As in the proposed regulation issued in July 2008 (see IRS Proposes New Rules on Employer HSA Contributions ), the final regulations address an exception to comparability rules for employer contributions and provide that employer contributions to the HSAs of non highly-compensated employees may be larger than employer contributions to the HSAs of highly-compensated employees with comparable coverage during a period. However, employer contributions to the HSAs of highly-compensated employees may not exceed employer contributions to the HSAs of non highly-compensated employees with comparable coverage during a period.
The regulation defines highly-compensated employee as any employee who was:
- A 5% owner at any time during the year or the preceding year; or
- for the preceding year, had compensation from the employer in excess of $110,000 (for 2009, indexed for inflation) and if elected by the employer, was in the group consisting of the top 20% of employees when ranked based on compensation.
In addition, the IRS allows an employer who makes the maximum calendar year HSA contribution, or who contributes more than a pro-rata amount, on behalf of employees who are mid-year eligible individuals will not fail to satisfy comparability merely because by doing so, some employees will have received more contributions on a monthly basis than employees who worked the entire calendar year.
However, if an employer contributes more than the monthly pro-rata amount for the calendar year to the HSA of any employee who is a mid-year eligible individual, the employer must then contribute, on an equal and uniform basis, a greater than pro-rata amount to the HSAs of all comparable participating employees who are mid-year eligible individuals.
Likewise, if the employer contributes the maximum annual amount for the calendar year to the HSA of any employee who is a mid-year eligible individual, the employer must contribute that same amount to the HSAs of all comparable participating employees who are mid-year eligible individuals.
The final regulation affects employers that contribute to employees’ HSAs and Archer MSAs, employers or employee organizations that sponsor a group health plan, and certain third parties such as insurance companies or HMOs or third-party administrators who are responsible for providing benefits under the plan. The guidance on employer comparable contributions to HSAs under section 4980G apply to employer contributions made on or after January 1, 2010.
The IRS allows for qualified HSA distributions, which are direct distributions of an amount from a health flexible spending arrangement (health FSA) or a health reimbursement arrangement (HRA) to an HSA. The distribution must not exceed the lesser of the balance in the health FSA or HRA on September 21, 2006, or as of the date of the distribution.
The final regulation provides that if an employer offers qualified HSA distributions to any employee who is an eligible individual covered under any HDHP, the employer must offer qualified HSA distributions to all employees who are eligible individuals covered under any HDHP. An employer that offers qualified HSA distributions only to employees who are eligible individuals covered under the employer's HDHP is not required to offer qualified HSA distributions to employees who are eligible individuals but are not covered under the employer's HDHP.
Reporting Excise Taxes
Under section 4980G, an excise tax is imposed on an employer that fails to make comparable contributions to the HSAs of its employees. The final regulation, like the proposed regulation, provide that these excise taxes must be reported on Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code. The excise tax under section 4980B, 4980D, 4980E or 4980G must be paid at the time prescribed for filing of the excise tax return (without extensions).
With respect to the excise tax under section 4980B or 4980D for employers and third parties such as insurers or third party administrators, the return is due on or before the due date for filing the person's Federal income tax return. An extension to file the person's income tax return does not extend the date for filing Form 8928. With respect to the excise tax under section 4980B or 4980D for multiemployer or specified multiple employer health plans, the return is due on or before the last day of the seventh month after the end of the plan year.
With respect to the excise tax under section 4980E or 4980G for non-comparable contributions, the return is due on or before the 15th day of the fourth month following the calendar year in which the non-comparable contributions were made. The final regulation also provides guidance regarding the place for filing these excise tax returns, the signing of these excise returns, and the time and place for paying the tax shown on such returns.
In its regulation, the IRS addresses reasons for not adopting a commenter's suggestion to establish a compliance date of 90 days after the period of non-compliance rather than tying the compliance date to the date of filing tax returns (see Health Provider Group Suggests HSA Contribution Tax Law Changes ).
The guidance relating to the excise tax under sections 4980B, 4980D, 4980E and 4980G apply to any Form 8928 that is due on or after January 1, 2010.
The final regulation is here .
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