Health savings accounts (HSAs) and high deductible health plans (HDHPs) can be confusing for individuals. When spouses and children are thrown into the mix, the rules can be even more difficult to figure out. A recent report by the LIMRA Secure Retirement Institute and Insured Retirement Institute finds only 51% of Americans believe they are knowledgeable about HSAs. This means employees are asking their benefits department questions surrounding HSA eligibility, contributions and use of HSA funds.
I’ve put together a list of HSA FAQs to help benefits professionals answer common questions pertaining to family coverage.
HSA Eligibility Questions
1. Can my 23-year-old child who’s a dependent on my HDHP and my tax return contribute to my HSA?
No. In order to qualify to make or receive contributions to an HSA, an individual must:
- Be unable to be claimed as a dependent on someone else’s federal tax return.
- Be covered under a HDHP on the first day of the month
- Not be enrolled in Medicare
- Have no other health coverage, except what is permitted by the Internal Revenue Service (IRS).
Publication 969 permits an individual to be covered under:
- Worker’s compensation laws
- Insurance for a specified disease or illness
- Insurance that pays a fixed amount per day of hospitalization
- Insurance covering accidents, disability, dental care, vision care, or long-term care.
2. Can my 23-year-old child who’s a dependent on my HDHP contribute to her own HSA?
Yes, as long as your child is not a tax dependent and meets the other requirements listed above, she can open and contribute to her own HSA. She does not have to be the subscriber to the health plan.
3. Am I eligible for HSA coverage if my spouse has a general purpose flexible spending account (FSA) through his/her employer’s plan?
No. A flexible spending account provides coverage for all eligible health expenses, and therefore it is disqualifying coverage for an HSA.
HSA Contribution Questions
1. I have family HDHP coverage. What are my HSA contribution limits?
According to Revenue Procedure 2018-30, the annual contribution limitation for the calendar year 2019 for an individual with family coverage under a HDHP is $7,000. Keep in mind if your employer makes a contribution, it does count toward the maximum.
2. How much can my child contribute to his/her own HSA while he/she is covered on my family qualified HDHP?
Your child can contribute up to the full family maximum of $7,000 in 2019 to his/her own HSA.
3. Does my child’s HSA contribution to his/her own account affect what my spouse and I can contribute into our family HSA?
No. Your child’s contributions to his/her own account will not reduce the amount you and your spouse can deposit into your accounts.
4. If my spouse and I are both employed, covered by a HDHP and have our own HSAs, how much can we contribute?
You can each fund your own HSA up to the single-person limit ($3,500 in 2019) if you have each elected self-only HDHP coverage. However, if one of you has elected self-only HDHP coverage and the other has elected family coverage, or even if both elect family coverage, you will have to share the family contribution limit ($7,000 in 2019). The Tax Adviser clarifies that you and your spouse can allocate the maximum in any way you choose, but if you cannot agree on how to divide it, it must be divided equally.
Distribution and Use of HSA Funds Questions
1. Can I use my own HSA funds to pay the health expenses of my spouse and children?
Yes. HSA funds can be used for expenses incurred by the employee, the employee’s spouse or the employee’s tax dependents.
A tax dependent is a qualifying child under Internal Revenue Code Section 152 if he/she:
- Is a child of the taxpayer
- Has the same principal place of abode as the covered employee for more than one-half of the taxable year
- Has not provided more than one-half of his/her own support during the taxable year
- Is not yet 19 (or, if a student, not yet 24) at the end of the tax year or is permanently and totally disabled.
Even if you have self-only HDHP coverage and your spouse has non-HDHP family coverage, you can spend your HSA funds on your spouse’s and children’s medical expenses. Tax-free distributions can be made from an HSA to pay or reimburse the qualified medical expenses of the employee/HSA owner, spouse or dependent meeting the above requirements.
2. When my child turns 26 and ages off my health plan, can my child still use the money in his/her own HSA?
Yes. Any HSA money your child has in his/her account can still be used for eligible medical expenses. The money can be spent at any time; he/she just can’t contribute to the account unless he/she is covered again by an HSA-eligible medical plan.
- Health Savings Accounts: Frequently Asked Questions and Answers – EPIC Insurance Brokers and Consultants, October 1, 2018
- HSA Requirements for Adult Dependents – OneDigital Health and Benefits, July 5, 2017
- Your Adult Children on Your Family Insurance can Have Their Own HSA – HSA Edge, August 13, 2016
For more information on HSAs, take a look at our e-learning course – HSA and HRA Basics.
Amanda Wilke, CEBS
Information/Research Specialist at the International Foundation