HSA Frequently Asked Questions for Employers
Q. As an employer, do I own my employees’ HSAs? Can I control how they
spend the money in them?
A. No, you do not own your employees’ HSAs. The employee fully owns the
contributions to the HSA account as soon as they are deposited, just as
with a personal checking or savings account to which you would deposit
their compensation.
Q. My employees want to contribute to their HSAs but want to make sure
they get a tax benefit out of doing so. How does that work?
A. Employee contributions can be made to HSAs on either after-tax or
pre-tax basis. If made on an after-tax basis they should be counted as an
above-the-line deduction on their tax return, effectively making their
contributions tax-free. If they want to make the HSA contribution pre-tax
it can be done through a Section 125 (also called a “salary reduction” or
“cafeteria plan”).
Q. How much do I have to contribute to my employees’ HSA, as an employer?
A. As much or as little as you want (while staying below the legal
limit on annual contributions to the HSA account).
Q. Do HSA contributions have to be made in equal amounts each month?
A. No, you can contribute to there HSA account in a lump sum or in any
amounts or frequency you wish. However, keep in mind that the funds belong
to the employee after they are deposited.
Q. As an employer, do I have to contribute the same amount to every
employee’s HSA?
A. Employer HSA contributions must be “comparable”, that is they must
be in the same dollar amount or same percentage of the employee’s
deductible for all employees in the same “class”. You can vary the level
of HSA contributions for “full-time” vs. “part-time” employees, and
employees with “self-only” coverage vs. “family coverage”. You do not need
to consider employees who do not have HDHP coverage as they are not
eligible for HSA contributions.
Q. Our company offers benefits through a Section 125 plan, do
contributions have to be comparable under these plans as well?
A. Section 125 plans (also known as “salary reduction” or “cafeteria”
plans) must meet a different set of rules. Under these plans,
contributions (both from employer and/or employee) must meet
“non-discrimination” rules. These rules require the employer to ensure
that contributions do not favor higher compensated employees.
Q. Our company wants to offer HSA “matching” contributions, can we do
that?
A. Yes, but your company can only offer HSA “matching” contributions
through a Section 125 plan. Remember that the non-discrimination rules
still apply.
Q. I don’t offer health insurance, but some of my employees have opened
HSAs and I’d like to help them out, what can I do?
A. Your company can make pre-tax contributions to your employees’ HSAs
as long as you do so for all eligible employees. However, the
comparability rules apply. If you have a Section 125 plan, then the
non-discrimination rules apply.
Q. How are HSA contributions treated for owners and shareholders of S
corps?
A. Owners and officers with greater than 2% share of a Subchapter S
corporation cannot make pre-tax contributions to their HSAs through the
company by salary reduction. In addition, any contributions made to their
HSAs by the corporation are taxable as income. However, they can make
their own personal contributions to their HSAs and take the
"above-the-line" deduction on their personal income taxes.
Q. How are contributions treated for partners in a partnership or
limited liability company (LLC)?
A. Partners in a partnership or LLC cannot make pre-tax contributions
to their HSAs through the partnership by salary reduction. However, they
can make their own personal contributions to their HSAs and take the
"above-the-line" deduction on their personal income taxes.
Q. May a self-employed person contribute to an HSA on a pre-tax basis?
A. No. Self-employed persons may not contribute to an HSA on a pre-tax
basis and may not take the amount of their HSA contribution as a deduction
for SECA purposes. However, they may contribute to an HSA with after-tax
dollars and take the above-the-line deduction.
