Health Savings Accounts – What about that IRS maximum contribution limit?

Health Savings Accounts (HSAs) are a great tool to help with certain medical expenses and your taxes, as they let you set aside money on a pre-tax basis. Additionally, HSAs offer other benefits as well. Take a look at The Anatomy of an HSA for details.

When it comes to HSAs, it’s important to remember that they come with some rules, including how much you are allowed to receive in contributions from any source – including you and Purdue (payroll and Healthy Boiler incentive earnings) – each year.

For 2020, the IRS single coverage maximum contribution amount is $3,550 and $7,100 for those who cover one or more family members. Also, keep in mind those maximum contribution amounts include any contributions your spouse receives in an HSA – together you must collectively adhere to the contribution maximum family limit.

Track your contributions

The good news is that you can sign up for HSA Bank notifications so you are alerted when you’re within a certain threshold of the IRS maximum contribution limit. This is an extra layer of protection to help you keep track of your annual contributions and reduce the risk of over-contributing. Here’s what you do: 

• Log into hsabank.com, scroll down to the “Quick Links” box, click “Manage Account Alerts.” Scroll down to “Contributions”, check the preferred Alert Preferences box, and enter the amount of the desired threshold in the “HSA contributions year-to-date are within $__________ of the IRS maximum” field.

Note: It is your responsibility to make sure your contributions (payroll – your contributions, payroll – Purdue’s contributions, outside of payroll, Healthy Boiler incentive earnings) do not go over the IRS max. Be sure to take into consideration your payroll contribution amounts and how often you’re paid before entering the threshold amount.  The timing in which the reminders are sent by HSA Bank do not coordinate with Purdue’s pay schedules, meaning if the threshold you enter is too close to the max, you might not be notified until late in the year when it might be too late to do anything about it on the payroll side (such as December, for example).

You also have the ability to check your total contributions for 2019 (IRS maximum contribution limits for 2019 were $3,500 (single) and $7,000 (family) by following these steps:

• Log into hsabank.com, scroll down to “Quick View.” Hover over the green bar in the 2019 column and you will be shown your total contributions for the year.

Now that you have checked your total contributions for 2019, what do you do – and by when – if you’ve over contributed?

• Funds contributed in excess of your contribution limit and the earnings on those funds are subject to penalty and tax unless you take one of the following additional actions:
  • Pay the excise tax on the excess contribution when filing your Federal Income Tax Return. The funds would remain in your HSA and count as a 2020 contribution; therefore you’d need to make sure you subtract the excess amount from the 2020 IRS HSA limits to determine the maximum amount you can contribute in 2020 to avoid further penalties.
• Complete an HSA Excess Contribution Removal Form and return it to HSA Bank before the tax-filing deadline. The excess amount will be removed from your account and refunded to you, less taxes. Questions on this process may go to HSA Bank at 800-357-6246.

Refer to your tax advisor for additional details around the tax implications for either of these processes.

HSA-related tax forms

Tax season is upon us, and there are tax forms related to HSAs.

First, let’s take a look at Tax Form 1099-SA, which reflects your total HSA distribution amount (debit card payments and reimbursements/withdrawals) from the prior tax year.

• HSA Bank
  • Forms 1099-SA are now available online – to those who spent their HSA funds any time in 2019. HSA Bank emailed notification of this to accountholders. To access the form, log into hsabank.com and click “Accounts” then “Statements.” There will be a link to the form in the “HSA Tax Statements” box.
  • Forms will not be mailed out automatically unless you opted to receive one via mail (they would have been sent on or before January 31, 2020). Those who would like a form mailed to them can call HSA Bank at 800-357-6246 to make the request; be sure your address on file is up-to-date. Those who wish to receive the Form 1099-SA via mail in the future should log into hsabank.com, scroll down to the “Quick Links” box and click “Statement Preferences.” In the “HSA Tax Documents” row, select “paper.”
• Payflex
  • 2018 PayFlex HSAs rolled over for a couple of months into 2019.  If you spent any funds from your HSA with PayFlex in January or February of 2019, you will receive a separate 1099-SA form from them either by mail or, if you opted out of paper, via their member portal. Those with paperless notification preference should’ve received an email notification about the form’s availability. To access the form online, log into payflex.com and click “View Tax Documents” under “Account Actions” at the bottom of the screen. Click the document dated 01/31/2020 to download it. If you would like a form mailed to you, call PayFlex at 844-PayFlex (729-3539) to request one; be sure you share your current address when the request is made.

Second, Form 5498-SA makes an appearance, but not until later.

• As a reminder, Form 5498-SA, which shows the total amount of contributions made to an HSA from any source for 2019, will not be available until May 2020.  It is not available until May since people have until the tax-filing deadline to make contributions outside of payroll to their HSA for the previous plan year, and the form is not required for filing taxes. 

Questions

Questions can be directed to HSA Bank and PayFlex – as noted in the article.
Additional questions can be directed to Human Resources at 765-494-2222, toll free at 877-725-0222 or via email to hr@purdue.edu.