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Tip for those interested in HSAs

April 17th, 2008 at 07:52 pm

I know from the comments left after I posted about setting up my HSA that some of you are interested in them.

So .... here's a little tip that I learned the hard way and that I hope will help you:

The first year you have set up an HSA, you have to pro-rate your contribution based on how long you had your HDHP.

For example, I had my HDHP for only the last 2 months of 2007, so the maximum I was allowed to contribute to my HSA (for a family) was:

$5,650 (maximum allowed 2007 contribution) / 12 months of the year x 2 months I had the HDHP = $942

But of course this did not dawn on me and I over-contributed. (Got too excited about the potential tax savings, I guess.) As MonkeyMama would say - "Doh." Rookie mistake.

Fortunately, it was not a really big deal. As soon as Turbo Tax told me I had made a "boo-boo" I contacted my HSA bank, and filled out a Distribution form for the Excess Contribution, and they sent me a check.

If you open an HSA this year, save yourself a step and pro-rate your contribtuion!

6 Responses to “Tip for those interested in HSAs”

  1. 76Chick Says:

    okay, my new job offers this - and I know nothing about it. sadly. i guess i have some reading to do. thanks for the tip. Big Grin

  2. Broken Arrow Says:

    Interesting! Thanks for the tip.

  3. scfr Says:

    76Chick - If you want to read up and benefit from all the research I did just type "HSA" in the search section of my blog and you'll pull up several entries I did ... There is one called "Cliff Notes" that might be a good place to start.

  4. Amber Says:

    Can you only set these up through your employer? So far that is all I have found

  5. scfr Says:

    Amber -

    You need to have a HDHP (high-deductible healthcare plan) in order to set up a HSA. Some employers offer HDHP plans as an option, and some don't. I think they are becoming more popular, so more employers may start offering them in the future.

    We pay for an individual health insurance plan because my husband in self-employed. We could choose whatever type of plan we wanted, and we decided to go with the HDHP because for us it made sense to have a HSA.

  6. Amber Says:

    Thanks, we do not have Frown

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