Thanks again for helping with this. I am grateful... and still confused 😉
<The excess contribution is present in whichever account you designate as the one containing the excess. By requesting a return of excess contribution from your HSA, you've designated that the excess contribution was made to your HSA, not your in wife's HSA, so the gain must be determined by the investment performance only in your HSA.>
Perhaps this is the way the rules are read/interpreted and if so I'll accept it. But does it make sense why this seems silly? I had no choice but to do the reversal on my account. My wife received an automatic contribution from her employer - one that I imagine we couldn't have stopped if we wanted to (nor would we. obviously, I'd rather pay the fees and/or taxes on gains over returning free money).
<In this case, the gain is determined by the investment performance in your HSA between the time of your 3/31/19 contribution and the date of the return-of-excess-contribution distribution (also taking into account in the calculation any intervening regular distributions). Investment performance in your wife's HSA is irrelevant to a return of excess contribution from your HSA.>
I don't follow why it is irrelevant - maybe you just mean per the letter of the law based on first comment above. If my wife hadn't accepted a new job with an employer that contributed money to her HSA, then we wouldn't have gone over our combined annual limit.
I also don't follow the part about intermediate distributions. It sounds like you're saying if I paid for HSA-qualifying expenses between 3/31 and date of reversal (I did), I may not have had to make the reversal at all. But if this were true, it seems like it would be akin to saying... if the annual contirbution limit is $7,100 and I knew I had $3k of upcoming expenses in the following year, I could contribute$10,100 to the account which I cannot believe would be true.
My custodian is PayFlex. On the Request for Return of Excess Contributions form I filled our, after I indicated the amount of excess contribution I wanted returned, there is a note, "The excess contribution plus any interest will be removed from the core account." However, the only returned the exact number I provided (which did not include estimated gain)
