HSA Wednesday Wisdom: Maximum Contribution

Did you know that your HSA contribution doesn't depend on whether other members of your family are HSA-eligible?

One of the more confusing concepts around HSA contributions is the maximum contribution for an individual who is the only member of her family who's HSA-eligible. Let's look at four scenarios:

• Lizette covers herself and her two young sons on her HSA-qualified medical plan. Her sons qualify as her tax dependents, so they aren't eligible to open and contribute to their own HSAs.
• Ranzino covers his wife and himself on his HSA-qualified medical plan. His wife is also covered by Medicare Part A (hospital insurance). Because she's enrolled in a Part of Medicare, she's not eligible to open and contribute to her own HSA.
• As part of a divorce agreement, Jason continues to cover his ex-wife Jillian on his HSA-qualified medical plan. Jillian is eligible to open and contribute to her own HSA, but Jason can't reimburse her qualified expenses tax-free from his HSA.
• Elisabeth covers her 24-year-old son Rob on her HSA-qualified medical plan. Rob is no longer her tax dependent, and he's eligible to open and contribute to his own HSA. His mother can't reimburse his qualified expenses tax-free.

In the first two scenarios, the family is covered by a family (as opposed to self-only) contract, since more than one family member is enrolled. In each of these cases, only the subscriber is HSA-eligible. Are the subscribers limited to the self-only contribution maximum ($3,450 in 2018) because only one family member is HSA-eligible, or can they contribute to the family maximum ($6,900 in 2018) because it's a family contract?

The answer: They can contribute to the family maximum.

The rule: It doesn't matter how many covered family members are HSA-eligible. If the HSA-qualified plan covers more than one person, the family contribution maximum applies.

What about the third and fourth scenarios, in which more than one person is HSA-eligible, yet the subscriber can't reimburse the other person's qualified expenses tax-free? How much can the subscribers contribute in these cases?

The answer: The same logic applies as in the earlier examples. They can contribute up to the family maximum.

The rule: Again, the number of family members who are HSA-eligible isn't relevant. In each scenario, the contract covers more than one person. Therefore, the family contribution limit applies.

To learn more directly from the source, read IRS Notice 2004-50, Q&A 31, Scenario 5.

William G. (Bill) Stuart is director of strategy and compliance at Benefit Strategies, LLC, a third-party administrator of medical reimbursement accounts. Visit www.benstrat.com to learn more about HSAs or https://www.benstrat.com/downloads/HSA-GPS.pdf to download Health Savings Account GPS, Benefit Strategies' easy-to-digest HSA rule book. Also, visit www.benstrat.com/blog to read and subscribe to Bill's biweekly column on HSAs, Consumer-Driven Health, and market reform.