Hi there, I joined this job on Feb 26th and enrolled in HDHP medical plan and HSA (Netbenefits). My company says maximum employee contribution is $3400 and Total 2024 IRS contribution limit is 4,150. I had initially signed up to contribute $170 per semi-monthly pay check. My Year-to-date contributions are $2,325.0, my current annual contribution is $1,700.00. I just realized that I might have probably signed up for too much contribution as I only joined in March. (3400/24=$141.66 per month.. So 141.66*20 = 2833. ).
I don't plan to sign up for HDHP next year so I don't want to end up with Last month rule.
Please confirm if I stop my contributions at $2800. Thank you.
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the maximum HSA for you in 2024 is 4150 * 10/12=3458.33. (The 3400 the employer cited is the proration for the year). This includes both employee and any matching employer contributions. to contribute to an HSA for any month you must be covered by a HDHP on the first day of that month. your first month of eligibility is March
assuming you will get 20 paychecks in 2024 from which HSA will be deducted and there are no matching employer contributions contributing $170 per pay period is fine. However, if the employer is going to make a matching contribution 170 would be too much. so ask your employer.
Thank you very much Champ! My employer has contributed $650 so far and their maximum contribution to HSA is $750 for the year. From my understanding, I thought that was the difference between the $4150 (total maximum IRS contribution) and the $3400 (maximum employee contribution) of their suggestion on Fidelity NetBenefits. Please confirm if you think $170 is still ok per pay period or should I reduce my annual contribution to $2800. Thank you.
If you are covered by the HDHP on 12/1/24 AND plan to remain covered by a qualifying HDHP for all of 2025, you can use the "last month rule" to contribute up to the maximum amount of $4150. Your employer is setting your limits based on the known facts of your employment ($345 per month) without assuming that you will remain covered or employed (you might change coverage, or be let go, or you might get married or have a child which would increase your limit).
If you don't rely on the last month rule, your limit is $345.83 for each month that you are covered by a qualifying HDHP on the first day of the month. Assuming your insurance started 3/1/24, your limit would be $3458. However, if your insurance started on March 15 (for example), then your limit for 2024 (without using the last month rule) would be $345.83 x 9 months = $3112.
You don't need to change anything now. If you get to December 2, and you are still covered by the HDHP and you think you will be covered for the whole next year, you can make an extra contribution out-of-pocket, from your bank account to the HSA, to "top it off" to the full $4150, and get an extra tax deduction for the contribution. If your HDHP coverage ends sometime before the end of the year, you have until April 15, 2025, to recalculate your actual contribution limit and remove any excess contributions. (This is a special procedure at the HSA bank, not a normal withdrawal.) If you remove the excess contributions before the deadline, they will be added back to your taxable income (since they are not eligible to be tax-free) but there is no additional penalty.
@jackkgan wrote:
Thank you very much Champ! My employer has contributed $650 so far and their maximum contribution to HSA is $750 for the year.
This is a slightly different issue, don't get confused.
Your contribution limit is $4150, or $3112, or $3458, depending on when your HDHP coverage started. That's combined, voluntary salary reductions and employer contributions (free money from the employer). Technically under the tax code, all contributions are "employer" contributions, because the employee makes a voluntary agreement to reduce their salary, and the employer contributes an equal amount to the HSA.
The employer $3450 limit may very well have been calculated based on their free money contribution and not on your personal limit. If your voluntary salary reduction adds up to $3400, then your total contributions for the year are $4150. That's fine if you use the last month rule. But if you think you might not use the last month rule, then you might need to either reduce your contributions or remove the excess contributions before the April 15, 2025 deadline. (And as mentioned, adding a spouse or dependent and changing to family coverage will increase your limit.) I would still leave things as they are, and not make any changes, until you get to the end of the year and see what 2025 looks like.
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