IRS Catch-Up Contribution Guidelines
Under Internal Revenue Service (IRS) guidelines, individuals that will be 55 years of age or older for a given tax year can make an additional catch-up contribution of up to $1,000 to their own Health Savings Account (HSA). Keep in mind that if an employee is a midyear hire you may need to prorate the contribution. If the employee was eligible to contribute to an HSA all year but was only 55 for part of the year, you DO NOT need to prorate the $1,000.
If a married couple will both be 55 or older, both spouses can make catch-up contributions totaling $2,000. Each spouse must have their own individual HSA to contribute their catch-up contribution into. If the spouse doesn’t already have an HSA account, HealthEquity offers a free Spousal account. To qualify, both the Member and the Spouse must be older than 55 and one of them must be paying the admin fee. This account does not need to be sponsored by the employer.
Opening an Individual Spousal Account
To open an Individual Spousal Account, the spouse will need to enroll in an HSA at HealthEquity.com and choose ‘Open Account’ and then ‘Individual.’ From here they will need to complete the sign-up process. Once done, the Spouse will need to call into the Member Services Team at 866.346.5800 24/7 that they have completed the online enrollment and that they need to be signed up for a free spousal account.
Contributions to the spouse's account will need to be made post-tax. Meaning the spouse will send their contributions directly to HealthEquity.
Medicare and Contributions
All contributions must cease once an individual enrolls in Medicare, as Medicare is not an HSA-qualified health plan. However, an existing HSA can continue to be used for investments and distributions for qualified medical expenses.* If you are not eligible to contribute for the entire year, you must prorate your contributions, including the catch-up contribution.
Prorating Using the Contribution Calculator Tool
To prorate contributions, you have a Contribution Calculator Tool in your employer portal that can make this task easy for you. To use the tool:
Select ‘Contribution Calculator’ under ‘Manage Money.’
Select the relative tax year from the drop-down list (contributions are calculated on the calendar year per the IRS).
From the drop-down list, select employee and verify that the correct
coverage type for the employee (i.e., family or individual) is selected.The age of the employee at the end of the year will pre-populate
based on their date of birth.Enter the number of months the employee is eligible to make HSA
contributions only if an employee wants to prorate their contribution
amount due to eligibility changes.Select ‘Calculate’ and three totals are displayed:
‘Annual maximum contribution’ is the total based on IRS-allowable
contributions determined by coverage type.‘Allowed catch-up contribution’ is the total based on the employee’s
age as of the last day of the selected tax year.‘Total maximum contributions’ is the total based on combining the
annual maximum contribution with the allowed catch-up contribution
*Investments made available to HSA holders are subject to risk, including the possible loss of the principal invested, and are not FDIC or NCUA insured, or guaranteed by HealthEquity, Inc.