What can I do about excess contributions that I can't withdraw?
There are several options for dealing with excess contributions that keep accruing penalties from year to year:
- If your health insurance plan is not eligible for an HSA, you can change it to one that is. Then, you'll be allowed to contribute to an HSA and will be able to use up your excess contributions.
- If you have medical expenses, you can take a qualified withdrawal that reduces your HSA balance to $0. A penalty on excess HSA contributions is based on the lesser of your excess contributions or your HSA balance. With a balance of $0, you won't have to pay any more penalties.
- You can just take a nonqualified withdrawal of the excess contributions, which would be taxable and subject to a one-time 20% penalty.
