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I have a HDHP with an HSA through my employer as well as a non-HDHP through my parents. Am I still eligible for the HSA through my HDHP? I have an HDHP with an HSA through my employer that I started with in August 2018. I also have a non-HDHP through my parents due to being under 26. I recently read that to be eligible for an HSA, I must not have coverage under a non-HDHP (https://www.irs.gov/publications/p969#en_US_2017_publink1000204025). I am currently contributing to my HSA and have been since September 2018. is it true that I am not eligible? If so, will I be penalized for contributing to an HSA? Should I purge the HSA to avoid any problems? My parents are about to switch to a HDHP; Does this change anything?

  • Read the "last month rule" – Ben Voigt Dec 5 '18 at 3:57
  • @BenVoigt What does the last month rule have to do with the OP's question? – Ben Miller Dec 5 '18 at 5:23
  • @BenMiller: "My parents are about to switch to a HDHP; Does this change anything?" Answer is (because of last month rule): If they switched before Dec 1st, it would have made things ok. – Ben Voigt Dec 5 '18 at 14:00
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In order to contribute to an HSA (or accept contributions from someone else, such as your employer), you need to be an eligible individual. IRS Publication 969 says this about being an eligible individual:

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  • You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.

  • You have no other health coverage except what is permitted under Other health coverage , later.

  • You aren’t enrolled in Medicare.

  • You can’t be claimed as a dependent on someone else's 2017 tax return.

You meet the first requirement, because your are covered under an HDHP through your employer. However, you do not meet the second requirement, because you have other health coverage: the non-HDHP that your are covered by through your parents. Therefore, you are not an eligible individual, and you cannot contribute to an HSA.

To fix this for this year, you need to remove the contribution from the HSA. This is called an excess contribution. If you got your HSA through your employer, you'll need to talk to your employer about this, so they can tell you what to do. Otherwise, if you need to deal with the HSA directly, tell them that you need to make an excess contribution withdrawal. There will probably be a form that you need to fill out (and there might be a fee). Take a look at this answer for more information about excess contributions, and if you need more information about that, ask a new question.

If you want to be able to participate in an HSA in the future, you need your parents to drop you from their health coverage. It is too late to fix it this year (in order to be eligible for any HSA contribution, you needed to be eligible by December 1), but if you can become eligible by January 1, you will be able to contribute the full amount to your HSA next year.

  • Thanks so much! If my parents' plan becomes an HDHP and I am on it, will I be eligible? Or can I not have dual coverage at all and have an HSA? I know pub 969 says "no other health coverage", but thought i read somewhere that if both plans are HDHP it is fine. – Joe Rocca Dec 5 '18 at 6:03
  • @JoeRocca When you have two health plans, they pay out using a system called Coordination of Benefits (COB). As long as the resulting combined coverage is still an HDHP, meeting the minimum deductible rule, I believe you are still considered HSA-eligible. So if you still are required to pay the first $1350 (or whatever your deductible is) of expenses, you are okay, but if one plan covers the deductible of the other, you are not HSA eligible. You may want to call one or both of the insurance companies and ask this question to be sure. – Ben Miller Dec 5 '18 at 12:25
  • @JoeRocca What is the benefit to you of being covered by two health plans? Usually parents drop the coverage of their kids when they obtain their own coverage, especially if it saves them money in premiums to do so. – Ben Miller Dec 5 '18 at 12:27
  • @BenMiller: I'd assume the benefit is having in-network providers in both places. And if the family has more than one child, there may very well be no difference in premiums. – Ben Voigt Dec 5 '18 at 14:05

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