Contributions can no longer be made by individuals who are otherwise eligible to contribute to Health Savings Accounts beginning with the first month the individual is eligible for benefits under title XVIII of the social security act (otherwise known as Medicare). [IRC §223(b)(7)] In Information Letters 2016-0014 and 2016-0003 the IRS addressed the maximum contributions for individuals who enroll in Medicare during the year.
As the provision requires a taxpayer to be eligible for benefits and one of basic requirements to be eligible is that the taxpayer must register of Medicare—so merely attaining age 65 is not, by itself, enough to trigger the limitation. If an individual has otherwise equivalent coverage (perhaps provided by an employer for employee that is working upon attaining age 65) the person can still be eligible to make a contribution.
In Letter 2016-0003 the situation involves a married couple where one taxpayer has family coverage entering the year. The other spouse enrolls in Medicare effective May 1, while the coverage spouse attains age 65 later in the year and enrolls in Medicare on October 1. In 2016 the maximum HSA contribution for an individual with family coverage is $6,750 and the maximum contribution for an individual with self-only coverage is $3,350.
The letter provides the following analysis of the maximum contributions for the couple:
Assuming that the ——————— have coverage by a high deductible health plan (HDHP) and no disqualifying coverage during 2016, for the 4 months that they have family HDHP coverage before the wife enrolls in Medicare, they would be allowed an HSA contribution of $2,250 ($6,750 x 4/12) that could be divided between the couple’s HSAs however they agree. In addition, the spouse turning 65 in April would be allowed a catch-up contribution of $330 ($1,000 x 4/12) into her HSA. The spouse turning 65 in October, assuming he continues with self-only HDHP coverage, would be allowed an additional HSA contribution of $1,396 ($3,350 x 5/12). Also, that spouse would be allowed a catch-up contribution of $750 ($1,000 x 9/12) into his HSA.
Letter 2016-0014 provides the analysis for the simpler case where only a single individual is involved who enrolls in Medicare on October 1. In that case the analysis holds:
If ———————-has coverage by a HDHP and no disqualifying coverage during 2016, for the 9 months that she has HDHP coverage before enrollment in Medicare, she would be allowed an HSA contribution of either $5,062.50 if enrolled in family coverage ($6,750 x 9/12) or $2,512.50 if enrolled in self-only coverage ($3,050 x 9/12). In addition, —————————- would be allowed a catch-up contribution of $750 ($1,000 x 9/12) into her HSA because she is age 55 or over.