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Switching Employer and HSA mid year

Discussion in 'Investments and Savings' started by LearnMS, Aug 29, 2017.

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  1. LearnMS

    LearnMS Level 2 Member

    HI,

    I recently switched jobs. In my old job, there was HSA option that I enrolled and contributed until I left. In the new company, there's again an option to enroll for HSA plan. Can I contribute again to the max allowed? Per IRS, I can contribute as an employee for up to $3400 for single or $6750 as family. I enrolled as latter and contributed to max during enrollment time last year.

    Can I do the same ($6750) at new place? I see the surcharge with family option is high, need to eat up $600.

    Thanks!
     
  2. CWAL

    CWAL Level 2 Member

    No, the limit is a yearly limit across that account type, similar to how having multiple IRAs will not allow you to exceed $5,500 in aggregate IRA contributions.
     
  3. Matt

    Matt Administrator Staff Member

    What @CWAL said. But you also confused me by saying you maxed it out last year, which sounds like 2016.... you can do the same for 2017, but only one maximum over all accounts each year.
     
  4. traveler

    traveler Level 2 Member

  5. LearnMS

    LearnMS Level 2 Member

    Thanks all.

    My bad to say that I contributed 'last year'. I meant early this year. In other words, I elected to contribute 6750 for 2017. Since I moved to a different job, I contributed ~4300 until the move. In the new job, I have a similar HSA option and the question was if I can contribute 6750 for 2017 again.

    I found out that I still can!! No IRS limit for different HSA unlike 401k, where the limit is 18k for 2017.
     
  6. Matt

    Matt Administrator Staff Member

    Could you point me to that, I've not looked into it deeply, but would be interested in reading how this is possible.
     
  7. traveler

    traveler Level 2 Member

    OP, before you go down that road read IRS pub 969 carefully.

    You can have an unlimited number of HSAs but you can't contribute more than the max regardless of how many HSAs you have.

    https://www.irs.gov/publications/p969/ar02.html#en_US_2016_publink1000204045

    If you've contributed $4300 for 2017 you can only contribute $2450 at your new employer before maxing out your 2017 contribution.
     
  8. Matt

    Matt Administrator Staff Member

    This was my understanding, but if there is something new to look at I'd be glad to review it.
     
  9. traveler

    traveler Level 2 Member

    IRS pub 969 is updated for 2017... Not to mention if there was a way to game the limits it would be common knowledge.

    Limit on Contributions

    The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual.

    For 2017, if you have self-only HDHP coverage, you can contribute up to $3,400. If you have family HDHP coverage, you can contribute up to $6,750.
     
  10. LearnMS

    LearnMS Level 2 Member

    Yes, I am aware of this.

    Since I moved jobs and won't have HSA contributions in the old job, the benefits center at the new employer said that I can max out for 2017 if I want to. I double checked this with 2 health benefits agents at the new employer before electing it for this year.

    It doesn't mean I maxed out $6750 at my new employer now. I just selected individual coverage (as opposed to family) and elected to contribute $2900 for 2017 instead.
     
  11. traveler

    traveler Level 2 Member

    I misunderstood you, sorry.

    The way I interpreted your post was that contributed $4300 to your 2017 HSA at your previous employer and your new employer said you could contribute $6750 along with the $4300 you've already done for the year.

    I'm still not sure what you're doing at your new job with the $2900 but it sounds like you've got it covered. :)
     
  12. Matt

    Matt Administrator Staff Member

    Sorry this is getting confusing.. but you may still have an issue.. can I recap to check that we are on the same page:

    You contributed $4300 for 2017 already:

    Then you want to contribute $2900 as an individual for 2017

    If this means by 12/31 you're contributing $4300 into the old employer Family Coverage and $2900 Individual Coverage, which I think it does... then you've got a problem.
     
  13. traveler

    traveler Level 2 Member

    Agree.

    The most straightforward thing to do would be to contribute $2450 to max out the 2017 family contribution at the new employer.
     
  14. Matt

    Matt Administrator Staff Member

    Depends on whether circumstances allow. However, you can contribute to both Family and Individual in same year, HSA's work on a monthly rule, so you could claim $283 for each covered Individual Month and $562 for each covered Family month.

    If the $4300 was front loaded, and number of covered months*$562.50 is greater than $4300 then adjustments are required.

    But in any circumstance, $4300+$2900 is an excess contribution.
     
  15. traveler

    traveler Level 2 Member

    The subject title, "Double dip on HSA" is where the issue is.

    It's not possible to 'double dip' on an HSA. The max per year is the max per year, regardless of how my HSAs you have, how many jobs you have, etc. etc. etc.
     
  16. LearnMS

    LearnMS Level 2 Member

    Oh boy!!

    I have to check this out then....I made my elections this last Friday.

    To summarize:
    - Contributed $4300 in 2017 - old employer (family).
    - Elected to contribute $2900 in 2017 - new employer (individual).

    If we combine above two, then it is $7200.

    I need to find a way to undo what I did last friday. And/or find more info to make sure I don't run into any problem. My recent election didn't kick in yet...
     
  17. CWAL

    CWAL Level 2 Member

    Since we're on the subject of strange HSA questions, here's one:

    Every year I front load the contribution fully in January ($2900 comes from me, and my employer leaks in $500 spread across the year).

    Am I correct in my understanding that there is then a problem if I quit my job before the end of the year, and do not (or am unable to) acquire a new HDHP?
     
  18. Matt

    Matt Administrator Staff Member

    Yeah, you can't do that, do the month by month calculation I listed, and contribute that. You may have already over contributed, depending on severance date, but also will certainly over contribute if you don't dial down the $2900 to a prorated amount.
     
  19. Matt

    Matt Administrator Staff Member

    Yes. If you aren't covered by a plan, you aren't able to contribute for that month, therefore if you leave early, you would over contribute.

    The resolution to over contributing is to withdraw from the HSA, you have to withdraw the contributions and the prorated growth of the earnings, the latter part is subject to tax.

    If you withdraw the amount, and file form 5329 by the tax deadline, you are exempt from additional tax, but if you do not do this in time, you are subject to an additional 6% penalty tax that will erode your account until resolved.
     
  20. LearnMS

    LearnMS Level 2 Member

    So I found out that I can undo my contribution election that I initiated last week. At my previous employer, I contributed $4352 towards family HSA. At new employer, my HSA contribution i set was $2900 for individual coverage.

    Will it make sense to contribute $2398 instead of $2900 to stay within the limits for 2017? Or am I complicating this by changing from family HSA at 1st company to individual coverage at 2nd company this year?

    Thank you.
     
  21. stroschein

    stroschein Level 2 Member

    I accidentally went over last year because I switched from family to individual and had to pay a fee and pay less into it this year. Unless you lie on your taxes you cannot overcontribute. They even pro rate how mich you can contribute based on the number of months you are family/single.

    Edit: this echoes exactly what Matt said. I can confirm from experience. I paid the 6% fee.
     
    Last edited: Sep 5, 2017
  22. LearnMS

    LearnMS Level 2 Member

    Is it best to not contribute at all for 2017 in my case? I know that if I continue to contribute remainder of money for family HSA, it would have been fine.

    But since I am changing from family to individual HSA in new job, I don't know if that triggers over the limit for the year.
     
  23. Matt

    Matt Administrator Staff Member

    You have to do it monthly like I mentioned:

    Jan
    Feb
    Mar
    Apr
    May
    Jun
    Jul
    Aug
    Sept
    Oct
    Nov
    Dec

    Write this down in an excel/google docs, then enter in $283 for each covered Individual Month and $562 for each family month.

    For the transition month, you can use family.

    If you separated service in May, that is 5*$562.50 that you were allowed to contribute, since you contributed more than that, you need to withdraw the excess, or reduce your ongoing individual amounts to offset this.

    If you separated in Aug, that is 8*$562.50 which means your original $4300 contribution year to date is fine.

    Personally, I'd run one payroll at the full $2900 to see what it means. It might be that they are forcing $2900 into the pro-rated months of the year (IE Sept, Oct, Nov, Dec at $725 per month) or might be that electing $2900 is an annual limit, so they are contributing just $241 per month.

    Let the payroll run a month, and then adjust it if needed, else you'll be going back and forth.
     
  24. LearnMS

    LearnMS Level 2 Member

    Thanks for the explanation.

    My HSA service with previous employer ended in Aug. So I contributed $4300 until August for family coverage. The leftover is now $2450, which I could've added if I chose family HSA at new employer.

    Instead, I am opting for individual coverage at new employer and I contributed $2900. With our recent discussion, it looks like I will incur penalty for 2017 as its greater than $6750 for 2017.

    However, the benefits team at the new employer insists that I won't incur a penalty as this would be a new HSA account at new employer and is considered as a fresh contribution for the year. I don't know, but looks like that info is inaccurate.

    I do have a grace period of few weeks before which I can make changes to my HSA contributions for 2017. I am thinking to change $2900 to $0 for now.
     
  25. Matt

    Matt Administrator Staff Member

    Sept, Oct, Nov, Dec at $283 means that you can put in $1,132 during 2017 with the new employer. You can also put in $200 for the Jan-Aug period.
     
  26. LearnMS

    LearnMS Level 2 Member

    Hello Matt,

    I did as you suggested. Jan-Aug was HSA with family coverage. Then job move. In new job, Sept to Dec, I contributed $283 for individual HSA. Since I am new, I have 60-day grace time to make any changes to these elections. So not sure if I will see these immediately in my pay stub until then.
     
  27. Matt

    Matt Administrator Staff Member

    Cool. In the new year, wait for the statements to arrive. They will be called 5498-SA and you will probably get one from each. Check that they match expectations, if so, you are good, if not, resolve via making a withdrawal to adjust them prior to tax day.
     
  28. LearnMS

    LearnMS Level 2 Member

    Great!

    Off-topic - is it wise to leave the 401k acct from previous job as is? I don't have any plans to move it but I am open if there's any advantage to it. The funds selection is mediocre at both places anyway....
     
  29. Zip

    Zip New Member

    That will be plan specific. Some 401k plans may charge a fee, sometimes this depends on your balance. Rolling over to an IRA would give you unlimited investment options, but it would make a backdoor IRA more complicated.
     

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