)

I understand that a HSA does not have a deductible.
I’m talking about the plan that allows us to open a HSA.
I’m not sure what else to call it other than the “HSA Plan”.

Also, a $1500 individual deductible within a family plan disqualifies that plan as an HDHP.  If the family plan has only the $3000 deductible (with no separate individual deductible) then it qualifies, at least as far as deductibles are concerned.

Those are two separate plans. There is one to cover yourself and there is one to cover your whole family.
I have the individual one since I do not have a family and I am positive that the plan is qualified as a HDHP that allows me to contribute to a HSA in 2019.

Thanks again for your help. After hearing what everyone has to say and going through the papers again, I now understand that I cannot contribute to my HSA Bank account until 2019.

[use2betrix]

Yeah - only if your HDHP plan became active in 2018.

I switched to a HDHP plan that came into effect November 1, 2018. As such, I put $6,900 in this month, then am putting $7000 in Jan/Feb of next year.

I'm too lazy to find a source right now, but I'm quite certain that the limit on HSA contributions is by month. If you only have an eligible plan for 2 months in 2018, your limit is not $6900, but rather $6900*(2/12).

There is an IRS "testing period". As long as you remain with the coverage for all of 2019, the monthly breakdown does not apply and you can deduct the full amount for 2018.

Thank you for that information. I was not aware of this.

[Brother Esau]

Yeah - only if your HDHP plan became active in 2018.

I switched to a HDHP plan that came into effect November 1, 2018. As such, I put $6,900 in this month, then am putting $7000 in Jan/Feb of next year.

I'm too lazy to find a source right now, but I'm quite certain that the limit on HSA contributions is by month. If you only have an eligible plan for 2 months in 2018, your limit is not $6900, but rather $6900*(2/12).

There is an IRS "testing period". As long as you remain with the coverage for all of 2019, the monthly breakdown does not apply and you can deduct the full amount for 2018.

Thank you for that information. I was not aware of this.

You're welcome. The HSA with my job began on July 1 of this year. The contributions from my job and my payroll deductions will leave me about $2k shy of the max for 2018. I will be sending in a check for the remaining $2k sometime before filing taxes in April '19. Can't recall if I need to stay with the plan for 6 months or for all of 2019 but regardless, I won't be changing it.

[Curmudgeon]

Just be aware of the Last Month rule incase you are not already.
If you lose HDHP coverage next year (specifically during the 1st of any month in 2019), you will have to pay income tax + a 10% penalty on that $6,900.

Does that 6900 then count as income for 2018 (requiring a corrected tax filing) or for 2019?
I'm not the OP, but I'm considering making a full 6900 HSA contribution for 2018 using the last month rule.  If something unexpected happens in 2019 and I'm not on a HDHP the whole year, and that 6900 suddenly becomes 2018 income, that would suck - it would mean, among other things, falling over the ACA cliff.  But if it's 2019 income, at least I have time to react.  Do you know in which year I would need to claim it?

[MDM]

Does that 6900 then count as income for 2018 (requiring a corrected tax filing) or for 2019?
I'm not the OP, but I'm considering making a full 6900 HSA contribution for 2018 using the last month rule.  If something unexpected happens in 2019 and I'm not on a HDHP the whole year, and that 6900 suddenly becomes 2018 income, that would suck - it would mean, among other things, falling over the ACA cliff.  But if it's 2019 income, at least I have time to react.  Do you know in which year I would need to claim it?

2019, based on the following from https://www.irs.gov/pub/irs-pdf/p969.pdf:
Example 1.
Chris, age 53, becomes an eligible indi-
vidual on December 1, 2017. He has family HDHP cover-
age on that date. Under the last-month rule, he contrib-
utes $6,750 to his HSA.
Chris fails to be an eligible individual in June 2018. Be-
cause Chris didn’t remain an eligible individual during the
testing period (December 1, 2017 through December 31,
2018), he must include in his 2018 income the contribu-
tions made in 2017 that would not have been made ex-
cept for the last-month rule.

[35andFI]

Just be aware of the Last Month rule incase you are not already.
If you lose HDHP coverage next year (specifically during the 1st of any month in 2019), you will have to pay income tax + a 10% penalty on that $6,900.

Does that 6900 then count as income for 2018 (requiring a corrected tax filing) or for 2019?
I'm not the OP, but I'm considering making a full 6900 HSA contribution for 2018 using the last month rule.  If something unexpected happens in 2019 and I'm not on a HDHP the whole year, and that 6900 suddenly becomes 2018 income, that would suck - it would mean, among other things, falling over the ACA cliff.  But if it's 2019 income, at least I have time to react.  Do you know in which year I would need to claim it?

As MDM mentioned, it would be 2019. It is important to note that you have to be covered by a qualified HDHP on the first of every month in 2019 to avoid paying the penalty + tax.

This means that if you lose coverage on say Feb 4th 2019, you need to be covered by March 1st 2019 to avoid having to pay.

[Curmudgeon]

Does that 6900 then count as income for 2018 (requiring a corrected tax filing) or for 2019?

2019, based on the following from https://www.irs.gov/pub/irs-pdf/p969.pdf:

Thanks - that's good to know, and makes planning easier.
Unfortunately, my Health Insurance situation usually usually ends up being a bit volatile.  I'm going to make a safe, prorated 2018 contribution now, and then a full-year (2018) contribution by 4/15/19.  If I lose HDHP in 2019, I can handle paying 2019 taxes on the difference, the only thing that will still suck is the 10% penalty.