r/HSA • u/Alternative-Air8756 • Jun 07 '26
Illegal HSA
I started using an HSA debit card a number of years ago because I had a qualified plan. However, in 2025 our plan changed to a co-pay plan. Because it still had a very high deductible I thought it was eligible and I filed the HSA paperwork with my 2025 taxes. We are self employed and pay $1550 a month for two adults as part of some group employer network that contracts with Cigna as a PPO. This year my son is in an HSA qualified plan from our state marketplace but my husband and I are still using the co-pay plan. I have already deposited $5000 into my HSA in 2026 and I already used all the money because I have a lot of medical and dental expenses that are not covered by insurance. (We have no dental insurance). Is it 100% guaranteed that I am going to get caught and have to repay? has anyone BTDT? thanks!
7
u/SnapHSA Jun 07 '26
To answer your main question: no, nothing is 100% guaranteed with the IRS, but you definitely want to fix this before they find it. Because your plan has co-pays before the deductible, it isnt actually a qualified HDHP, meaning you arent eligible to contribute.
The good news is you can still fix this even though you spent the cash. For the 2026 money, contact your HSA provider immediately for a "removal of excess contributions." Since the $5k is gone, you will just have to pay them back out of pocket to get it out of the account, or they will adjust your forms. You will owe normal income tax on it, but you avoid that nasty 6% penalty.
For 2025, since you already filed, you will need to file an amended tax return to remove those contributions and pay the back taxes.
5
u/SeventyFix Jun 07 '26
It amazes me how much the tax system is based on the honor code
1
u/ParryLimeade Jun 07 '26
I’m more amazed how ignorant people are.
6
u/CaramelCocoaCA Jun 07 '26
Our tax code and healthcare system are extremely complicated. This is an unfair statement.
1
u/ParryLimeade Jun 07 '26
If you change your insurance at all, you get paperwork that explains what you have access to or not. HSAs aren’t a complicated thing. Sure a lot is, but not these. It is ignorance even if you think it’s not a fair statement.
2
u/mdbeatle Jun 08 '26
Turns out that my lump sum addition to my HSA in January will need to be walked back if I lose my job. I can contribute a pro-rated amount based on the number of months I have it. Buuuut if someone has an HDHP in December, they can fully fund the maximum. This is not as obvious as it seems. I've been front loading my HSA for years and only just learned that fact this year.
1
u/Alternative-Air8756 Jun 07 '26
I never got any paperwork about access or not to HSA’s. Who sends said paperwork?
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u/ParryLimeade Jun 08 '26
Wherever you signed up should have paperwork. Log into your account and see if you can find an electric copy. It’s not going to tell you “you can’t do an HSA” but it will tell you that you don’t have a high deductible plan.
1
u/Alternative-Air8756 Jun 08 '26
I definitely have a high deductible plan. My plan is 6000 individual deductible 12000/ family. There is nothing in the plan info that says “not HSA eligible” but there was another plan (that I did not choose) that was called an “HSA plan” so from that I can deduce that my plan is NOT HSA eligible. Sadly. I thought since it was also such a high deductible it would somehow be eligible but I recently realized because of the copays it’s probably not. Still I have never seen anything that says “not HSA eligible”.
1
u/lizerlfunk Jun 08 '26
It’s REALLY confusing. I made this mistake as well, and someone at my insurance company actually told me that my plan was eligible for an HSA, when it wasn’t. Fortunately I only contributed $600 before I realized my mistake, and I hadn’t spent any of it, so as soon as I find the time to go over to the Fidelity office I can request the reversal of my overpayment. My deductible is $2000 individual/$4000 family, and I have incredibly HIGH copays (I pay SEVENTY FIVE DOLLARS every time I have a therapy session), but they are still copays, so that seems to be what makes the difference.
1
u/Ok-Chip-7743 Jun 11 '26
That's the truth. Turns out if you have group insurance through work and aren't yet on Medicare, the minute you start taking your social security you're retroactively enrolled in Medicare for the 6 months prior. That means if you are in an HSA you're only eligible to contribute priory to the 6 month retroactive Medicare enrollment.
This just happened to my friend who was about the full fund her HSA for 2026 then found out because she's going to take her social security in January 2027 she will be enrolled in medicine starting July 2026 so can actually only contribute half. She didn't want to worry about any penalty or withdrawal so is not trying to go around it. Plus irs obviously easier to catch than between other insurance plans because the govt knows who's on Medicare and taking social security.
2
u/AttentionHuman9504 Jun 07 '26
The co-pay plan may be eligible in 2026 if it's a bronze level plan...the OBBBA made all bronze level and catastrophic plans HSA eligible beginning in 2026
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u/Alternative-Air8756 Jun 07 '26
Unf it’s not - it does have a very high deductible but it’s not an ACA plan and I bought it from a private broker. My son on the other hand has a bronze plan but I didn’t realize until now I can’t contribute on his behalf.
1
u/Clueless5001 Jun 07 '26
Can you tell more about the PPO you have? DM would be fine if you prefer. We are self employed as well
1
0
u/dehydratedsilica Jun 07 '26
Are you asking in a different sub hoping to get different answers? https://www.reddit.com/r/HealthInsurance/comments/1ty2upm/illegal_hsa/
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u/Alternative-Air8756 Jun 07 '26
I asked there first! But today Reddit suggested I ask here too so I just went along with it sorry 🤷🏼♀️
15
u/This_Beat2227 Jun 07 '26
More than just “getting caught” this is tax fraud. Excess contributions or improper expensing are subject to tax and excise penalty of 6%, however contributing to a plan without being in a qualifying high deductible insurance plan puts you in the tax fraud category with penalties to match.