A Health Savings Account (HSA) recalculation refers to the process of determining the allowable contributions a taxpayer can make in accordance with their eligibility. Essentially the IRS wants to make sure that individuals do not participate in a High Deductible Health Plan (HDHP) for a small portion of the year in order to make full contributions to an HSA, only to have them switch out to another type of health plan.To guard against gaming the system, the IRS imposes two rules:1. Partial Contributions for eligible periods. This mainly applies to partial year participants in qualified health plans. Taxpayers can pro-rate their eligible contribution amount based upon the number of months they were covered under a qualified plan. For the month to count you must be eligible as of the first day of the month. The IRS includes a worksheet on their Instructions for Form 8889.2. Last-month rule. The first point notwithstanding, if you are an eligible individual on the first day of the last month of the tax year (Dec 1st for most), then you are considered an eligible individual for the entire year. THE CATCH • YOU MUST REMAIN AN ELIGIBLE INDIVIDUAL FOR THE NEXT 12 MONTHS. This is referred to as the “testing period.” If you over-contribute as a result of failing to participate in a qualified plan not only must you recalculate your last-month rule contribution, you will also owe an additional 10% penalty on the overage.If this sounds daunting, fear not - the IRS included a full description of the contribution conditions as well as examples of the calculation in IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. If you open it up you are likely to learn a bit more about HSAs, which will be to your benefit.Note • we built an app, HSA Coach, to educate users on Health Savings Accounts, as well as assist them with keeping track of contributions and withdrawals, as well as record keeping. The above sounds all very confusing, particularly as you move from employer to employer or even as your employer switches HSA providers, which happens often. We have some financial planning calculators to help plan contributions, and even compare to other employer plans, like a 401(k) [I’m a CFP® and we couldn’t help ourselves…]. Finally, we back up to Dropbox should you use that cloud service as a document storage solution. More at HSA Coach.