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How a Status Change Affects Your HSA Contributions

Family coverage and HSA contributions

If your coverage status changes during the plan year, it can affect how much you can contribute to your Health Savings Account (HSA) for that year. Learn how a person’s HSA contribution limits can change due to a mid-year status change.

As an HSA owner, you can change how much you contribute (up to the IRS annual limit) at any time during the plan year. However, if you have a life-changing event that leads to an insurance change from individual to family coverage (or vice versa), your HSA annual contribution limit could be affected.

What qualifies as a change of status?

It’s important to remember that with an HSA, you can only contribute if actively enrolled in an HSA-qualified, high-deductible health plan (HDHP). Events that can trigger a change of status include:

  • Marriage
  • Divorce
  • Birth/adoption of a child
  • Change in employment status
  • Change in participation eligibility
  • Medicare or Medicaid eligibility

Learn more about change of status.

The “Greater of” Rule

Let’s talk about the Full-Contribution Rule, also called the “greater of” rule. Issued by the IRS in 2008 (see IRS Notice 2008-52), this rule explains how the new contribution limit is calculated when an HSA account owner has a mid-year status change.

Suppose the HSA owner is HSA-eligible for the entire 2023 plan year and enrolls effective January 1 as an individual. During the year, s/he gets married and changes HDHP coverage from individual to family. In that case, s/he may contribute up to the greater of:

  1. The average annual contribution based on actual HDHP coverage (i.e., self-only or family HDHP coverage) for each month of the year; or
  2. The annual maximum HSA contribution limit that applies to the employee’s HDHP enrollment status on the first day of the last month of the plan year.

The account owner calculates what the annual limit would be under each option. The highest of the two results is the account owner’s annual HSA contribution limit for that plan year (in this example, for 2023). Here are two sample scenarios that should help make this easier to understand.

From Individual to Family Coverage

Switching from individual to family coverage is pretty straightforward. For example, Linda Lou starts with individual coverage for 2023 but switches to family coverage starting August 1.

  • If Linda Lou used Option #1 as outlined above, her annual limit would be $5,475.
  • However, under Option #2, her limit would be $7,750.

Under the “greater of” provision of the Full-Contribution Rule, Linda can contribute $7,750 for that year. Here’s the detailed calculation for Option 1.

Months in 2022Amount from Limitation Chart
(see Form 8889 instructions)
January$3,850
February$3,850
March$3,850
April$3,850
May$3,850
June$3,850
July$3,850
August$7,750
September$7,750
October$7,750
November$7,750
December$7,750
Total for all months$65,700
Limitation.  Divide the total by 12.$5,475

From Family to Individual Coverage

But what if Linda Lou starts with family coverage but then switches to individual coverage starting August 1? For January through July, her annual contribution limit was $7,750. However, starting August 1, her limit dropped to $3,850.

Again, Linda would calculate her annual contribution limit for 2023 based on Options #1 and #2 outlined above.

  • Under Option #1, her annual limit would be $6,125.
  • Under Option #2, her limit would be $3,850.

Using the “greater of” provision of the Full-Contribution Rule, Linda can contribute $6,125 for 2023. Starting January 1, 2024, the standard annual maximum for her coverage status will apply.

Refer to IRS Notice 2008-52 for more information.

Have more HSA questions? Learn more in these HSA FAQs.