Brian Gilmore

The HSA eligibility rules are the same whether the HDHP enrollment is active coverage or COBRA coverage. As long as you don't enroll in Medicare, you can still be HSA-eligible. Just keep in mind that starting Social Security benefits will automatically enroll you in Part A (and therefore block HSA eligibility). Also keep in mind that you generally would not want to enroll only in COBRA at age 65+ because the plan can treat such coverage as secondary to Medicare even if not enrolled in Medicare, and (as noted above) you do not get an extension on the Medicare 8-month special enrollment period or late enrollment penalty from COBRA coverage. More details: https://www.newfront.com/blog/the-hsa-eligibility-requirements-part-2 The HSA Eligibility Requirements Individuals must satisfy the following four requirements to be HSA-eligible (bolded items covered in this post): Be covered by a qualified high deductible health plan (HDHP); Have no other disqualifying health coverage; Not be enrolled in any part of Medicare; and Not be able to be claimed as a dependent on someone else’s current-year tax return. HSA Eligibility Requirement #3: No Medicare Enrollment Enrollment in any part of Medicare is disqualifying coverage that causes an individual to lose HSA eligibility. This means that an individual who is enrolled in Medicare Part A, Part B, Part C, Part D, or any combination thereof is not eligible to make or receive HSA contributions. Even enrollment in only the (generally premium-free) Medicare Part A hospital coverage blocks HSA eligibility. For more details: Newfront Medicare for Employers Guide How Medicare Affects HSA Eligibility Individuals Who Are Age 65+ May Still Be HSA Eligible Medicare enrollment causes an individual to lose HSA eligibility. However, many employees age 65 and older delay enrollment in Medicare, and therefore may continue to be HSA-eligible. In other words, mere eligibility to enroll in Medicare has no effect on the individual’s HSA eligibility if the individual chooses not to enroll in any part of Medicare. The Medicare Part A Automatic Enrollment Trap: Individuals Receiving Social Security Retirement Benefits Individuals who are receiving Social Security retirement benefits are automatically enrolled in (premium-free) Medicare Part A hospital coverage with no opt-out permitted. Accordingly, any individual receiving Social Security retirement benefits is not HSA eligible by virtue of the automatic Medicare Part A enrollment. The Medicare Part A Retroactive Enrollment Trap: Six Months of Retroactive Coverage For individuals who delay enrolling in Medicare until after age 65, the Medicare Part A enrollment will be effective retroactively up to six months. This six-month retroactive enrollment in Medicare Part A will also block HSA eligibility retroactively for six months. Individuals have two options to address the retroactive Medicare Part A enrollment causing the retroactive loss of HSA eligibility: Plan Ahead: Stop making HSA contributions at least six months before applying for Medicare, and limit HSA contributions during that period to the prorated amount; or Correct Mistake: Work with the HSA custodian to take a corrective distribution of the excess contributions by the due date (including extensions) for filing the individual tax return (generally April 15, without extension). Example 1: Jacob reaches age 65 in August 2024 but does not enroll in Medicare. Jacob signs up for Social Security benefits on October 1, 2025, which automatically enrolls him in Medicare Part A retroactive to April 1, 2025. Result 1: Jacob retroactively loses HSA eligibility as of April 2025—and therefore he can contribute only 3/12 of the HSA statutory limit for 2025 (plus 3/12 of the catch-up contribution). If he already contributed in excess of that limit, Jacob will need to make a corrective distribution of the excess contributions by April 15, 2026 (assuming no extensions) to avoid a 6% excise tax. Slide summary: 2025 Newfront Medicare for Employers Guide

I would consider that an ERISA group health plan benefit. The payment is to medical practitioners for the purpose of accessing medical items and services. Even though the fully insured policy will cover the underlying items/services, this service is a vehicle to access them at an accelerated rate. It's along the lines of a membership fee for one of the concierge services like One Medical. I'm not aware of any definitive guidance that these types of concierge medical service fees are §213(d) medical benefits, but there's an IRS Information Letter that suggests these fees do qualify as medical expenses: https://www.irs.gov/pub/irs-wd/11-0027.pdf. In any case, employers generally treat them as such by excluding the cost from employees' taxable income (pursuant to Internal Revenue Code §105 and §106). One way you could look at it is in light of how the DOL views EAPs. Those are generally always found to be ERISA group health plans because they include services provided by trained medical professionals (in that case, mental health therapists). If it was truly limited to non-medical concierge services it would not be an ERISA plan, but that rarely is the case. As with here, the payments are being made to trained medical providers. Here's some more discussion on topic: https://www.newfront.com/blog/most-eaps-are-group-health-plans-subject-to-cobra Here's some relevant cites: ERISA §3(1): (1) The terms “employee welfare benefit plan” and “welfare plan” mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 302(c) of the Labor Management Relations Act, 1947 [29 USC §186(c)] (other than pensions on retirement or death, and insurance to provide such pensions). ERISA §607(1): (1) Group health plan. The term “group health plan” means an employee welfare benefit plan providing medical care (as defined in section 213(d) of the Internal Revenue Code of 1986) to participants or beneficiaries directly or through insurance, reimbursement, or otherwise. Such term shall not include any plan substantially all of the coverage under which is for qualified long-term care services (as defined in section 7702B(c) of such Code). Such term shall not include any qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) of the Internal Revenue Code of 1986). ERISA §733(a): (a) Group health plan.
For purposes of this part— 
(1) In general. The term “group health plan” means an employee welfare benefit plan to the extent that the plan provides medical care (as defined in paragraph (2) and including items and services paid for as medical care) to employees or their dependents (as defined under the terms of the plan) directly or through insurance, reimbursement, or otherwise. Such term shall not include any qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) of the Internal Revenue Code of 1986).
(2) Medical care. The term “medical care” means amounts paid for—
(A) the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body,
(B) amounts paid for transportation primarily for and essential to medical care referred to in subparagraph (A), and
(C) amounts paid for insurance covering medical care referred to in subparagraphs (A) and (B) . IRC §213(d)(1)(A): The term “medical care” means amounts paid— (A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, Treas. Reg. §1.213-1(e)(1)(ii): (ii) Amounts paid for operations or treatments affecting any portion of the body, including obstetrical expenses and expenses of therapy or X-ray treatments, are deemed to be for the purpose of affecting any structure or function of the body and are therefore paid for medical care. Amounts expended for illegal operations or treatments are not deductible. Deductions for expenditures for medical care allowable under section 213 will be confined strictly to expenses incurred primarily for the prevention or alleviation of a physical or mental defect or illness. Thus, payments for the following are payments for medical care: hospital services, nursing services (including nurse’s board where paid by the taxpayer), medical, laboratory, surgical, dental and other diagnostic and healing services, X-rays, medicine and drugs (as defined in subparagraph (2) of this paragraph, subject to the 1-percent limitation in paragraph (b) of this section), artificial teeth or limbs, and ambulance hire. However, an expenditure which is merely beneficial to the general health of an individual, such as an expenditure for a vacation, is not an expenditure for medical care.

Yes, anyone can be in the HDHP--even if not HSA-eligible. You just cannot make/receive HSA contributions for the period where you are not HSA-eligible. Yes, perfectly fine to use the FSA for any cost-sharing expenses--even when covered by an HDHP. The Section 125 cafeteria plan election for the health FSA is irrevocable for the duration of the plan year absent a permitted election change event. Here's a quick overview of those events: 2025 Newfront Section 125 Permitted Election Change Event Chart

Well they probably wouldn't have two payrolls if they are leaving at the beginning of the month. But I suppose they might if they had some additional payment stream post-termination. In any case, I think any consistent employer approach here would be fine. Here's some more thoughts on the issue: https://www.newfront.com/blog/final-paycheck-issues-2

Lots of variables here. At a high level it could work if the carriers/stop-loss approve and it is clearly communicated in plan materials addressing eligibility. One potential area of concern (that I think you're hinting at here) is the 125 uniform election rule. If this new class is eligible for the same underlying health plan options as the grandfathered class, there's a good chance that doesn't fly. It would result in HCPs in the grandfathered class receiving a larger employer contribution (premium/HSA) than non-HCPs in the new hire class enrolled in the same plan option. Those are likely "similarly situated" employees for 125 purposes. More details: https://www.newfront.com/blog/designing-health-plans-with-different-strategies The key component of these rules for this purpose is the “uniform election” requirement. That provision requires that employers provide a “uniform election with respect to employer contributions.” A contribution structure that charges more to certain non-HCPs for the same benefit generally does not provide a “uniform election with respect to employer contributions”. This means full-time non-HCP employees eligible for the same plan option as an HCP generally must be offered at least the same employer contribution amount that is available to HCPs for that same plan option. Furthermore, in almost all cases the same Section 125 nondiscrimination rules apply to employer HSA contributions. This means that employers will generally have to make the same employer HSA contribution amount available to full-time non-HCPs enrolled in the HDHP plan option as made available to any HCPs. ... Relevant Cites: Prop. Treas. Reg. §1.125-7(c)(2): (2) Benefit availability and benefit election. A cafeteria plan does not discriminate with respect to contributions and benefits if either qualified benefits and total benefits, or employer contributions allocable to statutory nontaxable benefits and employer contributions allocable to total benefits, do not discriminate in favor of highly compensated participants. A cafeteria plan must satisfy this paragraph (c) with respect to both benefit availability and benefit utilization. Thus, a plan must give each similarly situated participant a uniform opportunity to elect qualified benefits, and the actual election of qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect permitted taxable benefits)…A plan must also give each similarly situated participant a uniform election with respect to employer contributions, and the actual election with respect to employer contributions for qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect to receive employer contributions as permitted taxable benefits). Prop. Treas. Reg. §1.125-7(e)(2): (2) Similarly situated. In determining which participants are similarly situated, reasonable differences in plan benefits may be taken into account (for example, variations in plan benefits offered to employees working in different geographical locations or to employees with family coverage versus employee-only coverage). Slide summary: 2025 Newfront Section 125 Cafeteria Plans Guide

Most employers will just stop employee pre-tax HSA elections for any period of unpaid leave. If the employee wants to contribute, they can always do by making direct contributions to the HSA custodian. When the employee returns in year two, the HSA contribution election (if any) will be for year two. There is also no requirement to continue employer HSA contributions while on leave. Even where it is a protected leave subject to FMLA (or a state equivalent) that requires continuation of the HDHP, no such requirement applies to the HSA because it is not an employer-sponsored plan. More details: https://www.newfront.com/blog/employer-hsa-contributions-during-protected-leave-2 2025 Newfront Health Benefits While on Leave Guide

I don't think there's any right answer here. It's just a matter of finding an approach that works for the employer and applying it consistently. For the employer contribution piece, that's a company policy matter. Employers have full discretion in designing their HSA contribution approach. The employee contribution is subject to the Section 125 cafeteria plan rules, but there is no clear guidance on how to address final paychecks. In any case, I don't consider any preferred approach to be concern given that the irrevocable election rule doesn't apply to employee HSA contribution elections. So again, best practice is really just to apply whatever approach they prefer in a consistent manner. To you last question--Given that HSA eligibility is tied to the first day of each calendar month, I would recommend not including the HSA contribution piece on a paycheck that falls in the following month post-termination. Including the contribution could result in contributions that exceed the proportional limit.

Employers have a lot of discretion in setting the HSA contribution structure, but I've never seen an approach where an employee would get an ER HSA contribution based on being a dependent on an employee spouse's (or parent's) HDHP. That is a bizarre approach. If they allow employee pre-tax contributions to the HSA the much simpler/easier Section 125 nondiscrimination rules apply. Those rules generally require that employers make the same employer HSA contribution amount available to non-HCPs enrolled in the HDHP plan option as made available to any HCPs. More details: https://www.newfront.com/blog/employer-hsa-contributions So in theory this could work if they applied the ER family and single contribution across all future married employees. But I'm not sure why bother/risk it. The husband is going to be an HCP based on officer status, and the spouse is going to be an HCP based on the attribution rules. So at a minimum it just looks bad. They can always contribute outside of payroll, take the deduction, and avoid this issue.

You'd be hard pressed to find any nondiscrim rule that doesn't apply on a §414 controlled group basis. Of course there are some scenarios that permit disaggregation, etc., but the general rule is always that everything is viewed on a controlled group basis. The specifics of each NDT rule vary considerably, so there's no easy way to address the possible issues here on the actual testing.

Those are the comparability rules, which are essentially irrelevant. They apply only where an employer does not allow employee pre-tax HSA contributions through the cafeteria plan. Since basically every employer making contributions also allows employee pre-tax HSA contributions, the comparability rules were just a big waste of Treasury time/paper. Instead, virtually all employers follow the Section 125 nondiscrimination rules. Those are much easier to satisfy. The main limitation is the uniform election rule described above.

Yes, IRS Publication 969 and the Form 8889 Instructions both state to include earnings in the corrective distribution. Your HSA custodian should be able to calculate the earnings attributable to the excess. More details: https://www.newfront.com/blog/correcting-excess-hsa-contributions Here's the guidance-- IRS Publication 969: https://www.irs.gov/pub/irs-pdf/p969.pdf You may withdraw some or all of the excess contributions and avoid paying the excise tax on the amount withdrawn if you meet the following conditions. You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. IRS Form 8889 Instructions: https://www.irs.gov/pub/irs-pdf/i8889.pdf However, you can withdraw some or all of your excess contributions for 2024 and they will be treated as if they had not been contributed if: You make the withdrawal by the due date, including extensions, of your 2024 tax return (but see the Note under Excess Employer Contributions, later); You do not claim a deduction for the amount of the withdrawn contributions; and You also withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. ... Include on line 14b any distributions you received in 2024 that qualified as a rollover contribution to another HSA. See Rollovers, earlier. Also include any excess contributions (and the earnings on those excess contributions) included on line 14a that were withdrawn by the due date, including extensions, of your return.

Wow, very generous employer. To move the Section 125 nondiscrimination rules they'll have to a) allow employees to contribute pre-tax, or b) make the employer contribution a cashable flex credit. The former is not going to be an option if they're maxing out the limit with employer contributions. So they'll have to make the employer contribution a cashable flex credit if they want to keep the full employer contribution up to the limit. More details: https://www.newfront.com/blog/employer-hsa-contributions If they do that, I see no issue with the eligibility requirement based on ACA LBMM full-time status. More details: https://www.newfront.com/blog/the-aca-look-back-measurement-method As for different contribution bands based on hourly vs. salaried, I view that as not permitted by the Section 125 NDT rules--the uniform election rule specifically--assuming they're going to be more generous to the salaried class. That would result in higher ER HSA contributions to salaried HCPs who are enrolled in the same HDHP as the hourly non-HCPs. More details: https://www.newfront.com/blog/designing-health-plans-with-different-strategies Here's the relevant cites: Treas. Reg. §54.4980G-5: Q-1. If an employer makes contributions through a section 125 cafeteria plan to the HSA of each employee who is an eligible individual, are the contributions subject to the comparability rules? A-1. (a) In general. No. The comparability rules do not apply to HSA contributions that an employer makes through a section 125 cafeteria plan. However, contributions to an HSA made through a cafeteria plan are subject to the section 125 nondiscrimination rules (eligibility rules, contributions and benefits tests and key employee concentration tests). See section 125(b), (c) and (g) and the regulations thereunder. (b) Contributions made through a section 125 cafeteria plan. Employer contributions to employees’ HSAs are made through a section 125 cafeteria plan and are subject to the section 125 cafeteria plan nondiscrimination rules and not the comparability rules if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (meaning that all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction. Prop. Treas. Reg. §1.125-7(c)(2): (2) Benefit availability and benefit election. A cafeteria plan does not discriminate with respect to contributions and benefits if either qualified benefits and total benefits, or employer contributions allocable to statutory nontaxable benefits and employer contributions allocable to total benefits, do not discriminate in favor of highly compensated participants. A cafeteria plan must satisfy this paragraph (c) with respect to both benefit availability and benefit utilization. Thus, a plan must give each similarly situated participant a uniform opportunity to elect qualified benefits, and the actual election of qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect permitted taxable benefits)…A plan must also give each similarly situated participant a uniform election with respect to employer contributions, and the actual election with respect to employer contributions for qualified benefits through the plan must not be disproportionate by highly compensated participants (while other participants elect to receive employer contributions as permitted taxable benefits). Prop. Treas. Reg. §1.125-7(e)(2): (2) Similarly situated. In determining which participants are similarly situated, reasonable differences in plan benefits may be taken into account (for example, variations in plan benefits offered to employees working in different geographical locations or to employees with family coverage versus employee-only coverage). Slide summary: 2025 Newfront Go All the Way with HSA Guide 2025 Newfront Section 125 Cafeteria Plans Guide

Yes, I agree. I think that's perfectly fine and a normal approach. Plus, as you noted, it's definitely way better to have a calendar plan year dependent care FSA going forward to avoid multiple issues. Normally I would recommend a prorated limit on a short plan year to avoid complications, but if it's a brand new plan I agree that's a non-issue. More details: https://www.newfront.com/blog/dependent-care-fsa-limit-challenges

Haha, thanks guys. Belgarath, you're making a glass half full pitch here. I agree. The glass half empty side is the HCEs lose a portion of the tax-advantaged benefit that they expected. Some of that can be made up for usually with the dependent care tax credit, but it's really about managing expectations. Many employers go overboard and cap HCE contributions from the outset at some arbitrary number in the desperate attempt to try to avoid giving HCEs bad news or to avoid minor payroll tweaks. I'm not a fan of that approach. In my mind you aim for the full $5k and work downward from there (based on the pre-test results) to get every last pre-tax dollar you can for the HCEs. The communications challenge is convincing those HCEs they're better off reducing downward from $5k than they would have otherwise been by capping them from the outset at a lower number than the test results might have required. Here's the good, the bad, and the ugly of strategies I've seen out there in the world to try to address the issue-- https://www.newfront.com/blog/the-dependent-care-fsa-average-benefits-test Strategies to Avoid ABT Failures: The Good, the Bad, and the Ugly Employers clearly become frustrated with failing the ABT year after year, and in many cases they overcompensate with approaches that unnecessarily harm HCEs. The following are a few of those strategies: The Good: Offer an Employer Matching Contribution to Non-HCEs The only approach to reducing the risk of testing failure that is recommended is to incentivize NHCEs to participate in greater numbers and to a greater degree. Although it is uncommon because of the increased employer cost, a few employers have taken the smart approach of offering NHCEs additional employer contributions as a carrot to encourage greater participation. One particularly effective approach is to offer an employer matching contribution to the dependent care FSA for NHCEs that operates in a similar manner as a 401(k) plan matching contribution. For example, the employer might offer a dollar-for-dollar matching contribution for NHCEs of up to $500. This will entice greater participation and higher elections from NHCEs, which will in turn significantly improve the employer’s chances of passing the ABT. The Bad: Limit HCE Contributions to a Reduced Level from the Outset A common approach that is not recommended is for employers to simply cap HCE elections from the beginning at a reduced level. For example, HCEs may elect only up to $3,000 instead of the standard $5,000 limit available to NHCEs. Although this approach does improve the chances of passing the ABT because it will decrease HCE dependent care FSA benefits by design, it does so in a very haphazard manner. In that example, allowing HCEs full elections and pre-testing may have resulted in a required reduction of $5,000 HCE elections to $4,000 to reach a passing 55% level. However, by capping HCE elections at $3,000, the employer would have effectively preemptively precluded HCEs from enjoying an additional $1,000 pre-tax contribution. This approach is therefore not recommended because it will always either a) cause HCEs not to be able to take advantage of the maximum permitted pre-tax election, or b) require only a slightly smaller correction to HCE contributions than would have otherwise been required if they initially could have elected up to the full $5,000 maximum. The Ugly: Permit Only NHCEs to Participate in the Dependent Care FSA This approach has the advantage of guaranteeing the plan will pass the ABT because 100% of the benefits will be for NHCEs. However, needless to say this approach does not go over well with the HCEs who are blocked entirely from dependent care FSA participation. Best Practice Approach Employers should not preemptively cap HCE elections at the outset, but instead run an early pre-test (e.g., summer for a calendar plan year) to determine any reduced contribution limit required to pass the ABT. This approach ensures that HCEs receive the maximum pre-tax benefit that can be made available. Although it is common for employers not to pass the ABT in pre-test results, running the test early will typically catch the issue before HCEs have contributed up to the reduced limit needed to achieve 55%. The administrative burden is relatively minor where the adjustment simply requires a payroll contribution cap for HCEs. Slide summary: 2025 Newfront Section 125 Cafeteria Plans Guide

Hi there, congrats. Your finance will need to use the marriage event to drop the general purpose health FSA to preserve your HSA eligibility going forward after the marriage. There will likely be a run-out period to submit claims incurred prior to dropping the health FSA. The company can provide the details, but it's typically in the neighborhood of 90 days. If she switches to your HDHP, you'll be able to contribute the prorated family limit for the remainder of the year.

Yes, assuming you met all other HSA eligibility requirements. Mere eligibility for the health FSA (without enrollment) doesn't present any HSA eligibility issues. It's only a problem (i.e., disqualifying coverage) when enrolled.

Yes, that's correct. The HSA contribution limits are calculated on a monthly basis. This means you are able to contribute 1/12 of the employee-only limit for the months of the year in employee-only HDHP coverage, and 1/12 of the family limit for the months of the year in family HDHP coverage. The overall annual contribution limit is the sum of those two prorated employee-only and family contribution numbers. The IRS provides a useful chart to complete this calculation in the “Line 3 Limitation Chart and Worksheet” section of the Form 8889 Instructions: https://www.irs.gov/pub/irs-pdf/i8889.pdf

I assume you're referring to the CMS Medicare Part D creditable coverage disclosure. The guidance says to report the total number of Part D eligible individuals covered by the plan as of the first day of the plan year, including COBRA participants. Any severance payment here (even if ostensibly to assist with the COBRA premium, if elected) is irrelevant. What matters is if they are enrolled in the plan, including COBRA. CMS Part D Disclosure Guidance: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Downloads/CreditableCoverageDisclosureUserManual05292012.pdf 10. Number of Part D Eligible Individuals expected to be covered under these Plan(s) as of the Beginning Date of the Plan Year. While CMS recognizes that many entities will not be able to provide an exact number of Part D eligible individuals, entities should estimate the number of covered Part D eligible individuals under the Options offered under the type of coverage for which they are providing the Disclosure Notice to CMS. This estimate should be the total number of Medicare eligible individuals, less any Medicare eligible individual(s) being claimed under the RDS program, that are expected to be covered under the entity’s RDS prescription drug plan options (this includes active, disabled, individuals on COBRA and retired individuals). For purposes of this disclosure question, a “Medicare eligible individual being claimed under the RDS program” is any qualified covered retiree for which the entity is expected to collect the retiree drug subsidy. This is a numeric field and must be filled in with a number. Entities should work with their current vendors (Insurance carrier, TPA, PBM, Consultant, etc.) to verify whether the prescription drug plan(s) offered by entity covers any Medicare eligible individuals (including active, retired, disabled individuals and their dependents or any individuals on COBRA) at the start of each plan year. If the entity has a plan participant that will be or becomes eligible for Part D coverage during the plan year, the entity should not include these individuals on their Disclosure to CMS form if they were not effective on the beginning date of the plan year. These individual(s) should be included on their annual Disclosure to CMS form at the beginning date of the next plan year. Entities are required; however, to provide a disclosure of creditable coverage status to the individual prior to when they become Medicare eligible as outlined in the General Creditable Coverage Guidance at http://www.cms.hhs.gov/CreditableCoverage/.

I assume you meant that you have a health FSA (not HSA) in 2025. HSA eligibility is relevant only to the ability to make/receive HSA contributions. It doesn't affect the ability to continue to have an HSA with a remaining balance. It just means your spouse cannot contribute any further in 2025. Furthermore, your spouse can still use that HSA (after losing HSA eligibility) to cover qualifying medical expenses tax-free. Individuals do not have to maintain HSA eligibility to take tax-free distributions for medical expenses.

So they went from a proposed $40k §4980H assessment to having IRS checks in hand totaling over $130k? That's one of the crazier stories I've ever heard. Never heard of that happening in the 226J context. I guess there isn't anything to do but continue to inform the IRS of the error each time and request guidance on how to handle. Maybe next time they'll get $60k...

In theory it can be done, but in reality it generally does not occur for a number of practical reasons: If fully insured, the insurance carrier won't allow it. If self-insured, they likely have stop-loss that won't allow it. ERISA requires the plan be administered pursuant to its written terms. An employer using its ability to interpret plan terms to allow an individual to continue coverage beyond the plan's standard COBRA terms would create a plan precedent that must be applied to other similarly situated individuals. COBRA has inherent adverse selection issues. Even if the employer could get through all those issues (very unlikely), it would simply be quite expensive to expand beyond the required timeframes. These are generally the same reason employers do not allow extensions on election/payment deadlines. More details: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-x Slide summary: 2024 Newfront COBRA for Employers Guide

Always consult your personal tax adviser for specific guidance to your situation. But I'm not seeing an end-of-year deadline here. In any case, there may be custodian deadlines etc., so taking care of it this year might still be prudent.

Check with the HSA custodian how to address that issue. They may be able to treat the distributions as a mistaken distribution, in which case you would be able to return the funds to the HSA to have them re-distributed as a corrective distribution. Here's an overview: https://www.newfront.com/blog/correcting-mistaken-hsa-distributions

Yeah that's a bummer. Happens all the time unfortunately. The spouse's general purpose health FSA is unfortunately disqualifying coverage for both the spouse and you. Spending the health FSA down to zero doesn't change that. The health FSA will remain disqualifying coverage for both you and the spouse for the full plan year. The only exception would be if the spouse revokes the health FSA (permitted election change event needed) or terminates (and doesn't elect COBRA for the health FSA)--in which case you could prospectively start HSA contributions on a prorated limit basis (HSA eligibility is determined as of the first day of each calendar month). Here's an overview: https://www.newfront.com/blog/hsa-interaction-health-fsa-2 I agree with your approach to notify your employer not to make any further ER HSA contributions because you are not HSA-eligible. As they noted, you can also revoke your EE HSA contribution election for any reason (you don't need a permitted election change event), so that was the right approach , too. Here's an overview: https://www.newfront.com/blog/hsa-contribution-election-changes-2 For the ineligible (excess) contributions already made, I recommend working with the HSA custodian to take a corrective distribution. That will avoid a 6% excise tax that would otherwise apply for the excess contribution. You'll need to take care of that by the tax filing deadline on 4/15. Here's an overview: https://www.newfront.com/blog/correcting-excess-hsa-contributions Slide summary: 2024 Newfront Go All the Way with HSA Guide

No. The HSA rules define family HDHP coverage as any coverage other than self-only coverage. This means that employees who are HSA-eligible and cover at least one other individual under the HDHP (e.g., employee + spouse, employee + domestic partner, employee + child(ren), employee + family) can contribute up to the family HSA limit. Where an employee is enrolled in individual-only HDHP coverage and HSA-eligible for the entire calendar year, the contribution limit is the statutory limit for individual coverage. Here's the simplest explanation: IRS Publication 969: https://www.irs.gov/pub/irs-pdf/p969.pdf Self-only HDHP coverage is HDHP coverage for only an eligible individual. Family HDHP coverage is HDHP coverage for an eligible individual and at least one other individual (whether or not that individual is an eligible individual). Example. You, an eligible individual, and your dependent child are covered under an “employee plus one” HDHP offered by your employer. This is family HDHP coverage. More details: https://www.newfront.com/blog/hsas-and-family-members Slide summary: 2024 Newfront Go All the Way with HSA Guide