In order to keep my insurance coverage through my husband's employer I was forced to sign up for my employer's High Deductible Health Plan. My employer knew I was keeping my other coverage but told me I could open an HSA account. I had no idea I was not really eligible for the HSA account until a few days ago. I have not made any withdrawals. How do I get rid of the HSA account without any penalties? Do I give the contributions from my employer back to them and if so, will I be taxed on the amount? The bank that holds the HSA has no idea what to do either.

  • 2
    If you're in a HDHP, why can't you be part of an HSA?
    – RonJohn
    Dec 26, 2017 at 21:27
  • Like RonJohn said, it sounds like you are eligible. Why do you think you aren't? And btw, it's very nice of your employer to still contribute to your HSA even though you don't have health insurance through them. Most companies don't do that.
    – TTT
    Dec 26, 2017 at 21:53
  • 3
    @RonJohn This is part of the HSA rules explained in IRS Form 8889 instructions: "To be eligible to have contributions made to your HSA, you must be covered under a high deductible health plan (HDHP) and have no other health coverage except permitted coverage." (emphasis mine)
    – krubo
    May 29, 2018 at 19:00
  • In order to keep my insurance coverage through my husband's employer I was forced to sign up for my employer's High Deductible Health Plan. This is exceptionally unusual..... are you 100% sure of this.
    – quid
    May 29, 2018 at 20:17

1 Answer 1


The IRS Form 8889 instructions provide for a way to handle "excess contributions" and "excess employer contributions":

... you can withdraw some or all of the excess employer contributions for 2017 and they will be treated as if they had not been contributed if:

  • You make the withdrawal by the due date, including extensions, of your 2017 tax return (but see the following Note);
  • You do not claim an exclusion from income for the amount of the withdrawn contributions; and
  • You also withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings.

It goes on to say that you can still correct such a mistake up to 6 months after filing your tax return, if you follow its instructions and file an amended tax return.

It looks like you should report the excess contributions you withdrew from the HSA in Part II, Line 14a ("Total distributions you received in 2017 from all HSAs") and Line 14b ("Distributions included on line 14a that you rolled over to another HSA. Also include any excess contributions (and the earnings on those excess contributions) included on line 14a that were withdrawn by the due date of your return") but you should not report them as contributions in Part I because they are being treated as if they had not been contributed.

Note, however, that I'm not 100% sure if this procedure applies to your situation.

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