Contributing to Your Health Savings Account

I started a new job in April that offers a high-deductible health insurance policy with a health savings account. Am I able to contribute the full amount for family coverage to the HSA for 2014, or do I need to prorate the contribution for the months that I’ve had the policy?

The HSA contribution rules are tricky, but they help in your situation: As long as you have an HSA-eligible health insurance policy on December 1, 2014 (with a deductible of at least $2,500 for family coverage, or $1,250 for an individual), you can make the full contribution for the year. In your case, that’s $6,550 for family coverage (it would be $3,300 if you had individual coverage), plus $1,000 if you’re 55 or older anytime during the year.

If you make the full contribution, however, there is one big caveat: You must keep an HSA-eligible policy for the entire following calendar year. If you don’t keep the HSA-eligible policy for all of 2015, then you’ll have to pay income tax and a 10% penalty on the difference between the amount you contributed ($6,550) and the amount you would have been eligible to contribute based on the number of months you had an HSA-eligible policy ($4,912.50 for the nine months from April through December), says Todd Berkley, president of HSA Consulting Services. “IRS Form 8889 will walk you through the calculation,” he says.

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This rule is important to keep in mind when choosing your health plan for 2015 during open-enrollment season, which starts November 15. However, a lot of people choose to prorate their contributions rather than maxing them out so they don't need to worry about keeping coverage for the following year, Berkley says.