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How to determine HSA Contributions when eligible for Medicare


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My wife and I have a HDHP with my former employer and contribute to a family HSA. We are both on the same HDHP (not individual plans) and would like to max out our yearly HSA contribution. 

I will be on Medicare effective August 1, 2018 when I turn 65 but my wife will remain on the HDHP, since she is 63.

At the end of July, 2018, I anticipate to contribute $4500 to my HSA. My wife does not have an individual HSA. I would like her to open her own HSA in 2018 but I'm not sure how much she can contribute since I will have contributed $4500 this year before going on Medicare.

My wife will also be on the HDHP all of 2019 if this info helps.

Does anyone know how to calculate the maximum HSA contribution given the above information?  I don't see a similar scenario as above in IRS Publ 969. 

Thank you for your help.

Rick S

 

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Its been awhile since I reviewed this issue and I'm not sure if I understand the question.  You're correct that you can no longer make additional contributions to your HSA once you are enrolled in Medicare.  However, our enrollment in Medicare doesn't disqualify her from contributing to her own HSA as on long as she is HSA eligible. 

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Thanks Madison 71, 

I was trying to determine the maximum amount my wife and I could contribute to our HSA's in 2018. I know as a family HDHP,  the maximum HSA contribution should be $6,900 plus $1,000 for being over 55 for a total of $7,900.

I will have contributed $4,500 for this year (by the end of July 2018) to my HSA and then I go on Medicare, effective August 1, 2018 and my HSA contributions end. 

My wife does not have a HSA at the present time. I do know that my wife can open a HSA and contribute to her own HSA but since I have been contributing to my HSA as a (family HDHP plan), I am stumped how much my wife can actually contribute to her HSA (when she opens one up) after August 2018. 

For 2018, it seems very muddy to me with respect to maximizing contributions. In 2019, it should be much simpler since she will be on a HDHP for the full year as a single individual and will be under 65.

Thank you,

Rick S 

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Your HSA eligibility will be for seven months of 2018.

Your maximum catch-up contribution will be $1000 * 7 / 12 = $583.33.

Your maximum base contribution "would" be $6900 * 7 / 12 = $4025.

However, your $4500 total contribution - $583.33 allowed catch-up contribution = $3916.67 deemed base contribution.

Your wife is HSA eligible for the entire year. Assuming that the family plan continues  for the remainder of the year (calculations will be different if not). Under rules for married people if one spouse has a family plan, both are deemed to be covered under a family plan. The full family plan limit ($6900) can be allocated as agreed by the spouses.

Your wife's base contribution = $6900 - your $3916.67 base contribution = $2983.33.

Your wife's can make the full catch-up contribution $1000.

The bottom line if you make a total contribution of $4500, your wife can open her own HSA account and contribute $2983.33 + $1000 = $3983.33.

 

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SpiritRider,

This is great information. Thank you!

One item that I think may change the calculations ??--- Effective August 1, 2018 I will go on Medicare and will not be on the HDHP. I will have Medicare Part A and B and a Medicare supplemental plan. I also will have my own dental and vision coverage.

My wife will still be on the HDHP but I'm assuming that since she is the only one on the plan effective August 1, 2018,  does it not convert over to a single person HDHP and therefore her HSA contribution would somehow be decreased from your calculation above?

Would her contribution calculated above change if we have a family HDHP plan for 7 months (both her and me) and then a single HDHP plan for 5 months (just her) when I go on Medicare (August 1, 2018).

I really appreciate your reply and insight!

Thanks again--

Rick S

 

 

 

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Enrolling in Medicare only makes you ineligible for HSA contributions not an HDHP family plan. It is possible to continue on a HDHP family plan and your spouse to be HSA eligible for family plan contribution limits.

However, if due to company policy or cost effectiveness, you are no longer covered on 8/1 and it becomes an individual HDHP plan on 8/1, her contribution limits change. Her HSA eligibility would become 7 months family plan and 5 months individual plan.

Under the rules for married people she could make a base contribution of ($6900 * 7 / 12 = $4025) - your $3916.67 base contribution = $108.33 for the first 7 months. An individual base contribution of $3450 * 5 / 12 = $1437.50 for the last 5 months. For a total base contribution of $1545.83.

She is an HSA eligible individual for all of 2018 and can make the full $1000 catch-up contribution. Her total contribution for 2018, if switching to an individual HDHP plan on 8/1, after you made $4500 in contributions for a family plan 1/1 - 7/31, is $1545.83 + $1000 = $2545.83.

Hope that makes sense.

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Be aware of the 6 months retroactive coverage of Medicare and the impact on HSA contributions:

https://www.medicareinteractive.org/get-answers/coordinating-medicare-with-other-types-of-insurance/job-based-insurance-and-medicare/health-savings-accounts-hsas-and-medicare

From the link:

Finally, if you decide to delay enrolling in Medicare, make sure to stop contributing to your HSA at least six months before you do plan to enroll in Medicare. This is because when you enroll in Medicare Part A, you receive up to six months of retroactive coverage, not going back farther than your initial month of eligibility. If you do not stop HSA contributions at least six months before Medicare enrollment, you may incur a tax penalty.

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A small clarification to that link quote.

It is not when you make HSA contributions that necessarily matters. Your HSA eligibility ends up to six months before your Medicare enrollment. That establishes your months of HSA eligibility and the maximum pro-rated contribution amount.

If you + your employer's contributions were pro-rated monthly maximums, it would be exactly six months. That is because the total contribution would match the pro-rated maximum based on your months of HSA eligibility.

If the monthly contributions were less than a pro-rated maximum, the contributions could continue up to even the date of Medicare enrollment or anytime before the tax filing deadline, as long as the total maximum contributions based on your months of HSA eligibility were not exceeded.

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Spiritrider,

I wanted to reply based on the comments regarding ---" Your HSA eligibility ends up to six months before your Medicare enrollment" Should I be concerned with this statement?

As I mentioned with my initial question ---"How much can my wife and I contribute to an HSA based on her remaining on a HDHP (for entire year of 2018) and me enrolling in medicare effective 8/1/2018,  ending my HDHP coverage 7/31/2018"

To date I (not my employer) have contributed $645 on a monthly basis to my HSA which will amount to $4,515 (after my July 2018 contribution) $645 x 7= $4515.

Also, based on your analysis and laying out the numbers, my wife will contribute as much as  $2,530.83 to her HSA sometime during 2018 --most likely as a single one-time contribution.

Am I still okay --based on " Your HSA eligibility ends up to six months before your Medicare enrollment" Should I be concerned with this statement?

Thanks for your help!

Rick S. 

 

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  • 5 months later...

Wonderful discussion found here. I have been researching struggling on this for a few months now and I think I have stumbled upon this post, which answers my questions. ? Exactly same situation as Rick S.

But a slight variation. Medicare eligibility is same. Difference is I had included my catch up contribution into the calculation for payroll deduction.

Thank you Spiritrider for all the detailed calculations.

One clarification on the 6 month retroactive coverage. This applies only when you sign up for Medicare later and not in the initial enrolment. As in this case, suppose 65th birthday is in Aug 2018, initial enrolment period runs from May 1st to Nov 30th 7 month period. If enrolled during this period, Part A is defaulted to Aug 1st. Part B will be effective on Aug 1st or the 1st of the month after signing up depending on which month you sign up. So there is no retroactive period here.

There are situations where you can postpone signing up for Medicare and can sign up later when an eligible event occurs. So say you signed up on June 30, 2019, Part A will be retroactively effective 6 month prior and Part B from July 1st.

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Medicare Part A and B are treated differently

If you sign up for Medicare Part A anytime during the 3 months before the month of your 65th* birthday and six months after the month of your 65th* birthday, your Medicare Part A enrollment and coverage begins on the 1st of the month of your birthday. If you sign up for Medicare Part A anytime > six months after the month of your birthday, your Medicare Part A enrollment and coverage will be on the 1st of the month six months retroactively.

If you sign up for Medicare Part B during the Initial Enrollment Period (IEP) in the 3 months before the month of your birthday, your Medicare Part B enrollment and coverage begins on the 1st of the month of your birthday or:

  • The month you turn 65*,  your coverage starts 1 month after you sign up.
  • 1 month after you turn 65*, your coverage starts 2 months after you sign up.
  • 2 or 3 months after you turn 65*, your coverage starts 3 months after you sign up.

* If your birthday is on the 1st of a month, it is always the preceding month.

If you sign up for Medicare Part B after the (IEP) with no eligibility for a Special Enrollment Period (SEP,)  you can only sign up during the January 1– March 31 General Enrollment Period (GEP) and your coverage starts July and you will be subject to a penalty.

I'm not sure when Medicare Part B coverage begins based a SEP. I'm inclined to think it might be either the month you sign up or the following month.

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medicare.gov has good info on the eligibility, enrolment periods, when coverage starts and other details. No complications.

https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b

In this link in the left menu are all the options to view these details. There should not be any confusion about eligibility, enrolment periods etc.

The only misdirection I had from others is that when you are still covered by an employer plan that meets the Medicare criteria, some said I still need to sign up, but discussing with medicare customer service and my benefits coordinator cleared this up. We need not sign up as long as we have coverage. when you loose coverage a 7 month SEP starts.

For me this was all not difficult.

Difficulty arose in how to calculate HSA limits.

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  • 10 months later...

I am in same situation but slightly different than Rick S. 

I will be turning 65 in October, and anticipating to sign up for medicare part A only since my employer will still provide medical insurance for me and my wife for entire year.

but they will be ending my eligibility to contribute to HSA on 3/31/2020( 6 months before my birthday month) 

Can I still participate in HSA on behalf of my wife (will be 65 in 2021)? she does not have a separate medical insurance ?

Is there any way I can pay for entire year withing 3 moths of my eligibility?

Thanks for your advise and help in advance,

Regards,

Cn Diva

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