HSA Question - Last Month Rule

[Brainonska511]

For 2021, I've had an individual HDHP and an HSA. In the middle of the year, my wife left her job where she was covered with a traditional HMO and we moved her over to my plan; thus, we are now on a family HDHP.

I was looking at adjusting my HSA contribution to take advantage of the higher contribution limit allowed with family coverage and came across the "last month" rule. Does this rule really mean I can contribute the whole $7300 for 2021 instead of some pro-rated amount (based on the length of family coverage in 2021), provided we keep the same coverage in all of 2022?

 

[dullard]

I don't know for sure, but that is how I read the IRS's website: https://www.irs.gov/publications/p9...ach spouse who is an,must open a separate HSA.

Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers)..

 

[Brainonska511]

I don't know for sure, but that is how I read the IRS's website: https://www.irs.gov/publications/p9...ach spouse who is an,must open a separate HSA.

Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers)..

That's pretty much what I saw too, so it seems like the answer to my question would be "yes". Guess I was looking for some validation that my reading of that was correct.

 

[dullard]

A similar thing happens with FSAs. You can contribute 100% of your FSA funds on Jan 1 then leave your job and still get full the FSA amount. There just appears to be no prorating concept in these health accounts.

 

[IronWing]

Your reading of the last month rule is correct. Also see the “testing period “ in the IRS form 8889 instructions. The testing period is designed to keep folks from jumping in and out of eligibility just to get the tax benefits of an HSA.

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

 

[zinfamous]

Yes, you can.

I asked one of the handlers of my new HSA when I started my current job last October ('20). Essentially, as long as I carried coverage to an HSA-eligible plan through December of this year ('21), then I could contribute the full 2020 limit, even though I was technically only eligible for those 3 months.

So I did. Haven't been audited, yet!

 

[Brainonska511]

Yes, you can.

I asked one of the handlers of my new HSA when I started my current job last October ('20). Essentially, as long as I carried coverage to an HSA-eligible plan through December of this year ('21), then I could contribute the full 2020 limit, even though I was technically only eligible for those 3 months.

So I did. Haven't been audited, yet!

Thanks all. This is all good to know. I'll probably make a large contribution come December, once benefits for next year are locked in, and I figure out how much I have left to contribute.