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Rules and Best Practices when Spouses are Both HSA Eligible

There are several things you should be aware of if both you and your spouse are interested in selecting a High Deductible Health Plan (HDHP) in your respective workplaces and making contributions to a Health Savings Account (HSA). One would assume, as a lot of married couples do, that each of you can each contribute up to your respective IRS contribution limit as determined by your coverage.

For example, let’s say one of you has self-only coverage and the other one has family coverage. The self-only contribution limit ($3,400) plus the family contribution limit ($6,750) should make your combined contribution limit $10,150, right? Wrong.

The contribution limit is determined by the Internal Revenue Service (IRS) and the IRS views spouses as one tax unit, even if filing as “married filing separately,” so if either spouse is eligible for a family contribution limit, that is intended to cover both spouses. The IRS suggests that the family limit be split evenly between the spouses, unless a separate allocation is desired.

Therefore, if:

  • Both spouses select a HDHP and each insures one child, each of their coverage is considered family coverage, then the couple will have to share one family HSA contribution limit which is $6,750 for 2017.
  • Both spouses select a HDHP and one is insured as self-only and the other one selects family coverage to include the children, then both will share the family HSA contribution limit which is $6,750 for 2017.
  • Both spouses select an HDHP and self-only coverage, then they each will have a single HSA contribution limit of $3,400 for 2017.

These rules raise an interesting question: should a married couple open only one HSA and not have to worry about exceeding the contribution limit by not having to compare and track two HSAs? The best practice, in most cases, is for each of you to open your own account, because this may increase your savings. If you only have one account, then one spouse could miss out on employer contributions, pre-tax contributions/reduction taxable income, and catch-up contributions if one of the spouses is 55 or older (catch-up contributions are available for each HSA holder so long as they have their own account). Employers cannot facilitate pre-tax contributions to an account not owned by the employee.

For example, Keith and Lora are married, work for different employers and both decide to participate in a HDHP with their respective employers. They decide that Lora will open an HSA and Keith will not.  Lora has family coverage to include their children, so her contribution limit is $6,750 for 2017. Keith has insured only himself and sees no reason to open his own account.  In this scenario, Lora is the only one that can take advantage of contributing funds to her HSA through pre-tax payroll deductions — which not only saves her federal taxes but saves her and her employer payroll taxes as well.

The main disadvantages of this strategy come in two specific scenarios.  First, if Keith reaches the age of 55 before Lora, he will forfeit the opportunity to make an additional $1,000 catch up contribution unless he has his own HSA.  Second, if Keith’s employer makes contributions to its employees’ HSAs then Keith will miss out on those funds as well.

The advantages of only opening an HSA for Lora are more minor and include: (i) only paying one set of account fees, which are often covered by the employer anyway, and (ii) only having paperwork for one account.

In conclusion, if both spouses are going to select a HDHP through their employers and are HSA-eligible, then they should probably each open their own HSA, figure out their collective contribution limit, and decide how they will split that limit between the two accounts to avoid over-contributing.

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