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CCH® PAYROLL — 4/30/08
The IRS has issued final regulations providing guidance on employer comparable contributions to Health Savings Accounts (HSAs) under Code Sec. 4980G< where an employee has not established an HSA by December 31 and where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses. The regulations are effective on April 17, 2008, and apply to employer contributions made for calendar years beginning on or after January 1, 2009. However, employers may rely on this guidance beginning on or after April 17, 2008.
An excise tax is imposed under Code Sec. 4980G on an employer that fails to make comparable contributions with respect to the HSAs of its employees. In order to comply with the comparable contribution requirements with respect to employees who have not established HSAs by December 31 (or have not informed the employer of their HSAs), the regulations impose a notice requirement and a contribution requirement. The regulations also include several examples to illustrate these requirements.
To satisfy the notice requirement, the employer must provide all such employees with written notice by January 15 of the following year which explains that comparable contributions will be made for each eligible employee who establishes an HSA and informs the employer by the last day of February. The notice may be delivered electronically. The final regulations include sample language that employers may use for their notices.
To satisfy the contribution requirement, the employer must make the comparable contributions by April 15. In determining the amount of the contributions, the employer must take into account each month that the employee was a comparable participating employee, plus interest.
The final regulations also allow an employer to accelerate part or all of its contributions for the entire calendar year to the HSAs of employees who have incurred qualified medical expenses during that year that exceed the employer’s cumulative HSA contributions at the time of the acceleration. Accelerated contributions must be available on an equal and uniform basis to all eligible employees throughout the calendar year. Also, employers must establish reasonable uniform methods and requirements for the acceleration of contributions and the determination of medical expenses. However, the employer is not required to contribute interest on accelerated or non-accelerated contributions.
Employers are cautioned that the final regulations concern only Code Sec. 4980G. Other statutes, such as the Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191) may impose additional requirements. (T.D. 9393, 73 FR 20794, April 17, 2008.)