HSA Conundrum

Dasher

Although I have not posted for a bit, I really need the assistance of this forum.

We have a HDHP and fund 85% of the deductibles for employees. It has come to my attention that employees over 65 (and entitled to Medicare) can not continue receiving or making contributions to an HSA. Apparently you enroll in Medicare (Part A is free) on your 65th birthday, and even if you do not use the Medicare benefit (because you have company insurance which has better coverage) that is the disqualifying event.

While aware of the 65/HSA rule somewhat when we elected the high deductible plan, I thought it was the selection of Medicare as your primary insurance (eligibility vs usage) that was the critical issue -- however, apparently this is not so. I am being told different things by different "experts" (insurance broker, accountants, IRS website, Bank collecting the HSA Funds, the administrator of the HSA funds) and some of them just flat out tell me they don't know. Those who claim to know know different things. I hate to hire a lawyer and throw them into the mix.

I have three employees who count on my HR knowledge. I need your help.

cnghr

According to IRS Publication 969, an individual cannot participate in an HSA if they are enrolled in Medicare. I understand that to mean that, even if they are not using the Medicare coverage, it isn't an eligibilty vs. usage question, it's actually being enrolled that disqualifies them.

FunHRBanker

That is also my understanding. Employees who have other insurance coverage (secondary coverage through a spouse, for example) are also ineligible for an HSA. Neither the employer nor the employee can contribute.