Only eligible individuals can establish HSAs and make contributions (or have them made on their behalf). An individual’s eligibility for HSA contributions is typically determined monthly as of the first day of the month. In general, an HSA contribution can only be made for months in which the individual meets all the eligibility requirements.
To be HSA-eligible for a month, an individual must:
- Be covered by a high deductible health plan (HDHP) on the first day of the month;
- Not be covered by other health coverage that is not an HDHP (with limited exceptions);
- Not be enrolled in Medicare; and
- Not be eligible to be claimed as a dependent on another person’s tax return.
An exception to this general rule is the last-month rule, in which an individual is treated as HSA-eligible for the entire year if they satisfy the HSA eligibility requirements on Dec. 1 of the year.
In the case of married individuals, each spouse who is an eligible individual who wants to have an HSA must open a separate HSA. Married couples cannot have a joint HSA, even if they are covered by the same HDHP. Also, if another taxpayer is entitled to claim an individual as a dependent, the individual is not eligible for HSA contributions, even if the other person does not actually claim the dependent.
In addition, an individual who is covered by a standard type of health flexible spending account (FSA) or health reimbursement arrangement (HRA) cannot make HSA contributions. However, there are certain types of health FSAs and HRAs that are compatible with HSA eligibility, such as post-deductible or limited-purpose health FSAs or HRAs.
Eligibility Criteria
To be HSA-eligible, an individual must:
- Be covered by an HDHP;
- Not be covered by other health coverage that is not an HDHP (with certain exceptions);
- Not be enrolled in Medicare; and
- Not be eligible to be claimed as a dependent on another person’s tax return.
Key Considerations
- Eligibility for HSA contributions is generally determined monthly as of the first day of the month.
- An individual does not need to be an employee to be eligible for HSA contributions, although nonemployees cannot make pre-tax HSA contributions through a cafeteria plan.
- In general, individuals with coverage under a health FSA or HRA are not HSA-eligible.
Additional Resources
IRS Increases 2023 HSA and HDHP Contributions
The IRS Takes on Inflation: Major Changes in HSA and HDHP for 2024
Annual Health FSA Contribution Limit to Increase in 2023
For more employee benefits information, contact INSURICA today.
This Compliance Snapshot is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Zywave, Inc. All rights reserved.
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