Many employers and insurance carriers permit individuals to cover a same-sex spouse or domestic partner on their insurance coverage. This includes high deductible health plans that make people eligible for health savings accounts (aka “HSA-qualified” plans). Under an HSA-qualified plan, individuals either have self-only coverage or family coverage. “Family coverage” is simply defined as having two or more persons covered by the same policy. No distinction is made about the types of individuals covered by the policy in order for it to be considered “family coverage.” Thus, same-sex couples or domestic partners covered by the same HSA-qualified plan could both be eligible to contribute to an HSA.
Same-sex couples that are married are treated the same as opposite-sex married couples, meaning that the couple’s combined contributions may not exceed the annual limit for families (i.e., $7,200 for 2021) unless one or both spouses is age 55 or older and thus are eligible to make catch-up contributions of $1,000.
Domestic partners (same-sex or opposite-sex) that are not legally married are not subject to the annual limit for families. This creates a loophole for these individuals because unmarried domestic partners do not meet the definition of a “married couple” under the federal tax code. So the annual limit on HSA contributions does not apply to them as a “family.” In fact, since each partner has “family coverage,” they are both eligible to contribute as much as $7,200 to their respective HSAs for 2021 (i.e., twice the amount married couples are permitted to contribute). However, they would each have to establish an HSA in their own name to take advantage of this loophole. In addition, if either partner is age 55 or older, they could also make a $1,000 catch-up contribution to their account.
But domestic partners are not permitted to use their HSA funds tax-free to pay for or reimburse their partner’s qualified medical expenses. The law only permits HSA funds to be used tax-free for eligible medical expenses incurred by the individual, a spouse, or a dependent child.
The are limited exceptions to these rules so domestic partners should be sure to consult a legal and/or tax advisor for appropriate legal and/or tax advice.