8826 / Who is an eligible individual for purposes of maintaining an HSA?
Individuals who are enrolled in Medicare Part A or Part B are not eligible to contribute to an HSA.2 Mere eligibility for Medicare does not preclude HSA contributions.3 Under the 2020 CARES Act, telehealth and other remote health care services are disregarded in determining eligibility for tax years beginning on or before December 31, 2021.
If an individual has received medical benefits through the Department of Veterans Affairs within the previous three months, the individual may not contribute to an HSA for the current month. Mere eligibility for VA medical benefits will not disqualify an otherwise eligible individual from making HSA contributions.4
If an individual is covered by a separate prescription drug plan that provides any benefits before a required high deductible is satisfied, the individual normally does not qualify as an eligible individual.5 Despite this general rule, the IRS has ruled that if an individual’s separate prescription drug plan does not provide benefits until an HDHP’s minimum annual deductible amount has been met, then the individual will be an eligible individual under Section 223(c)(1)(A). For calendar years 2004 and 2005 only, the IRS provided transition relief such that an individual would not fail to be an eligible individual solely by virtue of coverage by a separate prescription drug plan.6