An individual’s eligibility for HSA contributions is generally determined monthly as of the first day of the month. The HSA contribution limit is calculated each month, and a contribution can only be made for months in which the individual meets all of the HSA eligibility requirements.

To be HSA-eligible for a month, an individual must:

• Be covered by an HDHP on the first day of the month;
• Not be covered by other health coverage that is not an HDHP (with certain exceptions);
• Not be enrolled in Medicare; and
• Not be eligible to be claimed as a dependent on another person’s tax return.

The full-contribution rule that applies to individuals who are HSA-eligible on Dec. 1 is an exception to this general rule. Under this exception, an individual is treated as HSA-eligible for the entire calendar year for purposes of HSA contributions if he or she becomes covered under an HDHP in a month other than January and is HSA-eligible on Dec. 1 of that year. An individual who relies on this special rule must generally remain HSA-eligible during a 13-month testing period, with exceptions for death and disability.

To be eligible for HSA contributions, an individual generally cannot have health coverage other than HDHP coverage. This means that an HSA-eligible individual cannot be covered under a health plan that provides coverage below the HDHP minimum annual deductible.

Being eligible for non-HDHP coverage does not make an individual ineligible for HSA contributions. To determine whether an individual is an HSA-eligible individual, the actual health coverage selected by the individual is controlling. Thus, it does not matter that the individual could have chosen, but did not choose, a low-deductible health plan or other coverage that would have disqualified the individual from contributing to an HSA.

Individuals who are covered by general-purpose health FSAs or HRAs are not eligible for HSA contributions. A general-purpose health FSA or HRA is one that pays or reimburses all qualifying medical expenses of the employee

An individual does not need to be an employee to be eligible for HSA contributions. Partners in a partnership, more-than-2 percent shareholders in a subchapter S corporation, sole proprietors and other self-employed individuals may be eligible for HSA contributions.

However, since these individuals are not employees, they cannot contribute to an HSA with pre-tax salary reductions under a cafeteria plan, and they cannot receive pre-tax employer contributions to their HSAs. IRS Notice 2005-8 provides more information about the tax treatment of HSA contributions for partners and more-than-2 percent shareholders.

When an employer makes a pre-tax contribution to an employee’s HSA, the employer should have a reasonable belief that the contribution will be excluded from the employee’s income. However, the employee, and not the employer, is primarily responsible for determining eligibility for HSA contributions. IRS Notice 2004-50 states that an employer is only responsible for determining whether the employee is covered under an HDHP or any low-deductible health plan sponsored by the employer, including health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).

To be eligible for HSA contributions for a month, an individual must be covered under an HDHP as of the first day of the month and have no other impermissible coverage.

For example—HDHP Coverage Begins Mid-month: An employee begins HDHP coverage on the first day of a pay period, which is August 16, 2014, and continues to be covered by the HDHP for the rest of 2014. For purposes of HSA contributions, the employee becomes eligible on September 1, 2014.

An HDHP is a health plan that provides “significant benefits” and satisfies requirements for minimum deductibles and out-of-pocket maximums. An HDHP can be insured or self-funded. With the exception of preventive care benefits, no benefits can be paid by an HDHP until the annual deductible has been satisfied.

Medicare eligibility

An individual who is entitled to Medicare benefits is not eligible for HSA contributions. To be entitled to Medicare benefits, an individual generally must be both eligible and enrolled. Eligibility for Medicare benefits alone does not make an individual ineligible for HSA contributions.

IRS Notices 2004-50 and 2008-59 confirm that a Medicare-eligible individual who is not actually enrolled in Medicare Part A, Part B, Part D or any other Medicare benefit may contribute to an HSA until the month that he or she is enrolled in Medicare.

Tax dependents eligibility

An individual who can be claimed as a tax dependent of another individual is not eligible for HSA contributions. In general, a taxpayer may claim an individual as his or her tax dependent if the individual is:

• The taxpayer’s child and under age 19 at the end of the tax year;
• The taxpayer’s child, a student and under age 24 at the end of the tax year; or
• A member of the taxpayer’s household for whom the taxpayer provided over half of the support for the year and whose gross income does not exceed the personal exemption amount ($4,000 for 2015).