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HSAs for Former Employees and Testing

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I am trying to understand the comparability rules for HSAs, particularly as they apply to former employees and have some pretty basic questions. 

 

Under the Final Comparability Regulations for HSAs CFR § 54.4980 Section 1-7, employer contributions to an HSA are not subject to comparability testing if the contributions are made through a cafeteria plan “if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (meaning that all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction,” and they are subject to the comparability rules if made outside of a cafeteria plan. (54.4980G-5, Q&A-1)

 

  • My first question is whether HSAs are ever not offered through a cafeteria plan?  This is not the relevant question, but I would like to know if that ever happens.

     

  • Former employees may receive contributions from their former employers, and former employees are a category that must be tested under the comparability rules if they apply.

    (a) Categories. The categories of employees for comparability testing are as follows … (3) Former employees (except for former employees with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). (54.4980G-3, Q&A-5)

     

    Also, “An employer that contributes only to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP is not required to make comparable contributions to the HSAs of former employees who are eligible individuals with coverage under the employer's HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). (54.4980G-3, Q&A-12).

             

              Am I correct that if the HDHP is a retiree plan, the comparability rules apply and if elected  through COBRA, they do not apply?  So, subject only to discrimination testing, the employer can choose to make HSA contributions of differing amounts or only to some but not all former employees under COBRA?  Finally, is there any limit as to how long employers can continue to make contributions to former employees, either under COBRA or the comparability rules?

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