How is HSA-eligibility affected when a spouse or dependent is enrolled in Medicare?

Health savings account (HSA) eligibility is determined on an individual basis. If the employee is enrolled in a qualifying high-deductible health plan (HDHP), does not have any disqualifying coverage, and cannot be claimed as another’s tax dependent, the employee is eligible to contribute to an HSA. This is true even if the employee’s spouse or dependents are enrolled in Medicare, Medicaid or other disqualifying coverage. 

Further, if the employee is enrolled in family HDHP coverage, the employee may contribute up to the family annual contribution limit, even if some individuals enrolled in the coverage are ineligible. See the excerpt from IRS Notice 2008-59 (Q&A #16).

How do the maximum annual HSA contribution limits apply to an eligible individual with family HDHP coverage for the entire year if the family HDHP covers spouses or dependent children who also have coverage by a non-HDHP, Medicare, or Medicaid?

The eligible individual may contribute the § 223(b)(2)(B) statutory maximum for family coverage. Other coverage of dependent children or spouses does not affect the individual’s contribution limit, except that if the spouse is not an otherwise eligible individual, no part of the HSA contribution can be allocated to the spouse.

In the answer, the IRS recognizes that normally the family HDHP annual contribution limit can be split between the spouses if they are both HSA-eligible, allowing each of them to open separate HSAs and contribute so long as together they do not contribute in excess of the annual contribution limit. However, if one of the spouses has disqualifying coverage, that spouse cannot contribute to their own HSA; rather, only the eligible spouse may contribute to an HSA and then can contribute up to the full family maximum since they don’t have to split it with the other spouse.

And finally, keep in mind that once funds are contributed to the HSA, the funds can be used to reimburse qualifying medical expenses for the HSA account holder and the account holder’s spouse and tax dependents. The spouse’s and dependents’ qualifying medical expenses would continue to be eligible for reimbursement from the employee’s HSA even if the spouse or dependents are not HSA-eligible.

Content for the WEX compliance Q&A is provided by Benefit Comply, LLC. Benefit Comply provides employee benefits compliance support and services to brokers, employee benefits consultants, and TPAs nationwide. For more information go to www.benefitcomply.com.

The information in this blog post is for educational purposes only. It is not legal, tax or investment advice. For legal, tax or investment advice, you should consult your own legal counsel, tax and investment advisers.