Health Savings Accounts: IRS Issues Final "Comparability" Regulations

• Special Rule for Contributions to Non-Highly Compensated Employees. The comparability rule allows employers to make larger contributions to the HSAs of non-highly compensated employees than to those of highly compensated employees with comparable coverage. However, the comparability requirements still apply to the non-highly compensated employees who are comparable participating employees (i.e., eligible individuals who are in the same category of employees with the same category of high deductible health plan coverage). A comparable employer contribution must be made to the HSA of each nonhighly compensated employee who is a comparable participating employee during the plan year.
• Maximum Contribution Permitted for Mid-Year Eligibles. An employer is permitted to contribute the maximum contribution on behalf of all employees who are eligible individuals on the first day of the last month of the employees' taxable year (i.e., December 1 for calendar year taxpayers), including individuals who became eligible after January 1. However, an employer who contributes more than a pro-rata amount to a mid-year eligible individual must contribute, on an equal and uniform basis, more than a pro-rata amount to the HSAs of all comparable participating employees who are mid-year eligible individuals.
• Qualified HSA Distributions. If an employer offers qualified HSA distributions to any employee who is an eligible individual covered under a high deductible health plan (HDHP), it must offer qualified HSA distributions to all employees who are eligible individuals covered under a HDHP. (However, if the distribution is offered only to employees who are eligible individuals covered under the employers' HDHP, the employer need not offer the distribution to those employees who are eligible individuals not covered under the employer's HDHP.)
• Reporting and Payment of Excise Taxes. Excise taxes for failure to provide comparable contributions are reported on Form 8928, "Return of Certain Excise Taxes under Chapter 43 of the Internal Revenue Code." IRC § 4980G imposes an excise tax on employers who fail to make comparable contributions equal to 35 percent of the aggregate amount contributed by the employer to HSAs during that period. The tax and return are due by the April 15th following the calendar year in which the non-comparable contributions were made.

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Copyright 2009, Deloitte.

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