HSA closed by trustee

[Guest MarieNo]

Has anybody addressed how to proceed as an employer when an employee's HSA account has been closed by the trustee because of unpaid fees on the account? The trustee (bank) refuses to re-open the account because it has had too many problems with this employee. Any thoughts? Encourage the employee to open a new HSA elsewhere? Have the employee prospectively change his HSA election as there is no account in which to place salary reductions? The employee is due to receive an employer contribution to the HSA in October, but if there is no HSA, there can be no contribution. Thanks for your comments.

[leevena]

Has anybody addressed how to proceed as an employer when an employee's HSA account has been closed by the trustee because of unpaid fees on the account? The trustee (bank) refuses to re-open the account because it has had too many problems with this employee. Any thoughts? Encourage the employee to open a new HSA elsewhere? Have the employee prospectively change his HSA election as there is no account in which to place salary reductions? The employee is due to receive an employer contribution to the HSA in October, but if there is no HSA, there can be no contribution. Thanks for your comments.

A couple of things. First, the employer will not be penalized because the employee has not opened an HSA account. Second, you should notifiy the employee, in writing, of this situation. In the letter provide timelines for the employee to follow to open the HSA account, including wording that after a certain time period, they will not receive the HSA contribution for that plan year. Any contributions that would have been made will be held until such time that the employee opens the account. If the employee does not notifiy you that they have complied, by the date in the letter, you do not need to contribute for that plan year.

You can find the details and samples at Treasury website.

Good luck.