HSA Contribution Limits

[gunnermag]

I have a client who retired 06/30/21.  During January through June 2021, he had HSA contributions totaling $8,200.00, which is the limit for him.

Does he still get this maximum limit even thought he was not on the plan all year?  He is only 61 and therefore not eligible for medicare.  

[BobKamman · Accepted solution]

Employment is not required for HSA eligibility.  He could have retired in 2020 and paid directly into the account last year.   

[qbteachmt]

What did he have as medical insurance coverage? Did he change plans starting in July?

If you are only partially covered in the year by a High Deductible Health Plan that qualifies for HSA, you would pro-rate your HSA contribution by that portion.

Example:

He had 1/2 year eligibility and the other half, was he in a plan that still qualified?

For example, there is at least one Medicare Supplemental plan that is HDHP and it is not qualified for HSA.

[gunnermag]

He had just a normal health insurance plan.  The deductible is not high.  It is not medicare or a medicare supplement.

[qbteachmt]

"He had just a normal health insurance plan."

So, July-Dec, not eligible for HSA if the coverage doesn't qualify. He only gets to put in half. You can make a corrective distribution.

A lot of people think the HSA is part of their coverage, but it is based on their coverage.

It's like having an IRA or Savings account. I can have an HSA account, which I would contribute to only when I was covered by qualifying HDHP coverage, whether that was through an employer, through a Marketplace, or any individual/family coverage from an insurance company or broker, as long as the coverage qualifies. For any times I was not covered under a qualifying plan, I still have an account and use the account for Spending, but no longer qualify to contribute.

[BobKamman]

He changed plans when he retired?