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My husband will be changing jobs mid-April to Employer B that has an HDHP + HSA. Our entire family is enrolled under his plan and our intent is to keep the entire family on the new plan.

Presently, he has an FSA with Employer A and will have contributed and used $550 toward an FSA.

Similarly, I have an FSA through my employer whom has said I can end contributions when husband starts at his new job as it is a QLE that allows me to change my benefits elections. Through my FSA I will have contributed and used $1000.

Combined if we have contributed to these FSAs, but contributions have ended. Can we contribute the difference to a family HSA?

For example, the max contribution for family HSA is $8,550 per year, could we still contribute the difference of $7,000 for the remainder of 2025?

M.C. Barnes
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Pools of money in HSA and FSA are separate. The fact that you had an FSA with the old policies, does not impact the amount you can contribute to the HSA.

For partial year coverage there is the last month rule to be considered:

Last-month rule.

Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month if you didn’t otherwise have coverage.

there is a important additional part of the rule.

Testing period.

If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month (for example, December 1, 2024, through December 31, 2025).

If you fail to remain an eligible individual during the testing period, for reasons other than death or becoming disabled, you will have to include in income the total contributions made to your HSA that wouldn’t have been made except for the last-month rule. You include this amount in your income in the year in which you fail to be an eligible individual. This amount is also subject to a 10% additional tax. The income and additional tax are calculated on Form 8889, Part III.

The risk of the last month rule (01 December 2025) is that if you use it you have to keep the HSA plan through 31 December 2026. You can't quit, retire, or get laid off. That would mean the excess funds would be taxable.

To determine how much you can contribute during the partial year you need form 8889:

However, if you weren’t an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of:

  • The limitation shown on the Line 3 Limitation Chart and Worksheet in the Instructions for Form 8889, Health Savings Accounts (HSAs); or

  • The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year.

mhoran_psprep
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