Hi,
I was on an HSA family plan this year Jan-Jul and then moved to an individual plan August 1. I fully funded my HSA based on the 2022 family limits of $7,300 before August 1. My understanding is that after downgrading to an individual HSA, the annual contribution limit for me would be ($7,300 max fam x 7months) + ($3,650 max individual x 5months) = $69,350 / 12 = $5,779 new max contribution. This means I am overfunded by $1,521 ($7,300 - $5,779).
From my understanding I have two options.
- I can submit an excess withdrawal form to my HSA bank and withdraw that excess $1,521 and let my employer know. They will update my contributions so my year end W2 reflects the correct $5,779 max contribution.
- I can let the excess sit in my account and pay a 6% excise tax on it each year it is not used up (either by contributions, or spending it)
My questions are
- Is my understanding of the above correct?
- If I do option 1 above and withdraw the excess- does my employer tax me on that withdraw, or am I taxed on that withdraw when I file my 2022 taxes?
- If my wife gets an HSA plan in January and I move to that plan and we make contributions to her plan, do those contributions count towards my excess funding next year?
- Based on my calculation that my new contribution limit is $5,779 and I’ve funded $7,300, what happens in the case I pay for medical expenses and my balance at year end is $2,000? Is this $2,000 still an excess since I’ve drawn my balance down below my max contribution limit of $5,779?
- Is there a dollar amount I can draw down to that wont require me to make a withdrawal or carry forward with 6% excise tax? I’m assuming not since I’ll want my W2 to reflect my new max contribution limit.
