How much can an Employer pay into an HSA Account for employees?

Question

If employees are offered a Bronze HSA and a Silver Plan how much contribution can be paid to the HSA account so that everything is fair and not in violation of §2716 Salary Discrimination and the requirement to treat similarly situated individuals the same, under Health Care Reform?

Answer

***I assume the Silver Plan is a regular PPO (not an HSA) and employer is paying 99% of employee cost for either plan, which is clearly legal and non discriminatory where the contribution is concerned, the $100 contribution into the HSA plan for those folks electing that plan has nothing to do with it

Employee has a choice to go with an HSA with the $100 contribution or a regular PPO plan which of course has no contribution ^{Reply from our wholesaler 7.12.2016}

Internal Revenue Bulletin: 2008-29 Health Savings Accounts – Guidance

Question

If an employee takes a Silver HSA, can the $100 contribution be used to pay premium instead?

Answer

Those taking a Silver HSA would have a different contribution based on the lowest priced Kaiser plan.

Employer Participation –

Excerpt from Publication 969

This section contains the rules that employers must follow if they decide to make HSAs available to their employees. Unlike the previous discussions, “you” refers to the employer and not to the employee.

Health plan. If you want your employees to be able to have HSAs, they must have an HDHP. You can provide no additional coverage other than those exceptions listed previously under Other health coverage .

Contributions. You can make contributions to your employees’ HSAs. You deduct the contributions on your business income tax return for the year in which you make the contributions. If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. For more information on employer contributions, see Notice 2008-59, 2008-29 I.R.B. 123, questions 23 through 27, available at www.irs.gov/irb/2008-29_IRB/ar11.html.

Comparable contributions. If you decide to make contributions, you must make comparable contributions to all comparable participating employees’ HSAs. Your contributions are comparable if they are either:

The same amount, or
The same percentage of the annual deductible limit under the HDHP covering the employees.

The comparability rules don’t apply to contributions made through a cafeteria plan.

Comparable participating employees. Comparable participating employees:

Are covered by your HDHP and are eligible to establish an HSA,
Have the same category of coverage (either self-only or family coverage), and
Have the same category of employment (part-time, full-time, or former employees).

To meet the comparability requirements for eligible employees who have neither established an HSA by December 31 nor notified you that they have an HSA, you must meet a notice requirement and a contribution requirement. You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. The notice must state that each eligible employee who, by the last day of February, establishes an HSA and notifies you that he or she has established an HSA will receive a comparable contribution to the HSA for the prior year. For a sample of the notice, see Regulations section 54.4980G-4 A-14(c). You will meet the contribution requirement for these employees if by April 18, 2017, you contribute comparable amounts plus reasonable interest to the employees’ HSA for the prior year.

Note.

For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees.

Excise tax. If you made contributions to your employees’ HSAs that weren’t comparable, you must pay an excise tax of 35% of the amount you contributed.

Employment taxes. Amounts you contribute to your employees’ HSAs generally aren’t subject to employment taxes. You must report the contributions in box 12 of the Form W-2 you file for each employee. This includes the amounts the employee elected to contribute through a cafeteria plan. Enter code “W” in box 12. ^{IRS 969}

***

Insurance Premiums

Excerpt from Publication 502 allowable medical expenses

You can include in medical expenses insurance premiums you pay for policies that cover medical care. You can’t include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction.

***In this case the employer is claiming a deduction under Section 106

Medical care policies can provide payment for treatment that includes:

Hospitalization, surgical services, X-rays,
Prescription drugs and insulin,
Dental care,
Replacement of lost or damaged contact lenses, and
Long-term care (subject to additional limitations). See Qualified Long-Term Care Insurance Contracts under Long-Term Care, later.

If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. ^IRS.gov

HSA Guidebook