HSA Contribution Rules
November 18, 2009
Health Savings Account (HSA) contributions for tax years 2009 and 2010 are limited to the monthly contributions limits that apply to your HSA. In other words, these monthly contribution limits are equal to 1/12th of the annual contribution limit for the type of HDHP you're covered under (single or family coverage).
Contribution Limits
Individuals or employers can contribute to an HSA at any time throughout the year up to the applicable contribution limit. Permitted HSA contributions have been expanded to include direct rollovers from health flexible spending accounts (FSAs), from health reimbursement accounts (HRAs), and from both traditional and Roth IRAs.
For 2009, the maximum annual contribution limit for an individual plan is $3,000, while the maximum contribution limit for a family plan is $5,950. And if you’re age 55 and older, you can make an additional “catch-up” contribution of $1,000 in 2009.
For 2010, the maximum annual contribution limit for an individual plan is $3,050, while the maximum contribution limit for a family plan is $6,150. Again if you’re age 55 or older, you can make an additional “catch-up” contribution of $1,000 in 2010.
HSA contributions can be made anytime between January 1 and April 15 of the following year. So for tax year 2009, you can contribute anytime between January 1, 2009 and April 15, 2010, while contributions for tax year 2010 can be made anytime between January 1, 2010 and April 15, 2011.
Contribution Rules
You must enroll in an HDHP before you can begin making HSA contributions. Once your HSA is established, anyone, including employers, can make contributions or transfer funds into the account on behalf of an eligible individual. An employer can also make a contribution on behalf of an employee.
Your eligibility to contribute to an HSA is determined on the first day of each month. If you meet the eligibility test on that day, you can contribute for that month. Your monthly contribution limit is calculated by dividing the annual contribution limit by 12. If you are over age 55, then your monthly limit increases by 1/12th of the catch-up contribution for the year ($83.33/month in 2009 and 2010). The maximum HSA contribution which can be made on your behalf for a year is the total of your monthly limits.
The rules state that anyone who is eligible during the last month of the year (December for a calendar-year taxpayer) is treated as having been eligible for every month of the year. For example, let's say you were an eligible individual during the last three months of 2008. The rules state that you could make HSA contributions for all 12 months in 2008. If you continue to be eligible for all of 2009, these 2008 contributions will be treated as any other properly made HSA contribution. However, if you lose your job in 2009 and are therefore not eligible in December 2009, then the HSA contributions you made for the first 9 months of 2008 will be added to your gross income and be subject to a 10% penalty tax.
Reporting Contributions
HSA owners are required to report tax-deductible contributions and distributions on IRS Form 8889 and include it with their tax return.