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Level 3

HSA/HDHP Self or Family

I have an HSA account in my name and pay expenses for both myself and my husband.  We both had health insurance through the Marketplace for 2019.  The Marketplace account indicates I am the recipient (Box 4) and my husband is listed as "Recipient's spouse's name"  (Box 7 Form 1095-A). 

 

In receipt of 3 1095-A's -  one for husband (covered by a HDHP from January - July, 2019) - he turned 65 in August 2019 and is now on Medicare.  I received one 1095-A covering January - August  (enrolled in a NON-HDHP).  Third 1095-A for me covers September - December (enrolled in a HDHP) 

 

We want to open an HSA for my husband for the months he is eligible (Jan-July) and I also want to add to mine. 

 

When the question of  "Let's Maximize your Contribution Limit" I need to choose each month of "self, family, or none" for myself and him.  I am confused - since we had different plans - does that mean the months I did NOT have an HDHP - is that self?  

 

FYI - as of December 1, 2018 we were both enrolled in an HDHP for the entire year of 2018

 

Thanks for any help!

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Expert Alumni

HSA/HDHP Self or Family

Because you had Self-only coverage on December 1, 2019, then your annual HSA contribution limit for 2019 is $3,500, thanks to the last-month rule. That's $4,500 if you are 55 or older. 

 

The last-month rule lets you use the full annual limit if you were covered in the last month of the year.

 

The catch is that you have to stay under HDHP coverage throughout the testing period, which is essentially all of 2020. If you don't, then you will be penalized.

 

If you think you are likely to go off of HDHP coverage (or get conflicting coverage like Medicare) during 2020, then you should limit your actual 2019 contributions to 1/3rd of the normal annual limit (i.e. $1,500 for $4,500, or $1.167 for $3,500). Then, even if you have to admit to a "lapse" in HDHP coverage in 2020, it will be OK because when you enter that you were covered for 4 months, TurboTax will determine that your contributions were less than or equal to the prorated limit.

 

Your husband's limit will be $2,626 (assuming that he had only HDHP insurance on July 1 and no conflicting coverage).

 

***NOTE*** If you make contributions now for 2019, you MUST make sure that you tell the HSA custodian that the contributions are for 2019. Otherwise they will use the default year of 2020, and that will really foul up the paperwork (and what gets reported to the IRS).

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HSA/HDHP Self or Family

Thank you for reminding of your particulars; it's raining questions and answers around here.

 

Your quote from that blog refers to two rare cases, one of which I will admit relates to you.

 

As I read IRS Notice 2007-22, this definition for a testing period appears to refer to FSA to HSA distributions that occurred prior to January 1, 2012.

 

However, more to your point, IRS Notice 2008-51 states, [For an IRA to HSA qualified funding distribution] "The testing period begins with the month in which the qualified HSA funding distribution is contributed to the HSA and ends on the last day of the 12th month following that month."

 

So this does pertain to you. 

 

However, this is all a lot of complication for a relatively small HSA contribution. Why don't you just have him take a normal distribution from his IRA (which adds to his income) for the amount of HSA contributions he was eligible to contribute for 7 months (was he under Self?), and then contribute that same amount to his HSA (which reduces his income back down again). 

 

In fact, he can do the HSA contribution first, so long as it's done by April 15th(see footnote***).

 

This will be a wash on the income side, and if you contribute no more than the correct amount ($2,623 if he was under Self coverage in 2019 and he is 55+). the transaction will accomplish what you want without the extra stress of a QFD.

 

Thanks for your question and discussion...and, yes, reading the Tax Code is a great deal like reading the law - because it's written by the same fellows.

 

***As of this edit, the IRS has announced that the filing date has been moved to July 15th, but has not updated the myriad of rules to clarify that this includes any regulations that depend on the due date of the return. So while the IRS will probably not mind you contributing to your HSA until July 15th, there is no guarantee that your HSA custodian - lacking written instructions from the IRS - will accept such a contribution after April 15th. In these uncertain times, it would seem prudent to make such a contribution by April 15th in any case. 

 

[Edited 3/24/2020 2:11 pm CDT - updated for July 15th]

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HSA/HDHP Self or Family

To answer your question - No, you do not answer "Self" when you did not have HDHP coverage, you answer None.

 

Family and Self refer to the type of HDHP policy that you had. A Self policy is just you, and a Family policy is you and any other person, even one not eligible to contribute to an HSA.

 

First question: what type of HDHP policy did your husband have from January to July. It was an HDHP policy, but did it cover anyone besides himself?

 

Second question: What type of HDHP policy did you have for September through December, Family or Self?

 

Third, yes, your husband can retroactively create an HSA for 2019 and fund it so long as you do it before April 15th(see footnote***). However, the amount he can contribute depends on your answers to my questions.

 

Fourth, how much you can add to your HSA depends on (1) your answers above, and (2) how much you (and any one else, like spouses or employers) have already contributed to your HSA.

 

I look forward to your replies.

 

***As of this edit, the IRS has announced that the filing date has been moved to July 15th, but has not updated the myriad of rules to clarify that this includes any regulations that depend on the due date of the return. So while the IRS will probably not mind you contributing to your HSA until July 15th, there is no guarantee that your HSA custodian - lacking written instructions from the IRS - will accept such a contribution after April 15th. In these uncertain times, it would seem prudent to make such a contribution by April 15th in any case. 

 

[Edited 3/24/2020 2:13 pm CDT - updated for July 15th]

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Level 3

HSA/HDHP Self or Family

Thanks for the quick reply, Bill! 

 

Husband had HDHP that only covered him (Jan-July)

 

My HDHP covered only myself (Sept-Dec)

 

No HSA contributions made yet.  Wasn't aware I couldn't use "my" HSA to pay his medicare premiums so want to open for him to be able to do so and get the tax break.  No additional contribution to my HSA yet - the last month rule and this "self" threw me for a loop so will do after calculations are made!

 

2019 was the first year we did not have a "family policy" so I've never dealt with this before!  So much appreciate your help! 

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HSA/HDHP Self or Family

Because you had Self-only coverage on December 1, 2019, then your annual HSA contribution limit for 2019 is $3,500, thanks to the last-month rule. That's $4,500 if you are 55 or older. 

 

The last-month rule lets you use the full annual limit if you were covered in the last month of the year.

 

The catch is that you have to stay under HDHP coverage throughout the testing period, which is essentially all of 2020. If you don't, then you will be penalized.

 

If you think you are likely to go off of HDHP coverage (or get conflicting coverage like Medicare) during 2020, then you should limit your actual 2019 contributions to 1/3rd of the normal annual limit (i.e. $1,500 for $4,500, or $1.167 for $3,500). Then, even if you have to admit to a "lapse" in HDHP coverage in 2020, it will be OK because when you enter that you were covered for 4 months, TurboTax will determine that your contributions were less than or equal to the prorated limit.

 

Your husband's limit will be $2,626 (assuming that he had only HDHP insurance on July 1 and no conflicting coverage).

 

***NOTE*** If you make contributions now for 2019, you MUST make sure that you tell the HSA custodian that the contributions are for 2019. Otherwise they will use the default year of 2020, and that will really foul up the paperwork (and what gets reported to the IRS).

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Level 3

HSA/HDHP Self or Family

Many thanks Bill!  Your help is very much appreciated!

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Level 3

HSA/HDHP Self or Family

Bill - have a follow up question that hopefully you are able to answer for me.  Husband has an inherited IRA from deceased father.  Read that one lifetime contribution may be made to HSA from that IRA using a portion of his RMD.  However, there are several references to the Last Month Rule/Testing Period.  Am I understanding it correctly that this is not an issue since we did have family coverage on 12/1/18 and he had self coverage HDHP from Jan 1, 2019 through July 30, 2019 at which time he went on Medicare? 

 

Again, your assistance is greatly appreciated! 

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HSA/HDHP Self or Family

Yes, you are allowed once in a lifetime a QFD (qualified funding distribution) from an IRA to an HSA.

 

However, this QFD is subject to the same rules as for contributions - they are counted against the annual HSA contribution limit. This limits the usefulness of the QFD because it means that you can move only up to $8,000 (if you are 55 or over and have Family HDHP coverage) to the HSA and that's only once in your lifetime.

 

Note that he cannot do the QFD once he goes on Medicare.

 

If I understand the situation correctly, you may trigger the extra questions for the last-month rule, because if he had an HSA in 2018 and contributed to it and used the last month rule, then he was required to stay under HDHP coverage for all of 2019, and Medicare doesn't count.

 

However, if he was under Family HDHP coverage for all of 2018, there won't be a penalty, because the last-month rule only makes a difference if you are not under HDHP coverage for all of the previous year (otherwise you qualified for the full year's annual HSA contribution limit, even without the last-month rule).

 

So if he triggers the last-month rule interview by answering "Family" to "What type of HDHP coverage did [name] have on December 1, 2018?", just answer the question and identify which months he had coverage in 2018.

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Level 3

HSA/HDHP Self or Family

Wow - I'm still confused.  No - he did not have an HSA in 2018.  I did but did not contribute.  You indicate he can't do the QFD once he's on Medicare - that I understand. 

 

The goal was to open an HSA in his name in the amount of $2626 (for the 7 months of 2019 he had HDHP before beginning Medicare)  as a prior year contribution for 2019 using partial RMD funds.   The ? of 2018 coverage did come up in the interview and I answered yes to HDHP family for all of 2018. 

 

My confusion stems from reading the "testing period" - appears to be from the date the QFD transfer is made - here's a quote from Making Sense of the HSA Test from Healthsavings.com

 

"When you transfer your IRA or Roth IRA to your HSA"   -  Second Scenario

For the second and third scenarios, the testing period is the 13-month period starting on the first day of the month when the transfer happened and ending on the last day of the following 12th month (if you made a transfer in June, the testing period would be until the end of the following June).

 

As I read that - I understand that to mean that if the QFD is done in March 2020 (for prior year contribution) - he would have to remain eligible for the next 12 months - which clearly is not possible since he went on Medicare on August 1, 2019.

 

Am I misunderstanding the "testing period"?  Think I may be better off forgetting the QFD for him completely and just make the prior year contribution from a savings account?  Thoughts? 

 

Thanks again for your saintly patience!  I worked in law for 30+ years and it was a breeze compared to this! 🙂

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Expert Alumni

HSA/HDHP Self or Family

Thank you for reminding of your particulars; it's raining questions and answers around here.

 

Your quote from that blog refers to two rare cases, one of which I will admit relates to you.

 

As I read IRS Notice 2007-22, this definition for a testing period appears to refer to FSA to HSA distributions that occurred prior to January 1, 2012.

 

However, more to your point, IRS Notice 2008-51 states, [For an IRA to HSA qualified funding distribution] "The testing period begins with the month in which the qualified HSA funding distribution is contributed to the HSA and ends on the last day of the 12th month following that month."

 

So this does pertain to you. 

 

However, this is all a lot of complication for a relatively small HSA contribution. Why don't you just have him take a normal distribution from his IRA (which adds to his income) for the amount of HSA contributions he was eligible to contribute for 7 months (was he under Self?), and then contribute that same amount to his HSA (which reduces his income back down again). 

 

In fact, he can do the HSA contribution first, so long as it's done by April 15th(see footnote***).

 

This will be a wash on the income side, and if you contribute no more than the correct amount ($2,623 if he was under Self coverage in 2019 and he is 55+). the transaction will accomplish what you want without the extra stress of a QFD.

 

Thanks for your question and discussion...and, yes, reading the Tax Code is a great deal like reading the law - because it's written by the same fellows.

 

***As of this edit, the IRS has announced that the filing date has been moved to July 15th, but has not updated the myriad of rules to clarify that this includes any regulations that depend on the due date of the return. So while the IRS will probably not mind you contributing to your HSA until July 15th, there is no guarantee that your HSA custodian - lacking written instructions from the IRS - will accept such a contribution after April 15th. In these uncertain times, it would seem prudent to make such a contribution by April 15th in any case. 

 

[Edited 3/24/2020 2:11 pm CDT - updated for July 15th]

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Level 3

HSA/HDHP Self or Family

Many many thanks for all of your assistance!  Your suggestion is perfect - that's the route we'll take!

 

Hopefully, I won't "rain" any more questions upon you - think this was the only area giving me great headaches!

 

Turbo Tax is lucky to have such a great expert! 

 

Cheers!

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HSA/HDHP Self or Family

We are happy to have such an interested and knowledgeable user!

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