Author Topic: HSA $6,750 family limit question  (Read 2609 times)

Joel

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HSA $6,750 family limit question
« on: October 27, 2016, 10:56:56 AM »
My wife has access to a HDHP w/ HSA.

For just her, the plan costs $0 and they contribute $600 to the account.
For her + me, the plan still costs $0 and they contribute $1,200 to the account.
No children.

With that said, we want to sign up for her + me through her employer, in order to get the extra $600 contribution from her employer.

With that said, my employer does not offer a HDHP w/ HSA. I'm able to get a decent Kaiser HMO medical plan for $24 per year through my employer. If I do not purchase insurance through my employer, my wife's employer charges a $125 per month spousal surcharge.

As a result, my wife has a HDHP w/ HSA for her and me, while I have an HMO covering just me.

Regarding the HSA, are we eligible for contribute $3,350 for my wife? Or $6,750 for the family?

My gut tells me we are probably limited to $3,350 for my wife, but I can't seem to find another saying we can't contribute $6,750.

therethere

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Re: HSA $6,750 family limit question
« Reply #1 on: October 27, 2016, 10:59:44 AM »
If you stay on the HMO

3350-600(employer) = 2750 is what you can contribute

Joel

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Re: HSA $6,750 family limit question
« Reply #2 on: October 27, 2016, 11:18:08 AM »
If you stay on the HMO

3350-600(employer) = 2750 is what youshe can contribute

Am I not allowed to be on my HMO, and be covered by her HDHP as well?

In that case, it would be:

3350-1200(employer) = 2150 is what she can contribute

OmahaSteph

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Re: HSA $6,750 family limit question
« Reply #3 on: October 27, 2016, 11:25:15 AM »
Was just about to post a similar question. Found this on Investopedia:

How much can you contribute each year to an HSA?

For 2016, you can contribute $6,750 if you have family HDHP coverage and $3,350 if you have self-only coverage.


However, you can use that $3,350 to cover dependents' medical costs if you claim them on your taxes, correct? So while your HDHP is single coverage, the money in the HSA is you and dependents. Yes? You cannot, however, contribute $6,750 despite using your HSA for your family. 

Joel

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Re: HSA $6,750 family limit question
« Reply #4 on: October 27, 2016, 11:26:04 AM »
I think my understand is as follows:

She can contribute $3,350 for the individual limit. We are not eligible for the family limit as I am covered by my HMO.

However, since I can be covered by my HMO and her HDHP, it makes sense to do that in order to get the additional $600 contribution by her employer. As a result, her employer will contribute $1,200, and we can only actually contribute $2,150.

Agree?

therethere

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Re: HSA $6,750 family limit question
« Reply #5 on: October 27, 2016, 12:31:21 PM »
So you are interested in having the HMO and then getting on the HDHP as secondary insurance? Is that what you're suggesting?

From my understanding you can either:

1. Take the HMO and have individual HDHP coverage for your wife. 3350 HSA annual limit with 600 employer contribution

OR 2. Pay the surcharge (my employer confirmed this is pre-tax), skip the HMO, and get family HDHP. 6750 HSA annual limit and a 1200 employer contribution.
« Last Edit: October 27, 2016, 12:34:13 PM by therethere »

seattlecyclone

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Re: HSA $6,750 family limit question
« Reply #6 on: October 27, 2016, 12:36:13 PM »
Hmm...I just looked over Publication 969 and think that your wife may be able to contribute the family limit if you are on her plan. Relevant sections quoted:

Quote
Qualifying for an HSA

To be an eligible individual and qualify for an HSA, you must meet the following requirements.
  • You must be 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 are not enrolled in Medicare.
  • You cannot be claimed as a dependent on someone else's 2015 tax return.

Based on this, if your wife is covered only by her employer's HDHP, she is likely an eligible individual, so she is able to contribute to an HSA. If you also have coverage through your employer, and that coverage is not an HDHP, you would not be an eligible individual, so you would not be able to contribute to an HSA.

However, "family coverage" is defined below:

Quote
Self-only HDHP coverage is an HDHP covering only an eligible individual. Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual).

If your wife's plan covers her and at least one other individual (i.e. you), it counts as family coverage even if you are not an eligible individual yourself.

Therefore it appears that your wife would be able to contribute up to the full family limit to her own HSA, unless I missed some exception when reading through the publication or if the publication is incorrect.

Joel

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Re: HSA $6,750 family limit question
« Reply #7 on: October 27, 2016, 12:49:07 PM »
That's why I'm back to my original conclusion:

HSA contribution limit: This is based solely on the type of plan. A family HDHP plan, a family HSA contribution limit = $6,750

HSA covered individual: The plan holder and if a family plan, spouse and dependents. I'm considered a covered individual.

HSA eligible individual: You are an eligible individual if you are a covered under a HDHP, you have no other health coverage (including Medicare) and you are not a dependent. I'm not considered an eligible individual, so I cannot make contributions to my own HSA account. However, that does not prevent her from being eligible for the family plan.

Lucky Recardito

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Re: HSA $6,750 family limit question
« Reply #8 on: October 27, 2016, 01:03:22 PM »
It sounds to me like you are thinking of "HDHP + HSA" as one thing, which it is NOT. It is two things.

HDHP = "High-Deductible Health Plan." This is an actual health insurance plan.

HSA = "Health Savings Account." This is a tax-advantaged saving & spending account intended to make your healthcare cost less via preferential tax treatment. An HSA is not a health insurance plan.

If you are signing up for your HMO at work, then you will have your own insurance plan. Your wife will sign up for her HDHP at work for $0 premium. She can then open an HSA (make sure she remembers to open it... it's often a separate step), but she will be participating as an individual. Her work will contribute $600, and she can then contribute up to the individual max ($3400 for 2017... so 3400 - 600 = $3200 that she can contribute).

Now, in this scenario, you are NOT on the HDHP. That's her plan. You have your HMO through your work. That's your plan. You can't usually have two health plans in this kind of situation.

BUT the cool thing is that your wife can use her HSA to pay for medical expenses for both of you -- you can spend from an HSA as a family.

The alternative scenario would be for you to decline your HMO at work and both sign up for her HDHP. That would cost you $125/month for the insurance plan, since her employer isn't going to fork over the money for  YOUR insurance like it's doing for hers. They would bump their HSA contribution to $1200, and you two could contribute up to the family limit into the HSA ($6750; 6750 - 1200 = $5550).

The downside here is that you'd be paying $1500 for insurance ($125 x 12) in exchange for a $600 HSA boost. That math doesn't work. Even if you factor in some tax savings from maxing out the family HSA limit (rather than the individual), as well as the $24 you'd save by not joining your HMO, I don't think the math works in your favor.

TL/DR: Stay on your HMO. Wife joins HDHP and contributes to HSA up to individual max. You can both use HSA $$ to cover expenses.

Joel

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Re: HSA $6,750 family limit question
« Reply #9 on: October 27, 2016, 01:05:46 PM »
It sounds to me like you are thinking of "HDHP + HSA" as one thing, which it is NOT. It is two things.

HDHP = "High-Deductible Health Plan." This is an actual health insurance plan.

HSA = "Health Savings Account." This is a tax-advantaged saving & spending account intended to make your healthcare cost less via preferential tax treatment. An HSA is not a health insurance plan.

If you are signing up for your HMO at work, then you will have your own insurance plan. Your wife will sign up for her HDHP at work for $0 premium. She can then open an HSA (make sure she remembers to open it... it's often a separate step), but she will be participating as an individual. Her work will contribute $600, and she can then contribute up to the individual max ($3400 for 2017... so 3400 - 600 = $3200 that she can contribute).

Now, in this scenario, you are NOT on the HDHP. That's her plan. You have your HMO through your work. That's your plan. You can't usually have two health plans in this kind of situation.

BUT the cool thing is that your wife can use her HSA to pay for medical expenses for both of you -- you can spend from an HSA as a family.

The alternative scenario would be for you to decline your HMO at work and both sign up for her HDHP. That would cost you $125/month for the insurance plan, since her employer isn't going to fork over the money for  YOUR insurance like it's doing for hers. They would bump their HSA contribution to $1200, and you two could contribute up to the family limit into the HSA ($6750; 6750 - 1200 = $5550).

The downside here is that you'd be paying $1500 for insurance ($125 x 12) in exchange for a $600 HSA boost. That math doesn't work. Even if you factor in some tax savings from maxing out the family HSA limit (rather than the individual), as well as the $24 you'd save by not joining your HMO, I don't think the math works in your favor.

TL/DR: Stay on your HMO. Wife joins HDHP and contributes to HSA up to individual max. You can both use HSA $$ to cover expenses.

My wife is covered by her HDHP. I'm covered by my HMO and my wife's HDHP.

I understand the difference between an HDHP and an HSA. For the first time, I am at a new employer that offers an amazing HMO while my wife's employer also offers an amazing HDHP, so these questions are very nuanced.

Lucky Recardito

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Re: HSA $6,750 family limit question
« Reply #10 on: October 27, 2016, 01:11:47 PM »
Quote

My wife is covered by her HDHP. I'm covered by my HMO and my wife's HDHP.


Weird! I find it unusual that your wife's employer would allow you to be on their health plan if you already have your own -- but I don't make the rules. :-)

In that case, if they'll definitely let you be on the HDHP (without paying $125/month) AND you can keep your HMO, then I think you are right -- it would make sense that your wife can contribute up to the family max.

Joel

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Re: HSA $6,750 family limit question
« Reply #11 on: October 27, 2016, 01:18:40 PM »
Quote
My wife is covered by her HDHP. I'm covered by my HMO and my wife's HDHP.

Weird! I find it unusual that your wife's employer would allow you to be on their health plan if you already have your own -- but I don't make the rules. :-)

In that case, if they'll definitely let you be on the HDHP (without paying $125/month) AND you can keep your HMO, then I think you are right -- it would make sense that your wife can contribute up to the family max.

It seems that is the case. (In fact, that's what I did for 2016 and if that's not the case I would have to withdraw excess contributions).

Now, I have to decide if the $600 employer contribution and the tax-deferral of the additional contributions make it worthwhile to have the higher family deductible. That was an easy decision last year as we both have minimal medical expenses. We are going to start trying for our first child in February/March of next year though, so that impacts the decision going forward.

Lucky Recardito

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Re: HSA $6,750 family limit question
« Reply #12 on: October 27, 2016, 01:25:06 PM »
Quote
Now, I have to decide if the $600 employer contribution and the tax-deferral of the additional contributions make it worthwhile to have the higher family deductible. That was an easy decision last year as we both have minimal medical expenses. We are going to start trying for our first child in February/March of next year though, so that impacts the decision going forward.

Oof, now THAT's a tough question... good luck! But it sounds like you guys understand the system well...