FSA and HSA mistake

I was on my wife’s HDHP with an HSA  in January 2024 when I started a new job January 3rd 2024. My benefits started February 3rd 2024. I started a FSA with my benefits thinking since we had our own health plans that it was okay. I was wrong. 

I know my wife will need to return of excess since she has been contributing to the HSA. 

I need to know if she needs to return the money that her employer put in and her contributions in January 2024 since my benefits didn’t start till February. 
 

Yes, common mistake.  HSA eligibility is determined as of the first day of each calendar month.  Your wife therefore would presumably have had two months of HSA eligibility (Jan and Feb) before your health FSA enrollment caused her to have disqualifying coverage.  That means any of her contribution amounts in excess of 2/12 the $8,300 statutory limit ($1,383) are excess contributions that need to be distributed by the tax filing deadline to avoid the 6% excise tax.

Some more details that may be helpful:

• https://www.newfront.com/blog/the-hsa-proportional-contribution-limit
• https://www.newfront.com/blog/correcting-excess-hsa-contributions

Slide summary:

2024 Newfront Go All the Way with HSA Guide

Thanks, Brian.

We have a couple more questions.
My wife is on an individual HDHP. Her max on the HSA is $5150 since she is over 55. I was not on her plan after I started my own plan.

So my understanding is we need to return the excess of contributions from March to the time we stopped. Or do we need to take $5150 and divide that by 12 which is $425 and times that by 2 which is $850 is all she can have? The employer put $1500 in her HSA in January.
 

Do we need to figure out the interest made with her contributions? She has more money in her HSA from previous years.
 

Work with your personal tax adviser for the details, but in general that would mean your spouse's HSA contribution limit would be 2/12 of $4,150 + 2/12 of $1,000.  I'm getting $858 as the result.  Any amount contributed in excess of that would need to be pulled out as a corrective distribution by 4/15/25.  

By my math, that's an excess contribution of $642 (plus earnings) that she'll need to take as a corrective distribution.  Your HSA custodian and personal tax adviser should be able to help with the details.