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Family Changes

An HSA can be used to pay for qualified medical expenses not only for yourself, but also for your spouse and dependents. What happens to your HSA when you encounter family life changes like marriage, divorce, birth, and adoption? This page explores what happens to your HSA when these events occur.

Marriage

HSA contribution limits are determined on a calendar/tax-year basis. During 2018, a person with individual coverage can contribute a maximum of $3,450 to their HSA, while those with family coverage may contribute up to $6,900. When a person's status changes, their annual contribution limit changes as well.

Determine your annual contribution limit 

There are two methods to determine your new annual contribution limit of an HSA-eligible after you have a mid-year status change.  

The method you will use is the one that allows the largest maximum contribution.

Method 1

Determine your maximum annual contribution limit prorating your family and individual contributions for the year.  Follow the process below to determine the maximum annual contribution:

Prorate your family contributions
  1. Divide the maximum family contribution for the year by 12.  This is $6,900 in 2018 and $7,000 in 2019.
  2. Determine the number of months you were covered by a family health plan.  
  3. Multiply the result from step 1 by the number of months you were covered by a family plan.  
Prorate your Individual contributions
  1. Divide the maximum individual contribution for the year by 12.  This is $3,450 in 2018, and $3,500 in 2019.
  2. Determine the number of months you were covered by an individual plan.
  3. Multiply the result from step 1 by the number of months you were covered by an individual plan.
Determine your maximum contribution for the year
  1. Add the results of both operations together.  
  2. This total is your new maximum contribution for the year.  

Method 2

Determine your maximum contribution based on the type of coverage (family or individual) you have as of December 1st of the current year.  

This method is subject to the 13-month rule: to contribute the maximum amount to your HSA you must keep the qualifying health plan for at least 13 months, from December 1st of the current year through December 31 of the following year.  

Charlie Smith starts 2018 with individual coverage, which has a contribution limit of $3,450, but gets married and switches to family coverage as of July 1, 2018. 

Under IRS rules, his maximum contribution is now  $6,900, the full family coverage amount for 2018.  

However he must follow the 13-month rule and maintain this coverage through December 31, 2019. 

How to Handle Contributions for Two

The IRS has specific rules for HSA contribution limits if both you and your spouse each have insurance coverage that qualifies you for an HSA. If you both plan on contributing to your HSAs, you must have separate accounts. This is true even if you’re both covered by the same high-deductible health plan (HDHP).

A married couple maintaining two HSAs -- with one spouse having family coverage and the other with self-only coverage -- has three options:

  • Split the family contribution evenly between the spouses
  • Allocate it according to a division they both agree on
  • Put 100 percent in one spouse’s account

The IRS treats married couples as a single tax unit, which means they must share one family HSA contribution limit of $6,900. In cases where both spouses have self-only coverage, each spouse may contribute up to $3,450 each year.

We recommend that each spouse have their own HSA if you're each eligible. You can each take advantage of the ability to make $1000 catch-up contributions when you turn 55, and you can build your savings faster if your or your spouse's employer contributes money to employee HSAs as part of their benefits package.  

See HSA Contribution Limits - Catch-up Contributions for more information.

Contributing Too Much

If an individual or married couple exceeds the HSA contribution limit, they will be subject to a 6 percent excise tax. In this event, withdraw the excess contribution amount from the HSA before the tax deadline for that year to avoid the fee, per the IRS. If you’ve gone over the contribution limit, talk to your tax advisor.

Divorce

Spouses do not jointly own an HSA. Each must qualify to contribute to an HSA. In the event of a divorce or legal separation, the HSA owned by one spouse may be divided or given in part or full to the other spouse by court judgement. The movement of all or part of your HSA to a spouse or former spouse as required by a divorce decree is not a taxable transfer.  A former spouse may avoid paying taxes on the account if it is maintained as a qualified HSA.

New Child

After giving birth or adopting a child, add your new family member to your health insurance plan as soon as possible. Your HSA contribution limit will be increased to the family coverage limit on the first day of the first full month after which you move to a family-coverage HDHP.

All medical expenses related to the birth of a child are eligible for HSA reimbursement.  The child's health expenses are also eligible if they are a dependent. 

Medical expenses for an adopted child are eligible for HSA reimbursement if they are a dependent. Fees associated with the adoption process are not eligible.

If you and your spouse were covered by a family HSA-qualified HDHP and you change to single coverage after a divorce or legal separation, you may need to adjust your contributions. You should talk to your tax advisor about the best way to deal with any possible over-contributions.

Frequently asked questions

If my spouse has a family HDHP with an HSA, and I lose coverage under my individual HDHP, can I still contribute to my HSA? 
No.  Once you lose coverage under your individual HDHP, you become ineligible to contribute to your HSA.  You must be covered by a qualified HDHP to be able to contribute.  
Is my HSA a joint account with my spouse?
No. A husband and wife cannot have a joint HSA. Each spouse who wants to contribute to an HSA must open a separate HSA. Dollars cannot be transferred between the HSAs. However, one spouse may use withdrawals from his or her HSA to pay or reimburse the eligible medical expenses of the other spouse, without penalty. However, both HSAs may not reimburse the same expenses.
Can I roll my HSA into my spouse’s HSA?
No. If your spouse has a family HDHP, you cannot roll your HSA into his or her HSA.
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