Individuals who are eligible on the first day of the last month of the taxable year (December 1st for most taxpayers) are considered eligible individuals for the entire year. These individuals are allowed to contribute up to the contribution maximum (plus catch up contribution, if 55 or older by year end), regardless of the number of months they were enrolled in the high deductible health plan during the year.
This is true as long as the individual continues to be covered by a qualified high deductible health plan (HDHP) during the testing period. The testing period begins with the last month of the individual’s tax year and ends on the last day of the 12th month following that month. For most individuals, the testing period would be from December 1st of the current year through December 31st of the next year.
If the individual is not covered by a qualified HDHP during the testing period, the maximum contribution is prorated based on the number of months the person was enrolled in the qualified HDHP. All contributions above this amount are included in the gross income for the year in which the individual ceases to be an eligible individual and penalties may apply.
In addition, a fiscal year plan that satisfies the requirements for an HDHP on the first day of the first month of its fiscal year may apply that deductible for the entire fiscal year.