I have a hard time understanding Part 3 of Form 8889 (HSAs). The situation is as follows - I have an HSA for a few years. This was opened about 3 years ago, while I was working for my previous employer. Years 2009 and 2010 were full years where I had an HDHP and made 12 monthly contributions to the HSA. Last October, I moved to a new workplace where I no longer have an HDHP, and have since stopped making HSA contributions.
I never made a withdrawal (distribution?) from this account, so I have all the contributions still there.
So, according to the instructions, I am an Eligible for the months Jan.-Sep. (and since the health insurance continues for extra 30-days, I assume I am an Eligible for October too). During the 1-9 mo period, there were some total of $3,507 contributed biweekly (reported on W-2/box 12/code W). My averaged contribution limit is (6,150 x 10 / 12 =) $5,125 so I am within margins here.
However, if I read the instructions correctly, I fail the last-month rule test and the Testing Period.
- Do I have to report anything in Part III?
- Line 18 - should only withdrawals made after the HDHP was closed be reported here?
- Line 19 - my understanding is that here I should put the difference between line 9 and the averaged limit, is this correct?
- Line 20 - whet is this about?
- If I make any future (eligible) withdrawals from the HSA, on money that was contributed during an eligibility period - will I be penalized b/c I am no longer an Eligible person?