HSA & Medicare

[ccristman]

I know I read something the other day but I can't find it now. I have a client that had an HSA through work but had to stop contributing in June since he was going to start collecting SS in January. My question is, he should be able to do a contribution to max out the HSA for the first half ($1,800) of the year by April 18, 2022 correct? Now if he already contributed over $2,000 from payroll, does he need to take out the over contribution?

[Rapid Robert]

The IRS would say yes, but I guess I am in a contrarian mood today, and I would not bother taking out the excess. However, you can easily find many internet documents that explain the illogic of this process exactly as you describe.

I don't buy the "retroactive coverage" business. I actually had a similar issue for myself, but instead of HSA contributions, it had to do with ACA coverage through the marketplace (Obamacare). My spouse ended the employer coverage, I needed coverage of my own, and applied through the exchange. It's ridiculous to say that I should have not done anything because, well, I was going to get retroactive coverage based on some uncertain event that might happen in the near future (enrolling in Soc. Security).

How can someone say you were "retroactively covered" by insurance when you had not applied, not paid (yes I know Part A is a government subsidy, not paid directly by the insured), and could not have gone to the hospital and shown a Medicare card to get admitted? What other insurance of any kind, any where, magically gives you "retroactive coverage" under such circumstances? I think it is just a government bookkeeping trick to help spread out the cost of Medicare to enrollees when they know that no claims are likely to be filed during the six month "retroactive" period.

[TaxGuyBill]

it had to do with ACA coverage through the marketplace (Obamacare).

I don't mean to go off topic from what the OP was asking, but (1) you can still get Marketplace insurance even if you are covered elsewhere (but no credit) and (2) the Premium Tax Credit has a specific provision saying that retroactive benefits do NOT affect your eligibility for the Premium Tax Credit.

[TaxGuyBill]

know I read something the other day but I can't find it now. I have a client that had an HSA through work but had to stop contributing in June since he was going to start collecting SS in January. My question is, he should be able to do a contribution to max out the HSA for the first half ($1,800) of the year by April 18, 2022 correct? Now if he already contributed over $2,000 from payroll, does he need to take out the over contribution?

First question: Will he have retroactive coverage? If I remember correctly, the retroactive period does not go back before the month they turn age 65.

Next:: I assume they are over age 55? If so, they get an extra $1000 for the annual amount. So the full year for a one-person plan would be $4600 ($2300 for 6 months).

Yes, they should have until April 15th to contribute whatever they qualify for.

[ccristman]

TaxGuyBill this is great! "The answer is Medicare coverage can be retroactive up to 6 months, if you sign up after your 65th birthday." Based on that, he can contribute up to $4,600 for TY 2021 if he chooses to do so because he didn't turn 65 until January of this year. Thank you so much!

[Gretel]

I did some research two years back and tripped by the "lookback period". So, this is in case there is retroactive coverage for part A? Cannot be part B because if you don't pay you don't have it. I thought they just added the lookback period to make our life hell for these clients, independent of when someone turns 65