My wife and I use an HSA with a high deductible Health Insurance Plan.
The HSA account is in my wife’s name.
We max out contributions to the HSA each year for a family.
I will be turning 65 in July 2023 and signing up for Medicare. My wife is younger.
Can we still do the maximum HSA contribution for 2023?
What about after 2023?
My wife is younger. She won’t be signing up for Medicare until 2028
The HSA account is in my wife’s name.
We max out contributions to the HSA each year for a family.
Do you mean the family contribution limit of $7,200 for 2022? If so, I would point out that each year you/your wife were 55 or over, each of you have been missing out on putting an additional $1,000 into an HSA for yourselves. That said - you would need to have 2 HSAs, one for you and one for your wife, to be able to make the full $9200 contribution, since the extra $1,000 must be put into an HSA that belongs to the person who is over 55. You are allowed to split the rest of the contribution between the two HSAs as you choose, but at least $1,000 must go into each HSA.
Can we still do the maximum HSA contribution for 2023?
No. The month you start Medicare (including any look-back period), you become ‘ineligible’ for HSA contributions. Using 2022 numbers (since 2023 numbers aren’t available yet), assuming you start Medicare in July, as a couple, you would be eligible for family coverage for 6 months (Jan-Jun), and she would be eligible for single coverage for 6 months (Jul - Dec). That means that your total contribution would be {[50% x ($7,200 + $2,000)] + [50% x ($3,600 + $1,000)]} = $6,900, of which at least $500 (50% of the $1000 extra contribution) must go into an HSA in your name and at least $1,000 would need to go into an HSA in her name.
These numbers will need to be refigured once the IRS publishes the 2023 contribution limits.
I would also note that if you are getting coverage through an employer, you may be eligible to delay Medicare - but you need to watch out for the look back period if you do delay.
What about after 2023?
My wife is younger. She won’t be signing up for Medicare until 2028
Your wife’s insurance would need to change from family coverage to single coverage once you start Medicare, so after that, she would be eligible for single coverage contribution limits. Again, using the 2022 numbers, that means she would be able to make a contribution of $4,600 for all of 2023. When you get to 2028, she would be able to make a pro-rated contribution based on the time that she is an ‘eligible individual’.
All of this is spelled out in IRS Pub 969 https://www.irs.gov/pub/irs-pdf/p969.pdf
AJ
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AJ,
Thanks for the response and the link.
More than enough information for me to work with.
Thanks again.
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Hello again AJ,
Regarding the first part of your response: yes we are aware of the extra 1000 dollars we each could contribute. We chose to just use the one HSA and we do contribute the 1000 extra for my wife; the account is in her name.
We are both self employed and with all the accounting that goes along with that, plus the various retirement accounts we have, and etc, and etc., sometimes it is hard to manage the multiple accounts and monitor the investments.
The one HSA worked best for us even though it might not have totally maximized the tax benefits.
Once again, thank you so much for your detailed response.
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The one HSA worked best for us even though it might not have totally maximized the tax benefits.
Glad you were aware and doing what works for you is all you should do.
You’re welcome.
AJ
Your wife’s insurance would need to change from family coverage to single coverage once you start Medicare,
Why?
Is there some reason the OP can’t be covered by both Medicare and a HDHP simultaneously?
I’m not familiar with Medicare - so maybe there is.
I have been in the situation where I had family HDHP, and my spouse had other (traditional) insurance. My spouse could not contribute to an HSA, but since I was only covered by HDHP and it was family coverage I could contribute up to the family amount to the HSA.
Since the OP’s spouse is the one with HDHP and the HSA, I think they could potentially keep the family coverage HDHP and keep contributing to the HSA the family amount.
The possible Medicare look back period was commented on but not explained. If you start Medicare after 65, Part A has a look back period of the shorter of 6 months or the month you turned 65.
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Now, in the US, you would just go to a 24 hour urgent care place, but where we were in Canada, the only option was the hospital emergency room, and of course we didn’t have Canadian (free) health care, so had to pay a whopping $1100 before getting a doctor to look at one of us, and hand over just 2 stout antibiotic pills.
Maybe not where you were but there are urgent care clinics in Canada.
My husband had the same shock when he had a kidney stone while in Toronto. He was able to go to a an urgent care clinic because of the $1,000 payment request for an ER visit. They were close to the US border which means if additional medical care had been required, he would have crossed the border back into the US.
Lesson learned. I hadn’t thought about travel insurance because he was traveling by car with his son and not far from the US.
Why?
Is there some reason the OP can’t be covered by both Medicare and a HDHP simultaneously?
I’m not familiar with Medicare - so maybe there is.
For the sake of HSA compatibility, Medicare Part A is considered a non-high-deductible insurance plan. As a result, being covered by Medicare Part A makes a person ineligible to contribute to a HSA.
I don’t make the rules, I just try not to get tripped up by them.
Regards,
-Chuck
Home Fool
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For the sake of HSA compatibility, Medicare Part A is considered a non-high-deductible insurance plan. As a result, being covered by Medicare Part A makes a person ineligible to contribute to a HSA.
Which would mean the OP (BrMad) when covered by Medicare couldn’t contribute to an HSA.
However their spouse being covered by only an HDHP would still be eligible.
So for BrMad, that wouldn’t matter, since BrMad hasn’t contributed to an HSA - only BrMad’s spouse has.
I don’t make the rules, I just try not to get tripped up by them.
True - but I am unaware of a rule that you can’t be covered by both Medicare and HDHP simultaneously. If there are articles, etc. saying coverage by Medicare means you can’t contribute to an HSA because it’s not high-deductible, it seems likely that you indeed can be covered by both. Just that a person with that coverage could not themselves contribute to an HSA. (their spouse OTOH is a different question because eligibility to contribute to an HSA is determined for each individual)
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Is there some reason the OP can’t be covered by both Medicare and a HDHP simultaneously?
I’m not familiar with Medicare - so maybe there is.
If they have ACA coverage, you can’t be on both ACA and Medicare - it’s one or the other. So in that case, it would not be possible.
If they have some type of employer coverage, then they could possibly retain the family coverage and be on Medicare, too, depending on the employer’s rules. That said, the employers I’m familiar with have said that you need to be either on Medicare or their coverage - not both, so again, it wouldn’t be possible if those are the employer’s rules.
If they do have employer coverage that allows both, then it would come down to the premiums that they would have to pay to keep the family coverage vs. the single coverage, and whether it’s worth that to be able to put some additional money into an HSA. For example, if the family coverage costs an extra $100/month vs. single coverage, is it worth $1200 a year to be able to contribute an additional $3600 into an HSA? Personally, I’d rather have $4800 in a taxable account, rather than paying $1200 to be able to put $3600 into an HSA.
Since the OP’s spouse is the one with HDHP and the HSA, I think they could potentially keep the family coverage HDHP and keep contributing to the HSA the family amount.
If the family coverage costs no more than single coverage, and the employer allows it, yes. But if there is an extra charge for family coverage (like all of the employer coverages I’m familiar with), then it probably wouldn’t be.
AJ
If they have ACA coverage, you can’t be on both ACA and Medicare - it’s one or the other. So in that case, it would not be possible.
Let me be a little more precise. You can go ahead and pay for ACA coverage if you are eligible for Medicare, but once you become eligible for Medicare, even if you’re not enrolled in Medicare, you are no longer eligible for an ACA subsidy. From IRS Pub 5187 https://www.irs.gov/pub/irs-pdf/p5187.pdf
In general, taxpayers are allowed a premium tax credit if they meet all of the following:
? The taxpayer, or his or her spouse (if filing a joint return) or dependent was enrolled in a qualified health plan offered through the Marketplace for one or more months in which the enrolled individual was not eligible for other minimum essential coverage such as employer-sponsored coverage or government-sponsored coverage such as Medicaid or Medicare, and for which the taxpayer’s share of the enrollment premiums was paid by the due date of the taxpayer’s return (not including extensions).
So without a subsidy, it’s probably not worth keeping ACA coverage once you become eligible for Medicare.
AJ
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That said, the employers I’m familiar with have said that you need to be either on Medicare or their coverage - not both, so again, it wouldn’t be possible if those are the employer’s rules.
Made me go look it up for my employer (only one I have easy access to their FAQ)
My employer does not have any rules that you can’t have HDHP coverage on a dependent that has medicare. And they do have explicit Q&A about a spouse/dependent having medicare and covered by the employee’s HDHP.
if there is an extra charge for family coverage (like all of the employer coverages I’m familiar with)
My employer does not charge more for family HDHP vs. individual HDHP.
(And while my employer has good health insurance coverage, I know there are others that are even better)
“I think they could potentially keep the family coverage HDHP and keep contributing to the HSA the family amount.”
If the family coverage costs no more than single coverage, and the employer allows it, yes. But if there is an extra charge for family coverage (like all of the employer coverages I’m familiar with), then it probably wouldn’t be.
IF they have to pay an extra charge for family coverage, that would not preclude that they could keep family coverage and keep the HSA at the family amount. It would change the balance of whether it’s worthwhile to do so.
Personally, I’d rather have $4800 in a taxable account, rather than paying $1200 to be able to put $3600 into an HSA.
Sure.
OTOH, if it’s $60 extra for the year, I may be willing to pay the $60 and have an additional $3600 in HSA vs. having $3660 in a taxable account.
My employer does not charge more for family HDHP vs. individual HDHP.
(And while my employer has good health insurance coverage, I know there are others that are even better)
Count yourself lucky. ALL of my employers charged higher premiums when covering more than one person vs. plans for individuals. In fact, some of my colleagues who were single complained that they were getting a bum deal when the family coverage premiums weren’t at least twice what the individual premiums were. On the other hand, some of my married colleagues would complain that they had to pay more for a plan with a spouse and kids than those who just were covering a spouse, which also happened at some of my employers.
All that said, given that the OP said they are both self-employed, I’m guessing that they probably need to pay significantly more for both of them to stay on their plan, since most self-employed plans are ACA/marketplace based now, and marketplace plans definitely charge more for 2 people than for one.
AJ
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All that said, given that the OP said they are both self-employed, I’m guessing that they probably need to pay significantly more for both of them to stay on their plan, since most self-employed plans are ACA/marketplace based now, and marketplace plans definitely charge more for 2 people than for one. - AJ
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Our company has uses BCBS for it group medical plan. The premium is X for Employee only, 2X for employee plus spouse, 2X for employee plus children (doesn’t matter how many), and 3X for employee plus family. We have both regular and high deductible (for use with HSA) and these ratio’s apply. Even though the premium changes from year, the ratios are maintained. These are ACA compliant plans and it is my understanding these ratios apply to all ACA compliant pliant plans.
These are the premiums charges to the company by BCBS which are not the amount passed along to employees.