The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: schmerna on October 12, 2016, 10:56:28 AM
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Background: I carry insurance for the family, me, DH, kids. It is great coverage and a reasonably priced PPO, not a HDHP. There is no cost savings if I drop DH from plan.
DH has the opportunity to enroll in a HDHP with HSA. The premium cost is $1800, company would contribute $1000 to HSA, we could contribute $3400 to HSA. I don't know what the investment options are or how much the fees are.
Should we sign him up even though he doesn't need coverage? Is the tax savings (income, FICA) worth it?
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So you've got a cost of $800 - $1800 premium less $1000 that the employer is contributing. You need to save at least $800/$3400 = 23% on taxes to come out ahead. Are you in the 25% federal bracket or higher? Then yes, it is a no-brainer on the financial aspects. If lower, FICA (remember that you must make HSA contributions via payroll to avoid FICA), and state/local income-tax savings could push you over the top.
Be sure to do your own math, and research the fees, but that's my back-of-the napkin analysis.
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following. I am pretty much having it down to only saving 10s of dollars. with my luck I'll forget some paper work and it would end up costing me.
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That's with the numbers as presented, and not taking into account differences in health care expenses between current plan and new HDHP plan for husband, which I can't just figure for you, so I left that part out.
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Actually the contribution limit is $3400 for 2017 INCLUDING an employer contribution. So you could only put in $2400, which changes your tax analysis.
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Unlike 401k's, company contributions count towards the allowable maximum. So if you're talking about him signing up for a single person coverage you would only be able to contribute 2,350. Use that for any math! Seems like a wash to me. Remember that if he has any health problems one year of HSA savings is likely not enough to cover the max out of pocket limits. So ideally he'd need to be emergency free for 2-3 years to be worth it in my opinion.
Does DH use the insurance for an existing condition?
Do you already max out all tax advantaged accounts?
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Actually the contribution limit is $3400 for 2017 INCLUDING an employer contribution. So you could only put in $2400, which changes your tax analysis.
Thanks for the information, I didn't realize that included the employer contribution.
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So you've got a cost of $800 - $1800 premium less $1000 that the employer is contributing. You need to save at least $800/$3400 = 23% on taxes to come out ahead. Are you in the 25% federal bracket or higher? Then yes, it is a no-brainer on the financial aspects. If lower, FICA (remember that you must make HSA contributions via payroll to avoid FICA), and state/local income-tax savings could push you over the top.
Be sure to do your own math, and research the fees, but that's my back-of-the napkin analysis.
Yes, we expect to be in the 25% bracket next year. A potential bonus makes the math a little uncertain but with the additional information, I think there will be a savings.
Yes, we are maxing out the other available accounts.
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Should we sign him up even though he doesn't need coverage? Is the tax savings (income, FICA) worth it?
Are you suggesting that you'd leave your DH on your health insurance and sign him up for the HDHP for "additional" coverage? If so, he wouldn't be eligible for the HSA anyway. One of the requirements is that you cannot have any other health coverage that is not an HDHP.
https://www.irs.gov/publications/p969/ar02.html#en_US_2015_publink1000204039
If you're going to drop him from your health plan, then you also need to factor in whether you're comfortable with him on the HDHP plan. Given the zero cost savings, the extra $800 in effective premium, you can do the math to see if it's worth it. Would be interested to see what you decide.
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Actually the contribution limit is $3400 for 2017 INCLUDING an employer contribution. So you could only put in $2400, which changes your tax analysis.
Not to side track the thread, but I'm getting married soon and I thought as long as you are married regardless of them being on the same plan as you, you could hit the married limit which is $6800 for 2016?
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Actually the contribution limit is $3400 for 2017 INCLUDING an employer contribution. So you could only put in $2400, which changes your tax analysis.
Not to side track the thread, but I'm getting married soon and I thought as long as you are married regardless of them being on the same plan as you, you could hit the married limit which is $6800 for 2016?
You must have FAMILY insurance. If your HDHP only covers you and not your spouse you can only contribute to the single limit.
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Not to side track the thread, but I'm getting married soon and I thought as long as you are married regardless of them being on the same plan as you, you could hit the married limit which is $6800 for 2016?
If you and your spouse are both on an HDHP plan, you can contribute the family limit, which is $6,750 for 2016.
If your spouse is not on an HDHP plan, they are not an eligible individual, and only the eligible individual can contribute at the individual contribution limit.
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Actually the contribution limit is $3400 for 2017 INCLUDING an employer contribution. So you could only put in $2400, which changes your tax analysis.
Not to side track the thread, but I'm getting married soon and I thought as long as you are married regardless of them being on the same plan as you, you could hit the married limit which is $6800 for 2016?
You must have FAMILY insurance. If your HDHP only covers you and not your spouse you can only contribute to the single limit.
Thanks good to know. So if like the OP they were to put herself and 1 child on the current plan and then more him and 1 child with no medical issues to the HD Plan they could tax protect the family limit.
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That might be a viable plan. I am working through the various possibilities.
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Don't forget to factor the difference in your out-of-pocket medical - HDHP. The healthier husband is, the better this move will likely work out for you. If you've got thousands of dollars in additional expenses due to the higher deductible and other terms with the insurance, then you've got to factor that in.