Employer HSA contribution for ineligible employee

[Mad24]

Hello,

I started a new job in March 2025 and opened an HSA account in April 2025. However, I was ineligible for HSA because I was a dependent on my husband's low deductible plan that we failed to remove me from within the one month period for qualifying life events. We removed my name from his plan in Nov 2025 during open enrollment and he also changed himself to HDHP plan. I didn't contribute anything to HSA in 2025 but received $560 from my employer that they automatically deposited when the account was opened. I also haven't used any of that money.

Am I right that this is not allowed and I should pay tax on the $560? I contacted my HSA bank and my company HR but neither of them could tell me what to do, even saying this is not an issue. 

The bank said I can't remove this because my employer made the contribution and HR said they can't reverse it/don't know what form I am requesting.

1. Who should be requesting the removal of excess funds and what form number will I have to add to my taxes?
2. Is there a way to use this money towards next year's contribution without getting any penalty? 

[Mike9241]

the fact that you were covered by your husbands low -deductible plan for the early part of the year only means that a pro-rata portion of a full year's contribution can not be made for those months on the normal rules. you indicated that your husband had a high deductible plan for November and December, but was it a self-only HDHP or a family plan? If it were a family plan, then you are considered to be covered by a family HDHP for November and December and would have the option of making contributions (yourself and employer) of 2/12 of $8550 or $1425, so there would be no excess. You would not be entitled to withdraw the employers. As a matter of fact, if it were family plan coverage on 12/1/2025, you are entitled to make a full year's contribution of $8550- 560. This full year's contribution is permissible under the last-month rule (LMR). Its use is optional. The downside to the LMR is that you must continue to be covered by a family HDHP for all of 2026  

if your husband only had self-only HDHP coverage for November and December, then the question is, did you have HDHP coverage with your employer? Seems certain since the employer made an HSA contribution. 

So if you had self-only HDHP coverage for November and December it would allow a SO contribution of 2/12 of $4,300  or about $716. There would be no excess for you to withdraw.

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As a matter of fact, under this scenario with SO-HDHP coverage on 12/1/2025, you could actually make a full-year's contribution of $4300-$560 by 4/15/2026. This would be under the LMR, which would require you to maintain HDHP coverage through 12/31/2026 or pay income taxes on the calculated excess contribution

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other possibilities exist if you were 55 or over on 12/31/2025 or were covered by a family HDHP. Details would be needed. 

[Mad24]

I realized after confirming again with my husband that I mistakenly mentioned in my original post that my husband had HDHP for November and December 2025. Since he didn't change employment, but only used open enrollment in Nov 2025 which doesn't come unto effect until January 1 2026. So for 2025 whole year I was on his low deductible plan AND started HSA. Now we both are on SO HDHP but that means all of my HSA contributions for 2025 were excess, correct? I'm planning to request the withdrawal of that excess from my HSA bank- basically my HSA account balance at the end of 2025 (contributions + earnings). Then I understand I have to show this as additional taxable income for my 2025 tax. Is there a specific form I need for this? Will I have to do anything again for 2026 taxes? And is this the easiest way to do this?