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Guest cpersitz
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Guest cpersitz

We have employees (about 40) who have been enrolled in the HDHP plan since 2007 and 2008 that refuse to open an HSA account. The employer makes contributions on a quarterly basis to HSA accounts. However, for the employees who have not opened accounts, the employer money goes into a general holding account. We continue to send letters and emails to these employees for the past 2 years informing them they must open a bank account. We continue to receive no response. Therefore, we have to go through the process of getting this money back each year since the HSA is considered not to have been established.

Can we send a letter to these individuals stating that if they do not open an account by a certain date, they will not be eligible for the HDHP plan and they will have to choose another medical plan? Is there any IRS (or other) regulation that states we cannot do this?

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  • 1 month later...

Treasury Regulations Section 54.4980G-$, Q&A 14----

Q-14: Does an employer fail to satisfy the comparability rules for a calendar year if the employer fails to make contributions with respect to eligible employees because the employee has not established an HSA or because the employer does not know that the employee has established an HSA?

A-14: (a) In general. An employer will not fail to satisfy the comparability rules for a calendar year (Year 1) merely because the employer fails to make contributions with respect to an eligible employee because the employee has not established an HSA or because the employer does not know that the employee has established an HSA, if —

(1) The employer provides timely written notice to all such eligible employees that it will make comparable contributions for Year 1 for eligible employees who, by the last day of February of the following calendar year (Year 2), both establish an HSA and notify the employer (in accordance with a procedure specified in the notice) that they have established an HSA; and

(2) For each such eligible employee who establishes an HSA and so notifies the employer on or before the last day of February of Year 2, the employer contributes to the HSA for Year 1 comparable amounts (taking into account each month that the employee was a comparable participating employee) plus reasonable interest by April 15th of Year 2.

(b) Notice. The notice described in paragraph (a) of this Q & A-14 must be provided to each eligible employee who has not established an HSA by December 31 of Year 1 or if the employer does not know if the employee established an HSA. The employer may provide the notice to other employees as well. However, if an employee has earlier notified the employer that he or she has established an HSA, or if the employer has previously made contributions to that employee's HSA, the employer may not condition making comparable contributions on receipt of any additional notice from that employee. For each calendar year, a notice is deemed to be timely if the employer provides the notice no earlier than 90 days before the first HSA employer contribution for that calendar year and no later than January 15 of the following calendar year.

© Model notice. Employers may use the following sample language as a basis in preparing their own notices.

Notice to Employees Regarding Employer Contributions to HSAs:

This notice explains how you may be eligible to receive contributions from [employer] if you are covered by a High Deductible Health Plan (HDHP). [Employer] provides contributions to the Health Savings Account (HSA) of each employee who is [insert employer's eligibility requirements for HSA contributions] ("eligible employee"). If you are an eligible employee, you must do the following in order to receive an employer contribution:

(1) establish an HSA on or before the last day in February of [insert year after the year for which the contribution is being made] and;

(2) notify [insert name and contact information for appropriate person to be contacted] of your HSA account information on or before the last day in February of [insert year after year for which the contribution is being made]. [specify the HSA account information that the employee must provide (e.g., account number, name and address of trustee or custodian, etc.) and the method by which the employee must provide this account information (e.g., in writing, by e-mail, on a certain form, etc.)].

If you establish your HSA on or before the last day of February in [insert year after year for which the contribution is being made] and notify [employer] of your HSA account information, you will receive your HSA contributions, plus reasonable interest, for [insert year for which contribution is being made] by April 15 of [insert year after year for which contribution is being made]. If, however, you do not establish your HSA or you do not notify us of your HSA account information by the deadline, then we are not required to make any contributions to your HSA for [insert applicable year]. You may notify us that you have established an HSA by sending an [e-mail or] a written notice to [insert name, title and, if applicable, e-mail address]. If you have any questions about this notice, you can contact [insert name and title] at [insert telephone number or other contact information].

(e) Electronic delivery. An employer may furnish the notice required under this section electronically in accordance with §1.401(a)-21 of this chapter.

(f) Examples. * * *

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While participation in an HSA requires coverage by an HDHP, participation in an HDHP does not require nor mandate an HSA.

I doubt that the employer can make the HDHP conditional on the opening of an HSA.

Edit: spelling error.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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I agree with GBurns observation. Also, if for whatever reason an employee covered by an HDHP doesn't cooperate in opening up an HSA, why can't/shouldn't the employer just give the employee the money as a taxable cash payment? Stated differently, what is the logic in not giving the employee the money?

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