HSA contribution max for unmarried dual family coverage under HDHPs

Question

Suppose two unmarried individuals each have independent family coverage HDHPs that provide coverage for both individuals. Irrelevant, but for simplicity, assume this family coverage is free of charge (perhaps sponsored by their respective employers).

Each individual qualifies for an HSA according to the requirements in IRS Publication 969:

• You must be 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 are not enrolled in Medicare.
• You cannot be claimed as a dependent on someone else's 2015 tax return.

The IRS has special "Rules for married people" (below), but this does not apply since the individuals are not legally married.

If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2015 is $6,650. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.

What is the maximum that these individuals may contribute to their respective HSA accounts?

Answer 1

The IRS treats you as unmarried, even if your health insurance/employer treats you as married. This has two implications for you.

First, you can each have an HSA, but you cannot pay for your partner's medical expenses out of your own HSA (and vice versa). From Publication 969, Distributions:

Qualified medical expenses are those incurred by the following persons.

1. You and your spouse.

2. All dependents you claim on your tax return.

3. Any person you could have claimed as a dependent on your return except that...

Your partner is not your spouse or dependent, so you can't use your HSA accounts to pay each other's medical expenses.

Second, you can each contribute the full amount to your own HSA for family coverage. The IRS does not define who needs to be covered in order for a plan to qualify as a "family coverage" plan. It only recognizes two types: "self-only" and "family." If your plan covers anyone besides yourself, it is a family plan for HSA purposes. As a result, you should each be able to contribute up to the family coverage limit for each of your HSAs.

An article on benefitspro.com titled "Crazy HSA rules" agrees with this reading of the rules:

Scenario 2 -- Same-sex domestic partners: Many states now recognize same-sex marriage or same-sex domestic partners, allowing employees to cover their partners on their health plans. If an employee and his same-sex domestic partner enroll in an HDHP, the employee could set up an HSA and contribute the family maximum of $6,150.

However, because the federal government does not recognize same-sex marriage, in most cases he could not use his HSA money for his spouse. But here's the loophole: the same-sex spouse is also an HSA-eligible individual with family coverage, so he too can set up an HSA and contribute the full family maximum - his contribution limit is not reduced by his partner's contribution. They just can't use their money for each other's expenses.

This is an example of the marriage penalty for income taxes.