HSA Limit for Partial-Year Family Coverage

Question:   An employee who began the year in employee-only HDHP coverage was recently married and enrolled her new spouse mid-year.  What is the HSA contribution limit for HSA-eligible individuals enrolled part of the year in employee-only HDHP coverage, and part of the year in family HDHP coverage?   

Compliance Team Response:

The HSA contribution limits are calculated on a monthly basis.  This means the employee is 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 employee’s overall annual contribution limit is the sum of those two prorated employee-only and family contribution numbers.

You look to the coverage in effect as of the first day of each calendar month to determine whether the employee has employee-only or family HDHP coverage for that month

The IRS has a chart to handle this calculation on page four of the Form 8889 Instructions.  You just need to adjust the numbers for the current-year contribution limits.

For more details on how the HSA contribution limit applies in other situations, see slides 11-18 of our ABD Office Hours webinar Go All the Way With HSA: Everything HDHP/HSA You Need to Know.

Regulations:

IRS Form 8889 Instructions:

https://www.irs.gov/pub/irs-pdf/i8889.pdf

 

IRC §223(b)(2):

(2) Monthly limitation.

The monthly limitation for any month is 1/12 of—

(A)  in the case of an eligible individual who has self-only coverage under a high deductible health plan as of the first day of such month, $2,250.

(B)  in the case of an eligible individual who has family coverage under a high deductible health plan as of the first day of such month, $4,500.

 

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship.  Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).

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