If you’re like most HR or employee benefits professionals, you’ve
probably been answering a lot of questions lately. Questions about plans, coverage, cost… the
list goes on. Here at ABG we’ve also
been answering our fair share of questions.
I’ve noticed questions about health savings account (HSA) eligibility come in again and again. I
thought it would be worthwhile to share the answers to a few common questions
with you. Hopefully this saves you some
time and energy.
Q: I know an employee can’t contribute to an HSA
if they’re covered by Medicare, but what if an employee’s spouse is covered by
Medicare? Can the employee still
contribute to an HSA?
A: Yes, as long as the HSA owner is not covered
by Medicare, they can still fund a HSA. Additionally,
if the spouse is also covered by the employer’s high deductible health plan, the
employee can contribute up to the family HSA maximum. The employee can also continue to use their
HSA funds to pay the spouse’s out-of-pocket health care costs, regardless of
the spouse’s coverage.
Q: If our company does not offer a group health
plan, can we still allow employees to fund HSAs through pre-tax payroll deductions? What about making employer contributions to
employees’ HSAs?
A: Yes, an employer who does not sponsor a group
health plan may still allow employees to fund HSAs and they may also make employer
contributions to their employees’ HSAs.
Here are a few considerations:
-
The employer must have a Section 125 plan document in place in
order to allow employees to fund HSAs with pre-tax payroll deductions. This is the case regardless of whether the employer
offers a group health plan.
-
If there is no Section 125 plan in place, employer HSA contributions
are subject to comparability rules, meaning similarly situated employees must
receive the same contribution.
-
If there is a Section 125 plan in place, the comparability rules do
not apply. Instead, employer HSA
contributions are included in the applicable Section 125 nondiscrimination tests.
Q: If an employer does offer an HSA-qualified
group health plan, but an employee opts to take coverage elsewhere, such as
with their spouse or on an individual policy, can the employer allow that
employee to fund an HSA?
A: This is the employer’s choice. There is nothing in the regulations that
would prohibit the employer from allowing this employee to fund an HSA. As long as the employee meets the eligibility
requirements under the employer’s Section 125 plan, they can fund the HSA with
pre-tax payroll deductions. Remember, the employer saves FICA tax on all
funds employees contribute to HSAs via pre-tax payroll deductions.
Q: What responsibility does an employer have to
ensure an employee’s HSA eligibility before allowing them to contribute to an
HSA, or funding an HSA on their behalf?
A: The employer’s responsibility to ensure
employees’ HSA eligibility is very limited. The employer would be responsible for ensuring
any health coverage sponsored by them (the employer) is HSA-compatible. Beyond that, the responsibility to ensure HSA
eligibility is almost entirely on the employee.
Employers may rely on an employee’s representation as to HSA
eligibility. Employer’s allowing pre-tax
HSA contributions must have “reasonable belief” an employee’s HSA contributions
are excludable from income. It may be
prudent to ask employees covered by outside health plans to make some sort of
declaration as to their HSA eligibility, but it is not required.
The Author: Sadie
Wuerflein, CFC
Compliance
Specialist – FSA/HRA/HSA
abgncs.com
swuerflein@abg-mn.com
Disclaimer: This blog is of an informative nature and should not be taken as advice. Please work with the appropriate parties for those services.
