Bi-annual contribution

[lexi]

Generally, our HSA is funded twice a year. However, some EE reach their entire deductible amount before the second (2nd) funding. For those EE, their accounts are fully funded before the 2nd contribution is made available to others.

What happens if an EE leaves before the 2nd funding contribution is made to her account (and she isn't one of those EE that wracks up enough bills to be entitled to the pre-2nd funding contribution)? Is she entitled to have her HSA fully funded, even though she is leaving before the 2nd contribution?

Section 4980G seems to answer yes to that question. Is there any other section I should be looking at? Thanks in advance to anyone who can help.

[Jacmo]

I tend to think that the employer would want to follow a 1/12th rule. Regardless of the timing of the fund transfers, they might want to consider following a "time served=amt deposited" type of rule.

I also think I would be just as concerned about the advantage/preferred treatment those employees with early claims have received. It could be argued that those who didn't get the early transfers missed out on earned interest.

You didn't state whether employee HSA contributions are offered through a cafeteria plan. If they are, IRS Notice 2004-50 confirms that an employer may accelerate HSA funding up to the maximum salary reduction amount elected by the employee, but employees terminating mid-year must repay any accelerated amounts.

4980g refers to 4980e as to comparability. Per 4980E(d)(2)(B): "In the case of an employee who is employed by the employer for only a portion of the calendar year, a contribution to the Archer MSA of such emplyoyee shall be treated as comparable if it is an amount which bears the same ratio to the comparable amount as such portion bears to the entire calendar year."

Therefore, I think you are correct. You've got to make those contributions. Which goes back to my first paragraph.