Employee Benefits Question of the Week: HSA Contributions

QUESTION: Can an employer utilize different HSA contribution amounts based on length of employment?

ANSWER: Tiering contributions based on length of service would be considered discrimination under a cafeteria plan and would fail comparability testing under a non-cafeteria plan. Thus, such an arrangement is not permissible.

Employers are not required to contribute to the HSAs of their employees. However, if an employer makes contributions to any employee’s HSA outside of a cafeteria plan, the employer must make comparable contributions to the HSAs of all comparable participating employees. As a general rule, contributions are comparable if they are the same dollar amount or the same percentage of the HDHP deductible. An employer that fails to comply with comparability requirements may be liable for excise taxes.

If an employer fails to comply with the comparability requirement during a calendar year, it will be liable for an excise tax equal to 35 percent of the aggregate amount contributed by the employer to the HSAs of its employees during that calendar year.

Categories of Employees
Non-collectively bargained employees can be separated into three categories for comparability testing:
• Current full-time employees
• Current part-time employees
• Former employees

Categories of HDHP Coverage
There are four categories of coverage for purposes of comparability testing:
• Self only
• Self plus one
• Self plus two
• Self plus three or more

The comparability rules do not apply to employer HSA contributions made through a cafeteria plan. HSA contributions are made through a cafeteria plan if the cafeteria plan allows employees to make pre-tax salary reductions to fund their HSAs.

Sources: Zywave, Health Equity, Robert Husta

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