Hi everyone,
I’m hoping to get advice on how to correct and report excess HSA contributions now that we’ve discovered my general-purpose Health Care FSA disqualified my wife from HSA eligibility for all of 2025.
Background
My FSA (2025 plan year):
I elected a $500 general-purpose Health Care FSA (plan year Jan 1 – Dec 31 2025). The full $500 became available upfront on Jan 1 (deducted over 26 paychecks) and has already been used for dental expenses for my wife and children.
My wife changed her job in March 2025, and will switch to another job in August 2025. HSA coverage in 2025:
Job 1 (Jan 1 – Mid March): Enrolled in an HDHP; she and her employer both contributed to her HSA.
Job 2 (Mid March – Mid August): Switched to a new HDHP; she and her employer both contributed.
Job 3 (Starting Mid August): About to begin a third HDHP role that offers a generous employer HSA contribution—she hasn’t enrolled yet, so maybe just enroll in a non-HDHP plan, to be safe.
Because of my general-purpose FSA covering her, all of my wife’s HSA contributions in 2025 are excess and must be corrected. I was told that all her contributions for the year must be withdrawn to avoid a penalty.
Questions
Scope of Withdrawal:
When removing excess contributions (plus any earnings), do we need to withdraw both my wife’s personal contributions and the employer contributions, or only her personal portion?
Repaying Employer Contributions:
If employer contributions must be withdrawn, do we need to:
Repay those amounts directly to the employers (e.g., Job 1, which she’s already left and Job 2, which she is leaving soon)?
Or simply arrange a full withdrawal (including employer funds) with the HSA custodian (Fidelity)?
For Job 3 (starting in August):
The company offers a generous employer HSA contribution if she enrolls in their HDHP. However, based on this situation, it seems she shouldn’t enroll in HDHP + HSA at all, even if she opts out of contributing herself — is that correct? In that case, would it be safer to choose a non-HSA plan, just in case the employer auto-contributes?
Treatment of Spent Funds:
We’ve already spent some of this year’s HSA contributions tied to Job 1 and Job 2 earlier in 2025 on qualified medical expenses. If we continue using funds from the 2025 contributions, do those spent amounts still count as excess requiring repayment (need to be repaid), or are “already-used” funds (or to be used later in 2025) treated differently when correcting the excess?
Tax-Time Reporting:
Lastly, when we file our 2025 return next year (e.g., in TurboTax), what specific forms or entries should we prepare? Or are there specific tax forms (e.g. 1099-SA or 8889) we should expect from Fidelity or include in TurboTax to reflect the withdrawal of excess contributions? For example:
Any detailed guidance—especially on how custodians handle employer contributions and on spent vs. unspent excess funds—would be greatly appreciated. Thank you!
