2018 HSA sanity check (two HDHP and 2 HSA's)

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sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 1:39 pm

His
Insurance is HDHP Employee + Children


Her's
Insurance is HDHP Employee only

His Employer Contributes $1000 to his HSA
Her Employer Contributes $1680 to her HSA

There should still be room for one of us to contribute $4220 to reach the $6900 HSA limit this yet.. Due to rounding errors, # of paychecks per year, and other general incompetence, will probably just make it $4200 even.

Edited.
Her entire paycheck is tax defered, and I don't really want to reduce that by having her pay for an HSA first. His has room to do max tax deferal, and HSA, etc.

Couple of questions.


1. Both HSA's have reasonable investment options, one is UMB which is actually really good as far as expenses.
2. Any reason to have him or her prefer doing the $4200 ish contribution? He is over SS limits for salary, she is not. Not sure if this makes any difference.
3. Does it matter if one of the children is over 18+ and not a tax dependent or full time student? If i understand properly they can still be covered, but funds from either HSA couldn't be used to cover their expenses?
4. How big of a deal is it, to correct an over contribution if payroll doesn't do what they are supposed to? Could someone point me to the form the IRS uses?
Last edited by sco on Mon Oct 30, 2017 4:28 pm, edited 1 time in total.

Olemiss540
Posts: 188
Joined: Fri Aug 18, 2017 8:46 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Olemiss540 » Mon Oct 30, 2017 1:42 pm

2. Any reason to have him or her prefer doing the $4200 ish contribution? He is over SS limits for salary, she is not. Not sure if this makes any difference. - This definately makes a difference as it is an additional 7.5% tax savings using her paycheck withholding.

Spirit Rider
Posts: 6498
Joined: Fri Mar 02, 2007 2:39 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Spirit Rider » Mon Oct 30, 2017 2:19 pm

sco wrote:
Mon Oct 30, 2017 1:39 pm
1. Both HSA's have reasonable investment options, one is UMB which is actually really good as far as expenses.
It is good to have options
2. Any reason to have him or her prefer doing the $4200 ish contribution? He is over SS limits for salary, she is not. Not sure if this makes any difference.
Yes, do as Olemiss540 suggested. Using her HSA for HSA deductions will save an additonal 6.2%
3. Does it matter if one of the children is over 18+ and not a tax dependent or full time student? If i understand properly they can still be covered, but funds from either HSA couldn't be used to cover their expenses?
You can't use either HSA for their expenses, but there is a little know, but really great loophole. They are covered under an HDHP, but not a dependent. They are an HSA eligible individual who can open their own HSA account. They are not subject to the rules for married people and can contribute the full family plan limit without reducing your contribution limit.
4. How big of a deal is it, to correct an over contribution if payroll doesn't do what they are supposed to? Could someone point me to the form the IRS uses?
You can remove the excess contribution and earnings up to your tax filing deadline including extensions. If all the contributions were by employee payroll deduction, you would report them on Form 1040 line 21 "other income". Most custodians charge for this, usually $25.

Based on this, if the excess contribution is less than $417 and you have an HDHP for the following year, it is better to leave it in and pay the 6% excise tax. You do this by filing Form 5329 with your return. You will have to reduce your contributions for the following year to <= your contribution limit - carried over excess contribution. You will file a Form 5329 the following year to reconcile the excess contribution, but no excise tax will be due.

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 2:23 pm

Olemiss540 wrote:
Mon Oct 30, 2017 1:42 pm
2. Any reason to have him or her prefer doing the $4200 ish contribution? He is over SS limits for salary, she is not. Not sure if this makes any difference. - This definately makes a difference as it is an additional 7.5% tax savings using her paycheck withholding.
Would it reduce her SS income? Meaning her future benefits?

I would have to consider as well, that this would reduce the amount she could contribute to her tax deferred account. She makes under the annual 18k limit, as so her salary is her limit to defer.

(Currently deferring 100%)

So her contributing $4k into the HSA would actually reduce her contribution to retirement 4k as well. So I'm thinking overall tax defered would be larger if he defered the full $4200, despite the 7.5%

Olemiss540
Posts: 188
Joined: Fri Aug 18, 2017 8:46 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Olemiss540 » Mon Oct 30, 2017 2:37 pm

sco wrote:
Mon Oct 30, 2017 2:23 pm
Olemiss540 wrote:
Mon Oct 30, 2017 1:42 pm
2. Any reason to have him or her prefer doing the $4200 ish contribution? He is over SS limits for salary, she is not. Not sure if this makes any difference. - This definately makes a difference as it is an additional 7.5% tax savings using her paycheck withholding.
Would it reduce her SS income? Meaning her future benefits?

I would have to consider as well, that this would reduce the amount she could contribute to her tax deferred account. She makes under the annual 18k limit, as so her salary is her limit to defer.

(Currently deferring 100%)

So her contributing $4k into the HSA would actually reduce her contribution to retirement 4k as well. So I'm thinking overall tax defered would be larger if he defered the full $4200, despite the 7.5%
That definitely would swap my recommendation to keep her entire salary going towards the 401k, and pay to fund the HSA through your paycheck. The lost tax advantaged space is not worth the FICA savings at the reduction in future SS benefits. Sorry I am not more help but good luck!

Spirit Rider
Posts: 6498
Joined: Fri Mar 02, 2007 2:39 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Spirit Rider » Mon Oct 30, 2017 2:55 pm

It would reduce her Social Security (SS) Earnings. Whether that would decrease any actual benefits received would depend on whose record under which she received benefits.

When a couple receives SS benefits, the lower earning spouse only claims there own benefit of it is >= 50% of the higher earning spouse.

You should strive max out all your family's tax-advantaged opportunities. If a contribution by either of you reduces that total space, then you should choose an alternate location. We did not know the circumstances when we recommend she make the HSA contributions.

investingparentof2
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Joined: Wed Oct 25, 2017 12:56 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by investingparentof2 » Mon Oct 30, 2017 3:25 pm

Spirit Rider's comment about dependents eligible to open their own HSA even though they are covered under the health insurance is great. Assuming you can afford to do so, this seems like it would really be great for larger families.

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Spirit Rider » Mon Oct 30, 2017 3:40 pm

The value of HSA contributions for an adult dependent 19 - 25 is only a real advantage in certain situations.

It can be really great for a recent college graduate who is in the 15% - 25% marginal bracket, your additional employee share of the premium is <= their employee share of health insurance through their employer and they are already maxing out their Roth IRA.

It is less valuable for a 19 year old with a 0% - 10% marginal tax rate and no Roth IRA contributions. You are getting very little tax benefit for an account more restrictive than a Roth IRA.

As always YMMV.

Nate79
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Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Nate79 » Mon Oct 30, 2017 3:49 pm

Have you actually confirmed with your wife's HSA provider that they will allow her to contribute above the personal limits ($3400)? There have been some past posts that when someone has an Individual HSA (not a family HSA) that their provider would not allow contribution above the individual limits even though the IRS allows it:
https://irs.gov/publications/p969
From pub 969:
Rules for married people. If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2016 is $6,750. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.
Your question may be mute if they do not allow her to go above $3400.

Spirit Rider
Posts: 6498
Joined: Fri Mar 02, 2007 2:39 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Spirit Rider » Mon Oct 30, 2017 4:11 pm

IRS guidance indicates that the employer should only allow contributions to the limit of the HDHP plan enrolled by the employee.

It wouldn't be entirely mute, because the OP could only contribute $4,220 anyway. So $3,400 hers and $820 would be OK.

However, based on facts not in evidence of the original post (subsequently provided by the OP), it would reduce the family's total tax-advantage contributions for the wife to contribute to the HSA.

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 4:14 pm

This is great info, thanks for your assistance.

It didn't occur to me that this would impact the tax deferred space, until after I started thinking about the SS aspect of things...

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 4:15 pm

sco wrote:
Mon Oct 30, 2017 1:39 pm
His
Insurance is HDHP Employee + Children


Her's
Insurance is HDHP Employee only

His Employer Contributes $1000 to his HSA
Her Employer Contributes $1680 to her HSA

There should still be room for one of us to contribute $4220 to reach the $6900 HSA limit this yet.. Due to rounding errors, # of paychecks per year, and other general incompetence, will probably just make it $4200 even.

Edited.
Her entire paycheck is tax defered, and I don't really want to reduce that by having her pay for an HSA first. His has room to do max tax deferal, and HSA, etc.

Couple of questions.


1. Both HSA's have reasonable investment options, one is UMB which is actually really good as far as expenses.
2. Any reason to have him or her prefer doing the $4200 ish contribution? He is over SS limits for salary, she is not. Not sure if this makes any difference.
3. Does it matter if one of the children is over 18+ and not a tax dependent or full time student? If i understand properly they can still be covered, but funds from either HSA couldn't be used to cover their expenses?
4. How big of a deal is it, to correct an over contribution if payroll doesn't do what they are supposed to? Could someone point me to the form the IRS uses?

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 4:27 pm

Spirit Rider wrote:
Mon Oct 30, 2017 2:55 pm
It would reduce her Social Security (SS) Earnings. Whether that would decrease any actual benefits received would depend on whose record under which she received benefits.

When a couple receives SS benefits, the lower earning spouse only claims there own benefit of it is >= 50% of the higher earning spouse.

Is this always the case? Even if hers is claimed at 62 and his is maxed at 70? I’ll admit I don’t know a lot about SS, as it is a while off.

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 4:27 pm

Duplicate

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 4:29 pm

Deleted

Spirit Rider
Posts: 6498
Joined: Fri Mar 02, 2007 2:39 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Spirit Rider » Mon Oct 30, 2017 4:40 pm

sco wrote:
Mon Oct 30, 2017 4:27 pm
Spirit Rider wrote:
Mon Oct 30, 2017 2:55 pm
It would reduce her Social Security (SS) Earnings. Whether that would decrease any actual benefits received would depend on whose record under which she received benefits.

When a couple receives SS benefits, the lower earning spouse only claims there own benefit of it is >= 50% of the higher earning spouse.
Is this always the case? Even if hers is claimed at 62 and his is maxed at 70? I’ll admit I don’t know a lot about SS, as it is a while off.
No, that is why I said it depends on whose record any benefits are received.

Also, it matters what the lower earning spouse's Adjusted Indexed Monthly Earnings will be. If it will be above the second bend point, you will only net 15 cents on the dollar towards any benefit.

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 6:12 pm

he is above and she is below the 2nd bend.

My thought has always been that she would claim at 62 and him at 70, to maximize SS benefits. My assumption is she could only take 50% of his after his death? I’ll have to read more on this, will have to fine some detailed articles.. most seem to just skim the surface..

Spirit Rider
Posts: 6498
Joined: Fri Mar 02, 2007 2:39 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by Spirit Rider » Mon Oct 30, 2017 7:47 pm

In your scenario she will receive 100% of her benefit from 62 until you claim at 70, then you will receive 100% of your benefit and she would receive 50% of your benefit.

Regardless of the order of passing the widow/widower will receive 100% of your benefit. So you should factor that into your planning, because there are usually a lot of fixed expenses that do not stop because one person is no longer there
Last edited by Spirit Rider on Mon Oct 30, 2017 11:37 pm, edited 1 time in total.

sco
Posts: 627
Joined: Thu Sep 24, 2015 2:28 pm

Re: 2018 HSA sanity check (two HDHP and 2 HSA's)

Post by sco » Mon Oct 30, 2017 9:44 pm

Spirit Rider wrote:
Mon Oct 30, 2017 7:47 pm
In your scenario she will receive 100% of her benefit from 62 until you claim at 70, then you will receive 100% of your benefit and she would receive 50% of your benefit.

Regardless of the order of passing the widow/widow will receive 100% of your benefit. So you should factor that into your planning, because there are usually a lot of fixed expenses that do not stop because one person is no longer there
Interesting, thank you..

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