Tips for Maximizing Your HSA Contribution

September 26th, 2011 by WPJ

As the end of the year approaches, now is good time to review HSA contribution limits. Individuals who enrolled in the HDHP mid-year or had changes in their coverage type during the past year may be able to increase their contribution limit. Check below to see if you qualify.

 Did you enroll in an HDHP mid-year?

 If an individual becomes eligible for an HSA anytime on or before December 1st of any year (last-month rule), they may contribute the full contribution maximum for that year as long as they meet the “testing period”.  The testing period states they must remain an eligible individual through December 31 of the following calendar year.    If the individual does not remain covered by HDHP during this “testing period,” the extra amount (i.e., the difference between the amount actually contributed and the pro-rated amount that would have been allowed) must be included in the individual’s income and will be subject to a 10 percent additional tax.

 Did you change coverage from single to family during the year?

 Individuals with changes in coverage type during the year (i.e. single to family coverage) may also take advantage of the last month rule.  For example, if an individual had single coverage during the year but switched to family coverage no later than December 1st, they would be eligible to contribute the family maximum for the tax year.  These individuals are still required to meet the testing period and must remain covered in a HDHP through December 31st of the following year.

 However, if an individual is unsure or knows that they will not keep the HDHP coverage through December 31 of the following year, pro-rating the contributions based on the actual HSA eligibility remains a choice and may be the better option for the individual.

 For more information, see IRS Publication 969 (pages 5 & 6).

Posted in Contributions, HSA Regulations, Taxes | No Comments »

HSA contribution limits for 2012

June 8th, 2011 by WPJ

HSA Contributions are based on your insurance coverage and age.

The 2012 tax year limits are:

Single Coverage:  $3,100

Family Coverage (2 or more people on your policy): $6,250

Catch up Contribution:  If you are age 55 or older at any time during the tax year, you may contribute an additional $1,000 to the numbers above.

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Over-the-counter drugs no longer an eligible medical expense

September 8th, 2010 by WPJ

 

 

The IRS  released their guidance on the recent changes to regulations regarding tax free HSA withdrawals. As of January 1, 2011, withdrawals (distributions)  from your HSA or Archer MSA to pay for medications are tax-free ONLY  if:

  1. the medicine or drug requires a prescription,
  2. it is an over-the-counter medicine or drug and the individual obtains a prescription, or
  3. it is insulin.

If amounts are distributed from an HSA or Archer MSA for any medicine or drug which does not satisfy this requirement, the amounts will be considered “distributions for nonqualified medical expenses”, which must be included in your gross income and are subject to a 20% penalty. This change does not affect HSA or Archer MSA distributions made before January 1, 2011 for medicines or drugs , nor does it affect distributions made after December 31, 2010, for medicines or drugs purchased on or before  December 31, 2010.

Posted in HSA Regulations, Medical expenses, Taxes | No Comments »

Who is eligible to open and contribute to an HSA?

August 11th, 2009 by WPJ

To open or contribute to an HSA you must meet certain eligibility requirements. Specifically:

  • You must be covered by a qualified high deductible health plan on the first day of the month
  • You cannot be covered by any other health plan that is not a qualified high deductible health plan, including spouse’s health insurance
  • You cannot be covered by spouse’s Medical FSA
  • You cannot be enrolled in Medicare Part A or Part B
  • You cannot be covered by TriCare
  • To make contributions you cannot have accessed your VA medical benefits in the past 90 days
  • You may not be claimed as dependent on another person’s tax return

Please feel free to contact us if you have any questions about HSAs with Health Savings Administrators.

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Posted in Contributions, Health Savings Accounts, Misc. | No Comments »

Health Reform and HSAs

July 30th, 2009 by WPJ

In reviewing the 1018-page House Bill on health reform there appear to be a few issues that could negatively impact health savings accounts. There is a limit on the out-of-pocket costs that could effectively narrow the plan design for HSAs. The limits set in the bill set a max-out-of pockets (single/family) of  $5,000 and $10,000. There is a provision to increase them annually based on the CPI.

It is possible that the penalty for non-medical withdrawals from the HSA could increase from 10% to 20%. For most HSA owners this would be a non-issue.

And it is possible that the over-the-counter drug expense allowance would be repealed.

In any case, it appears that nothing will be done until September when Congress returns form its recess.

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May the employer advance the HSA contribution for an employee who has a financial/medical need?

December 11th, 2008 by WPJ

Yes. IRS regulations allow for the employer to advance the employer contribution to the HSA for a specific employee. However, the employer must treat all employees equally. Ideally, the employer would develop a policy for advancing (employer funded) HSA contributions. Any employee meeting those requirements, who requests an advance, would recieve the advance on the HSA.

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