HSAs are growing in popularity. So exactly who is eligible to establish an HSA account and make an HSA contribution or have a contribution made on his/her behalf (e.g., by an employer)?
An individual must meet several criteria. In order to make an HSA contribution, the individual must be eligible on the first day of that month and meet the following criteria:
- Cannot be another individual’s tax dependent,
- Cannot be entitled to (enrolled in) Medicare,
- Must have current coverage under a qualifying high deductible health plan (HDHP)
- For 2017, the minimum HDHP deductible is $1,300 for single plan coverage and $2,600 for family coverage (any coverage other than single plan). The maximum out-of-pocket (OOP) amounts are $6,550 for single coverage and $13,100 for family coverage. Preventive care is first dollar coverage under a HDHP and not subject to the deductible
- For 2018, the minimum HDHP deductible is $1,350 for single plan coverage and $2,700 for family coverage (any coverage other than single plan). The maximum out-of-pocket (OOP) amounts are $6,650 for single coverage and $13,300 for family coverage. Preventive care is first dollar coverage under a HDHP and not subject to the deductible.
- Cannot be covered by any other disqualifying health plan that provides coverage for a benefit prior to satisfying the regulatory minimum annual HDHP deductible. There is certain “permitted coverage,” that allows the individual to remain HSA eligible.
- Permitted Coverage
- IRS regulation specifies that permitted coverage includes coverage provided for preventive care, dental or vision services (through an insurance plan, limited health care flexible spending account (FSA) , health reimbursement arrangement (HRA) or other) or coverage provided through specified disease insurance (e.g., a cancer care policy), accident or disability insurance, workers’ compensation, liability insurance or automobile insurance.
- Disqualifying Coverage
- Disqualifying coverage disqualifies the individual from contributing to an HSA. It does not disqualify them from receiving a distribution. Disqualifying coverage is any other coverage that pays or reimburses for medical expenses before the individual’s HDHP minimum deductible has been met.
- Examples of disqualifying coverage include: an HRA that reimburses medical expenses, a standard health care FSA, secondary coverage with another insurer that is not HDHP coverage, coverage for prescription drug copays, Medicare, Medicaid or any coverage that pays first dollar.
- The disqualifying coverage could be primarily in the individual’s name or it could be spousal coverage which covers the employee such as a spouse’s HRA that reimburses the individual’s medical expenses, a spouse’s standard health care FSA, a spouse’s insurance coverage that covers the individual as well, a spouse’s prescription drug copay plan or any spousal coverage that pays first dollar.
- A spouse’s Medicare or Medicaid coverage would not cover the individual, so this is not disqualifying coverage.
The eligibility of other individuals covered under the employee’s HDHP is not relevant when determining whether that employee may contribute to an HSA.
Want to learn more about HSAs? Register for our upcoming webinars Introduction to Health Savings Account Webinar and Advanced HSA concepts.