HSA Question spouse has option to get an EPO

[ranman6418]

I will be enrolling in a HDHP with a HSA in 2018 with my employer.  I will have my wife and college daughter covered on the plan (she is full time student and under 26).

My wife also has the option to get an EPO with her employer to cover herself only.  I only keep her on my insurance because I'm retired and can never add her back if I remove her.

Questions.  Can I pay for any qualified medical expense she has out of pocket if she uses her own EPO?

How much can we contribute to the HSA for all 3 of us, or just me and my daughter?  I'm over 55 as well.

[Opus 17]

If you cover yourself and your daughter, that would be considered a family HDHP and you can contribute up to $7900 ($6900 plus $1000 catchup for over 55).  (If your wife is also over 55, but not enrolled in an HDHP, you can't include her $1000 catchup provision.)

You can use your HSA to pay for out of pocket expenses incurred by yourself, your spouse or your dependent, even if your spouse is not eligible to contribute to an HSA.

[ranman6418]

Is there a problem with my spouse actually being covered under the HDHP, and being on her own EPO?  Her EPO is going to be her primary insurance, she is basically being kept on mine, because if anything happens to her employment in the future, i can't add her to mine ever again since i'm retired from my employer.

[dmertz]

Your wife having a non-HDHP plan that covers her only prevents *her* from being eligible to contribute to an HSA in her name.  It does not prevent *you* from being eligible to contribute to an HSA in your name up the the family-plan limit based on you having a family HDHP plan.

[Opus 17]

Something else to watch for is that if you provide coverage for your daughter when she is not a tax dependent**, the value of the coverage will be considered taxable income to you, and if you are deducting an employee share of premiums from your pension, the part that covers her won't be pre-tax anymore, it will be after tax.  This is known as "imputed income."

**You can't get tax-free health insurance for someone who is not a spouse or tax dependent, even if coverage is allowed under the ACA.  For example, your daughter can't be your dependent when she is age 24 or 25 years old if she earns more than $4050, even though the ACA allows you to carry her on your insurance.  Suppose your employer is paying $1000 per month for single coverage or $1500 per month for self+daughter insurance (you normally never see this.)  When your daughter is no longer a tax dependent, that $500 per month premium paid on her behalf will be counted as taxable income to you.

But that may be a few years down the road.

Also, once you enroll in Medicare, you can't contribute to an HSA.  That may be a few years farther down the road.

[ranman6418]

My daughter is a full time college student under 26, so I have been able to claim her as a dependent.  She files her taxes on her PT jobs and she always checks that someone else is claiming her on their taxes.  Is there a cap on how much she can make as a FT student that is being carried on her parents tax return?  We still provide over half her support, she usually only makes 4-5 thousand a year during the summer, plus PT while she is a FT student in college.

[Opus 17]

While she is "under 24" (age 23 or less on December 31 of the tax year) then the test to be a dependent is "does not provide more than half of own support".  It doesn't matter if the parents pay more than half or if the more than half is provided by a combination of scholarships, parents, and other relatives.  Just that the student provides less than half of own support.

However, when she is over 23 (age 24 or older as of December 31) the rules change.  She is not eligible to be a "qualifying child" dependent.  The other set of rules, called "qualifying relative" say that she can't be a dependent if she earns more than $4050, regardless of who provides the rest of her support.

So there is a 2 year period where she probably can't be your tax dependent but is still allowed to be covered under your insurance.  If your employer recognizes this situation, they should impute you with income for the money they provide for her insurance.  It would be treated as if you received a salary that was then used to pay her premium after tax.  This is because pre-tax or untaxed insurance premiums are only allowed for self, spouse, and tax dependents.

You could ask the employer about this, or keep quite and wait and see what happens.  But it is a thing that should happen, if the employer is aware of her age and keeping track of the rules.