Next year, my employer is offering an HSA-compatible HDHP with no employee premium, a $5,400 deductible and a $4,400 HSA contribution. My wife's employer is offering a Kaiser plan with no employee premium and no deductible. These are both for family coverage. Neither employer offers cash-in-lieu of these benefits which, quite frankly, sucks. Truly, this is an embarrassment of riches, but that's not going to stop me from trying to maximize our benefits.
What would happen if I signed up for the HSA-compatible HDHP and my wife signs up for Kaiser? Can I withdraw the $4,400 HSA contribution, claim it as ordinary income, pay taxes (and possibly a penalty) and pocket the rest? I think it's pretty ridiculous that one of us has to forego a portion of our compensation just because we both have excellent benefits.
No dice, see Pub 969. If you are covered by your spouse's non-HDHP health plan, you're not eligible to make HSA contributions. ========== Note so fast: Note that he said eligible for, not covered by.
There are factors that should affect the decision that weren't given, namely your current health status. If you think you're more likely to get sick, it seems that the wife's coverage will be the better deal. That's no longer a tax issue. However, taking her coverage means there will be no coverage via the husband's employer. You can't take both policies.....
If his wife signs up for the Kaiser plan, he's covered by non-HDHP insurance so no HSA for him.
It's true, if the out of pocket with the HDHP turns out to be less than the $4400 his employer will put into the HSA, he still wins. I'd leave the extra money in the HSA either for future medical expenses or for retirement rather than take it out now, but that's a detail.
1) Sign up for the HDHP with my employer
2) My employer contributes $4,400 to my HSA over the course of the year
3) Withdraw the $4,400 and all earnings before my taxes are due
4) Include the $4,400 and all earnings in my gross income
5) Pay taxes on the $4,400
6) Pocket the rest (aka profit)
I already signed up for the HSA with my employer (our open enrollment was early November). That's already done. My wife has already signed up for Kaiser. That's also done. Presumably, my employer is going to start making the HSA contributions at the beginning of 2016. At the end of 2016, I withdraw that money as an excess contribution. From a sheer mechanical standpoint, it looks like everything will work.
Honestly, this whole thing stinks. My employer is willing to shell out $15k for my health insurance next year. If I opt to use my wife's benefits, instead, my employer will just pocket that money. There's absolutely no incentive me for me to forego my employer-provided health insurance. In fact, you could argue that there's a DISincentive, since I would be missing out on the $4,400 HSA contribution. So instead, I'm jumping through hoops to try and cash in on less than 1/3 of the value of this benefit. It would be better for all parties involved if I could simply forego the insurance and just.. split the savings with my employer. Halfsies, as it were. :-)
Anyway, thanks for the advice. Sorry for the rant. Things like this just really upset me. I wish my employer would just give employees a lump sum for benefits and let them spend it as they see fit. Treat adults like adults - what a novel concept. :-p
Somewhere in this process you made an agreement (either explicit or implicit) to remain HSA eligible and to inform your employer if this changed. By not informing them that you are not HSA eligible, they are paying $19.4K ($15K insurance plus $4.4K for the HSA) for a fringe benefit you DO NOT quality for. Every employer I have ever worked for would be mighty unhappy if an employee pulled such a stunt and some would fire the employee and ask the local authorities to prosecute for fraud. I hope you have a very atypical employer or you don't like your job.
If his wife signs up for the Kaiser plan, he's covered by non-HDHP insurance so no HSA for him. ==========...But she hasn't done so yet. It's still an open option. Your answer considered it a done deal when it wasn't.
It's true, if the out of pocket with the HDHP turns out to be less than the $4400 his employer will put into the HSA, he still wins. I'd leave the extra money in the HSA either for future medical expenses or for retirement rather than take it out now, but that's a detail. ===========Leaving it in without telling him that the excess contribution excise is imposed EVERY year it remains excess is irresponsible.
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