1. The employee owns your contributions to their account as soon as the funds are deposited.

2. The employer can no more restrict the use of funds in the employee's Health Savings Account than they can restrict the employee's funds in the employee's personal checking account.

3. Employee contributions to their Health Savings Account can be made on an after-tax basis and taken as an above-the-line deduction on their tax return (making such contributions tax-free) or the employee can make pre-tax contributions to their Health Savings Account through a Section 125 (aka "salary reduction" or "cafeteria") plan.

4. Employee contributions to their Health Savings Account through a cafeteria plan can change on a month-by-month basis. However, the employer can put reasonable limits on how often those contribution amounts can change.

5. Employer contributions to an employee's Health Savings Account are always excluded from any employee's income (such contributions are made pre-tax).

6. Employers must make comparable contributions to all employees' Health Savings Accounts (unless made through a Section 125 plan).

7. Such comparable contributions to an employee's Health Savings Account are that all employer contributions must be of the same amount, or of the same percentage of the annual deductible.

8. Comparability rules are likely being violated if "extra contributions" to any employee's Health Savings Account are being made. For example, additional contributions to an employee's Health Savings Account being made based on the employee's seniority, length of service or giving catch up contributions to those employees 55 years and older violate the comparability rules.

9. The comparability rule can be applied separately to part-time employees. The rule can also be applied separately for employees with self-only vs. family coverage.

10. Matching contributions by an employer through a Section 125 plan are not subject to the comparability rule, but are subject to the non-discrimination rules of Section 125 plans.

11. The non-discrimination rule for Section 125 plans, in general, is that contributions cannot be higher for higher-paid employees than they are for lower-paid employees. Contributions that favor lower-paid employees are allowed.

12. There are no cases in which the Health Savings Account comparability rule or the Section 125 non-discrimination rules do not apply.

13. Without violating the comparability rule, employers may make their contribution to an employee's Health Savings Account conditional on the employee's participation in a Wellness program. However, the employer must offer an equal cash amount to all HSA eligible employees (those who have an HSA qualified high deductible health plan) who participate in the Wellness program, through a cafeteria plan.

14. For employers who do not provide their employees with health insurance but whose employees may purchase a Health Savings Account on their own, such employer may make pre-tax contributions to such employees' Health Savings Account through a Section 125 plan, as long as the offer is open to all such employees, and the contribution amount follows the Section 125 plan's non-discrimination rule.

15. For employers who do not provide their employees with health insurance but whose employees may purchase a Health Savings Account on their own, such employer may make pre-tax contributions to such employees to reimburse their monthly health insurance premium, provided the employee brings their monthly health insurance bill to the employer each month.

16. Self-employed, partners and S-corporation shareholders are not generally considered employees and cannot receive pre-tax employer contributions to their Health Savings Accounts. Self-employed can only take an above-the-line deduction for their premium and Health Savings Account contribution.

17. Regardless of how your S-Corporation or your LLC is structured, the company cannot make pre-tax contributions to owners, shareholders, or partners.

18. It is prohibited to transfer the employee's balance of a Flexible Spending Account (FSA) into a Health Savings Account.

19. It is prohibited to transfer the employer's notional balance of a Health Savings Account (HRA) into any Health Savings Account.

20. A limited purpose FSA or a limited purpose HRA is allowed for expenditures like dental, vision or preventive care.

21. Post deductible HRAs or post deductible FSAs are allowed to pay for expenses above the minimum HSA deductible.

22. COBRA rules apply to the high deductible health insurance plan portion of an HSA, but not to the account.

 

Give us a call today to discuss the rules as they apply to your business:  256-653-7451