Special HSA Contribution Limit for Spouses

Question:  What is the HSA contribution limit for each spouse where both spouses are HSA eligible?

Short Answer: Where at least one spouse is enrolled in family HDHP coverage, the combined HSA contributions for both spouses cannot exceed the annual family limit.

General Rule: HSA Eligibility

The general rule is that an individual must meet two requirements to be HSA-eligible (i.e., to be eligible to make or receive HSA contributions):

  1. Be covered by an HDHP; and
  2. Have no disqualifying coverage (generally any medical coverage that pays pre-deductible, including Medicare).

HSA eligibility also requires that the individual cannot be claimed as a tax dependent by someone else.

As described below, special rules apply to the HSA contribution limit for married couples where both spouses are HSA eligible.

Both Spouses are Enrolled in Employee-Only HDHP Coverage: Standard Individual HSA Limits Apply

If both spouses are enrolled in employee only HDHP coverage, the standard individual HSA contribution applies to each spouse.

In other words, each spouse can contribute up to $3,550 (2020) to their own HSA.  The marriage does not affect each spouse’s standard HSA contribution limit.

Note that there is no such thing as a jointly owned HSA.  Every HSA is owned by only one individual.  So, each spouse would need to contribute to their own HSA to take advantage of the maximum contribution permitted between the two of them.

Example:

  • Married couple Buster and Kristen are both HSA-eligible and enrolled in employee-only HDHP coverage through their respective employers for the full calendar year.

Result:

  • Buster can contribute up to the individual HSA contribution limit ($3,550 in 2020) in his HSA.
  • Kristen can contribute up to the individual HSA contribution limit ($3,550 in 2020) in her HSA.
  • There is no option to contribute more than $3,550 to either spouse’s HSA.

At Least One Spouse is Enrolled in Family HDHP Coverage: Special Combined Family HSA Contribution Limit

If one or both spouses are enrolled in family HDHP coverage, a special combined family HSA contribution limit applies.  “Family” HDHP coverage refers to any coverage other than employee-only coverage (i.e., employee plus child, employee plus spouse, or employee plus family).

Under the special rule, the combined HSA contribution limit for both spouses is the family HSA contribution limit.  In other words, the aggregate HSA contribution limit for both spouses combined cannot exceed $7,100 (2020).

The spouses can agree to how they would like to divide the combined limit between them, provided the total HSA contribution by both does not exceed the family limit.

Example:

  • Married couple Buster and Kristen are both HSA-eligible.
  • Buster is enrolled in employee plus child HDHP coverage for the full calendar year.
  • Kristen is enrolled in employee only HDHP coverage for the full calendar year.

Result:

  • Option 1: Buster can contribute up to the family HSA contribution limit ($7,100 in 2020) in his HSA—with no HSA contributions by Kristen (or her employer).
  • Option 2: Kristen can contribute up to the family HSA contribution limit ($7,100 in 2020) in her HSA—with no HSA contributions by Buster (or his employer).
  • Option 3: Buster and Kristen can agree to divide the family HSA contribution maximum between their HSAs (e.g., Buster contributes $5000 to his HSA, Kristen contributes $2,100 to her HSA).
  • Any allocation of the HSA contributions is fine as long as the combined contributions of both Buster and Kristen do not exceed the family HSA contribution limit ($7,100 in 2020).

The Domestic Partner Double Family HSA Contribution Loophole

The special combined family HSA contribution limit does not apply to domestic partners because they are not spouses.  Furthermore, the family HSA contribution limit applies for all HSA-eligible individuals in any coverage other than self-only coverage.

Therefore, if both domestic partners are HSA-eligible and enrolled in family HSA coverage, they can each contribute the family HSA maximum ($7,100 in 2020) to their respective HSAs.

Example:

  • Domestic partners Oprah and Stedman are both HSA-eligible and enrolled in Oprah’s HDHP coverage (employee + domestic partner) for the full calendar year.

Result:

  • Oprah and Stedman can both contribute to the family HSA contribution limit ($7,100 in 2020) in their respective HSAs.
  • The family HSA contribution limit is available for Oprah’s and Stedman’s HSA because they are both enrolled in HDHP coverage other than self-only (employee + domestic partner).
  • However, because they are not married, the special combined family HSA contribution limit does not apply.
  • Their total combined HSA contribution limit is therefore double the family HSA contribution limit ($7,100 to each HSA, $14,200 total in 2020).

For more details on everything HSA, see our ABD Office Hours Webinar: Go All the Way With HSA.

Regulations

IRS Notice 2008-59:

https://www.irs.gov/irb/2008-29_IRB#NOT-2008-59

Q-17. How do the maximum annual HSA contribution limits apply to a married couple if both spouses are eligible individuals and one spouse has self-only HDHP coverage and the other spouse has family HDHP coverage?

A-17. The maximum annual HSA contribution limit for a married couple if one spouse has family HDHP coverage and the other spouse has self-only HDHP coverage is the § 223(b)(2)(B) statutory maximum for family coverage. The contribution limit is divided between the spouses by agreement. See § 223(b)(5) and Notice 2004-50, Q&A-32. This is the result regardless of whether the family HDHP coverage includes the spouse with self-only HDHP coverage. See Notice 2004-2, Q&A-15. If only one spouse is an eligible individual, see Rev. Rul. 2005-25.

Example. For 2008, H and W are married. Both are 40 years old. H and W are otherwise eligible individuals. H has self-only HDHP coverage. W has an HDHP with family coverage for W and their two children.

The combined contribution limit for H and W is $5,800, which is the § 223(b)(2)(B) statutory contribution limit for 2008. H and W divide the $5,800 contribution limit between them by agreement.

Q-18. How do the maximum annual HSA contribution limits apply to a married couple if both spouses are eligible individuals and each spouse has family HDHP coverage that does not cover the other spouse?

A-18. The maximum HSA contribution limit for a married couple where both spouses have family HDHP coverage is the § 223(b)(2)(B) statutory maximum. This rule applies regardless of whether each spouse’s family coverage covers the other spouse. The contribution limit is divided between the spouses by agreement.

Example. In 2008, H, who is 37, and W, who is 32, are married with two dependent children. H has HDHP family coverage for H and their two children with an annual deductible of $3,000. W has HDHP family coverage for W and their two children with a deductible of $3,500.

The combined contribution limit for H and W is $5,800, the maximum annual contribution limit. H and W divide the $5,800 contribution limit between them by agreement.

IRS Notice 2004-50:

https://www.irs.gov/irb/2004-33_IRB#NOT-2004-50

Q-12. What is family HDHP coverage under section 223?

A-12. Under section 223(c)(4), the term “family coverage” means any coverage other than self-only coverage. Self-only coverage is a health plan covering only one individual; self-only HDHP coverage is an HDHP covering only one individual if that individual is an eligible individual. Family HDHP coverage is a health plan covering one eligible individual and at least one other individual (whether or not the other individual is an eligible individual).

Example. An individual, who is an eligible individual, and his dependent child are covered under an “employee plus one” HDHP offered by the individual’s employer. The coverage is family HDHP coverage under section 223(c)(4).

Q-63. May a husband and wife have a joint HSA?

A-63. No. Each spouse who is an “eligible individual” as described in section 223(c)(1) and wants to make contributions to an HSA must open a separate HSA. Thus, only one person may be the account beneficiary of an HSA. But see Q&A 32 concerning allocating contributions between spouses. See also Q&A 38 concerning reimbursements from spousal HSAs.

ABA JCEB IRS Q/A (May 2010):

https://www.americanbar.org/content/dam/aba/migrated/jceb/2010/2010IRSFINAL.authcheckdam.pdf

  1. § 223 – Contributions to Health Savings Account

An employee elects family coverage for himself and his domestic partner under a high deductible health care plan (HDHP) for a calendar year. The domestic partner is not the employee’s dependent. The fair market value of the health coverage for the domestic partner is imputed as income to the employee.

Question A: What amount can the employee contribute to a health savings account (HSA) during the year such coverage is elected, disregarding any “catch-up contribution” that may be available to the employee?

Question B: Does the special rule for married individuals that limits the contribution amount that a husband and wife can make to an HSA apply to the employee and his domestic partner?

Question C: What amount can the employee’s domestic partner contribute to an HSA during the year such coverage is elected, disregarding any “catch-up contribution” that may be available to the employee’s domestic partner?

Proposed Response A: Since the employee has elected family coverage defined in Section 223(c)(4) of the Code as “any coverage other than self-only coverage” and Notice 2004-50 confirms that family HDHP coverage is HDHP coverage for one HSA-eligible individual and at least one other individual (whether or not the other individual is an HSA-eligible individual), the employee is treated as having family HDHP coverage and is eligible for contributions up to the HSA contribution limit for family HDHP coverage.

Proposed Response B: No. The HSA contribution limits imposed on married individuals do not apply to domestic partners. The Defense of Marriage Act provides that domestic partners will not, for federal tax purposes, be considered each other’s “spouse.” 1 U.S.C. § 7. Thus, the employee and his domestic partner are not subject to the contribution limits imposed on married individuals.

Proposed Response C: The employee’s domestic partner is eligible to contribute up to the HSA contribution limit for family HDHP coverage for the same reason that the employee is eligible to contribute up to the HSA contribution limit for family HDHP coverage.

IRS Response A: The Service representative agrees with the proposed response.

IRS Response B: The Service representative agrees with the proposed response.

IRS Response C: The Service representative agrees with the proposed response.

 

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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