As we have noted, high-deductible health plans (HDHPs) with a Health Savings Account (HSA) feature are growing in popularity. Our last post on HDHP/HSA arrangements explored some of the general eligibility questions we are asked most frequently. Today we address common questions about HSA contributions.
1. Are contributions limited by the number of months an employee is HSA-eligible, or is an employee entitled to the full contribution limit for being HSA-eligible for just part of the year? HSA contributions generally may be made for months in which an individual is HSA-eligible, and the individual’s annual HSA contributions may not exceed the sum of the “monthly limitations” (the annual contribution limit divided by 12) for all months in the calendar year in which the individual actually is HSA-eligible. Said another way, an employee’s yearly contribution limit is prorated based on the period the employee is actually HSA-eligible. That is the general rule, often called the “general monthly contribution rule.” By contrast, under the “full-contribution rule” described below an individual may be treated as HSA-eligible for the entire year and entitled to make contributions up to the annual maximum HSA contribution limit if the employee becomes covered by an HDHP in a month other than January and is HSA-eligible on December 1 of that year.