I had individual health insurance coverage with HSA in 2020 with $850 deductible. But FAQ says 2020: Individual coverage: A minimum deductible of $1,400 for HDHP. Help?

[ckhdz]

Turbotax instructions says to get an HSA, you have to be covered by an HDHP first, but according to the instructions I didn't have an HDHP? Am I supposed to choose "No, I did not have coverage"?

[Opus 17]

For 2020, your health plan must have an individual deductible of at least $1400, or it is not considered a qualifying plan to allow you to contribute to an HSA.

https://www.irs.gov/pub/irs-dft/p969--dft.pdf

So your answer to the question must be, you did not have qualifying coverage.  That will mean your contributions will be disallowed.  You must remove your contributions (or whatever remains) as "unallowable contributions" before April 15, 2021, and they will be added back to your taxable income.  (This is not a normal withdrawal and will require a special procedure at the HSA bank.)

[BillM223]

There are a number of requirements for a policy to be a High Deductible Health Plan (HDHP) besides just the size of the deductible. You should call the insurance company itself and ask them if this is an HDHP policy - the insurance company should certainly know.

Your answer in the interview will be determined by what the insurance company says, although I agree it seem unlikely that this is an HDHP. Perhaps someone in HR called it an HDHP without realizing that it wasn't?

[ckhdz]

This is so weird because I work for a large employer and that’s the way they set up our health insurance, with HSA deduction option....? Also I spent all the HSA contributions in 2020

[Opus 17]

---

@ckhdz wrote:

This is so weird because I work for a large employer and that’s the way they set up our health insurance, with HSA deduction option....? Also I spent all the HSA contributions in 2020

---

I linked to the draft 2020 version of publication 969 above, here is the official 2019 version, although nothing has changed to the definition of a qualifying HDHP except the money limits were adjusted for inflation. https://www.irs.gov/forms-pubs/about-publication-969

Unless you have misremembered your deductible, it seems like someone at HR made a major error and there may be a lot of people in your shoes.  I am not a lawyer, and I can't advise you on whether you should rely on your company's advice when it seems to be in conflict with the regulations.  If a lot of people are affected, the IRS might get wind of it even if you don't say anything. 

If the policy is not qualified, your contributions will be added back to your taxable income.  But, the additional 6% penalty is charged based on the amount of funds remaining in the account, so if you spent the money down, there won't be a penalty other than the income tax, which you would have paid anyway if you had not enrolled in the HSA. 

[BillM223]

Have you called the insurance company to ask them if your policy is an HDHP? That would be safer than asking HR in your company.

I would have thought that a large company would know this.

@ckhdz

[AmeliesUncle]

Is there any chance you are mixing things up and you actually had a Health FSA, rather than a HSA?  Does Box 12 of your W-2 show a code "W"?

Are you sure the insurance deductible is $850?  Or is maybe the employer contributing some money via a HRA to pay for part of the deductible first?

Is the policy actually through the employer?  Or did you purchase the policy elsewhere (such as the Healthcare Marketplace) and the employer is paying for or reimbursing for part of the premiums?

[Opus 17]

---

@AmeliesUncle wrote:

Is there any chance you are mixing things up and you actually had a Health FSA, rather than a HSA?  Does Box 12 of your W-2 show a code "W"?

---

The idea that this taxpayer might have had an FSA or HRA is a pretty good suggestion.  Let's see what they say.