W2 Box 12, Code W

[Dennis Povloski]

Box 12, code W indicates HSA contributions. As I'm learning about this, it looks like these contributions can be made through employee deferral via section 125, or they can be employer contributions.

What I can't seem to tell is if the amounts were withheld through employee deferral, are they already included in either Box 1 or Box 5 of the W-2?

Our definition of comp is W-2 including all types of deferral, and in this particular case, everything else is already included in Box 5...I'm not sure if I need to add these code W amounts in, or if they're already included in Box 5.

Any help is greatly appreciated!
Thanks!

[hr for me]

Or they can be a combination.....Since the employee part is taxed under FICA, they would be part of Box 5 as Soc Sec/Medicare wages, but employer HSA contributions are NOT FICA taxable and would not be part of Box 5.

But generally the employer portion would not be considered wages or a deferral and generally would not be a part of 401k compensation definitions since it is not a deferral. You might think of the employer-contributed part more like benefits paid directly by the employer (401k match, employer part of health insurance, etc)

Your box12 would have BOTH employee HSA deferrals and any HSA employer contributions.

[spiritrider]

The above is not likely correct.

Retirement plan deferrals are subject to FICA, but HSA deferrals as Section 125 deductions are almost certainly not. These amounts should not be included in W-2 boxes 1, 3, 5. See the Forms W-2/W-3 instructions for Health Savings Accounts page 10.

[hr for me]

Actually we are both partially correct...here is what I found after more searching and it does depend on whether the employer sets it up as a 125 and whether they put the employer contributions through the 125 plan also:

"Setting Up HSA Contributions Properly

Employer and employee HSA contributions can be made in one of two ways:

1) Direct Contributions

An employer may make a direct contribution to an employee's HSA on a "pre-tax" basis. This means that the contribution is not subject to federal income tax or FUTA or FICA taxes. An employee may make direct contributions to his or her HSA via payroll deduction or by writing a separate check using post-tax dollars, which also have tax advantages. Employee direct contributions are subject to FICA and FUTA taxes.

2)Contributions Through a Section 125 Cafeteria Plan

Employee contributions to an HSA through a Section 125 Cafeteria Plan are voluntary salary reductions and are not subject to federal income tax or FICA or FUTA taxes. For employee contributions to be treated in this manner, the employer must formally establish a Section 125 Cafeteria Plan. Generally, employee elections to an HSA under a Section 125 plan can be revoked or changed at any time on a prospective basis.

Employers may also make pre-tax contributions to an HSA through a Section 125 Cafeteria Plan, which involves a choice between contributions to the HSA or other employer provided benefits. All Section 125 Cafeteria plans must comply with federal regulations regarding non-discrimination, elections, qualifying events and other requirements. As a result, such plans are often more complex than all but the largest employers may want to contemplate."

[spiritrider]

The OP is referring to employee contributions by payroll deduction. I would like to think that a benefits administrator would always do this through a section 125 plan. For that matter I would like to think this would also be true for the employer contributions.

I leave the possibility of cheap, lazy employers and/or lazy HR staff.