Mid-Year Enrollees

This rule allows full-year HSA contributions for individuals who enroll in an HDHP before the first day of December of any year, provided certain conditions are satisfied. This means, pro-ration of HSA contributions is no longer required based on the number of months covered by a qualified HDHP in the calendar year.

• Individuals who enroll in the HDHP at any time prior to December 1 can make a full-year contribution to the HSA that year.
• Individuals must be covered by a qualified HDHP and remain an eligible individual for 12 months after the end of the calendar year in which they enrolled in an HDHP.
• Individuals not covered by an HDHP for 12 months after the end of the calendar year in which they enrolled in an HDHP are subject to income tax and a 10% excise tax on HSA contributions for months not covered by an HDHP.

Examples

Joe enrolls in family coverage under an HDHP on July 1, 2007, with a $6000 deductible. He may contribute the maximum annual contribution allowed for family coverage, which is $5650. However, if Joe contributes the full amount and fails to maintain qualified HDHP coverage for the remainder of the current taxable year (July 1, 2007 through December 31, 2007) and the following year (January 1, 2008 through December 31, 2008 in this example) he will be subject to taxes for the months he is not covered by an HDHP.

Under the prior rules, an individual on a calendar year plan with a $1200 annual deductible, who joined the plan in July, could only put $600 into the HSA. Due to pro-ration, he could only contribute half of the lesser of the deductible or maximum annual contribution amount. In addition, the full $1200 deductible had to be satisfied before the plan paid any benefits. This new rule fills that gap.

What are the benefits of this change?

The elimination of the pro-ration of HSA contributions responds to a concern that the HSA contributions were required to be pro-rated even though the individual had to satisfy the full HDHP deductible.

If you have questions, employers should contact their Humana Sales Representative.
Brokers should call Humana’s Spending Account Hotline at 800.281.6778.