HSA & Medicare Premiums

Submitted by Brandon Blanchard on Wed, 2023-03-15 21:01

I have clients Mike and Lynn that are married.

Mike is 59, still working and has an HSA that he funds every year through his employer.

Lynn is 65. She retired last year and just went on Medicare. She doesn’t have an HSA in her name.

Lynn just got a Medicare premium bill and it requires payment upfront for the first four months (due 3/25) for about $700. She will then have ongoing quarterly premium billing. Can Mike take money out of the HSA in his name (tax and penalty free) to pay Lynn’s Medicare bills? I am getting conflicting information online. Some sites are saying that Mike would have to be 65+ in order for him to take money out tax and penalty free from his HSA to pay Lynn’s Medicare premiums.

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Permalink Submitted by William Tuttle on Wed, 2023-03-15 22:23

Under 26 U.S. Code 223(d)(2)(C)(iv). It is the age (>= 65) of the account owner and not a spouse or dependent that makes insurance (other than Medicare supplement policies) qualified medical expenses.
This one reason why when eligible, spouses (especially older) should have their own HSA account and contributions.
If prior to age 65, they had a family HDHP and she did not have other coverage. She would have been an HSA eligible individual:

At a minimum if >= age 55, could have been making catch-up contributions to her own HSA account, and;
Under the rules for married people, the family contribution limit can be allocated in any manner agreed to by the spouses.