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What is the “Last-Month Rule” as it pertains to an HSA?

The Last-Month Rule states that if you are covered by an HSA-eligible health plan on the first day of the last month of a given year, you are considered an eligible individual for the entire year. In turn, you can then contribute to the HSA for that full year.

Example: If you enrolled in the CDHP on July 1, 2018 and retained coverage under that plan through December 1, 2018, you are covered per the Last-Month Rule. This means you are considered an eligible employee for the entire year in 2018. This allows you to contribute up to the 2018 contribution limit. However, you must also take into consideration the Testing Period.