What happens if I dont have HSA qualified plan coverage all year?
HSA eligibility is earned one month at a time, based on whether you are carry HSA-eligible coverage on the first day of each month. You earn the ability to deposit one-twelfth of the annual maximum contribution on the first of each month that you are eligible. You are then able to make a partial contribution for that tax year and have until April 15th of the following year to complete it.
Examples would be starting or losing your HSA-qualified coverage during the year, enrollingin Medicare or TRICARE mid-year, receiving non-preventive medical care at the VA or Indian Health Service, or changing from a family HSA plan to one that covers only you.
You simply divide the number of months that you were HSA-eligible by twelve months, then multiply that fraction by the contribution that you were entitled to make if you had been eligible all year.
For example, if you are 35 years old and covered on a self-only policy and you lose coverage effective July 1, 2015 (for example, by enrolling in Medicare or leaving your job without continuing your insurance), you would divide six months of coverage by twelve months (the fraction 6/12) and multiply that fraction by your statutory maximum annual contribution of $3,350 for a maximum contribution of $1,675.
If you are age fifty-five or older, you must also can pro-rate your $1,000 catch-up contribution (an additional $500), for a total contribution of $2,175.
If you are covered by an individual plan in the first part of the year and change to a family plan mid-year, such as by getting married or having a baby, you then pro-rate your limit by the fraction of the year covered under each plan type. The instructions for IRS form 8889 will walk you through the pro-ration process no matter what situation applies.
There is also an exception to this rule called the Last Month Rule, but that is a subject for another question.