HSA Qualifying event as of 12/1/25 with previous vendor. How to handle employer share contribution in new calendar year?

Now I have a situation with the employee that switched from PPO to an HDHP as of 12/1/2025. We received the Qualifying event paperwork today 1/7/2026. We have also switched HSA vendors as of 1/1/2026.

• We give employees a seed contribution when they sign up for the HDHP. Would the seed money that they would have received for the month of December 2026 be able to be applied to 2026?
• If the employee would be eligible for the December funds, would we need to attempt to deposit that money through the previous vendor?
• How should any of this affect their taxes and W-2?

I have reached out to our HR department and they asked us if we knew what to do, so I would love some regulatory backup for any answers.

thank you

John

First of all, unless this is a birth/adoption event the election change request received in '26 generally would not have a retroactive effect to 2025.

• More details: https://www.newfront.com/blog/when-mid-year-election-changes-are-effective

Assuming the change is retro to '25, this would be a matter of plan design.  Employers have broad discretion on how to structure their ER HSA contribution approach.  Any consistent approach would generally be fine. I leave to you to address the potential vendor issues.

If you are going to make the contribution, employers can make a year one HSA contribution by 4/15 of year two if they notify the HSA custodian and employee that the amount is to be allocated to year one.  That does not require any changes to the year one W-2. 

More details:

https://www.newfront.com/blog/correcting-missed-hsa-contributions

Missed Employer HSA Contribution: Prior Year (Correction by 4/15)

Employers frequently discover missed HSA contributions after the calendar year has closed. These discoveries often occur as part of a regular year-end payroll auditing process. They may also be discovered as part of the reporting process for HSA contributions on the Form W-2.

The good news is that whatever the reason for the error or the cause of its discovery, missed HSA contributions from a prior year are still an easily correctible mistake. The HSA rules provide that employers can make a prior year missed HSA contribution by the tax filing deadline without extension (generally April 15).

There are two communication steps required to ensure that the contribution is allocated to the prior year contribution limit:

1. The employer must notify the HSA bank that the contribution is to be allocated to the prior year; and
2. The employer must inform the employee that the contribution is to be allocated to the prior year.

No Form W-2 Correction Required

Employers must report all employer and employee HSA contributions made through payroll as a single aggregated amount on the employee’s Form W-2 in Box 12 using Code W.

Employers are often concerned that making an HSA contribution for the prior year will require a corrected Form W-2c to report the additional contribution allocated to that prior year. However, IRS guidance is clear that an HSA contribution correction by the tax filing deadline (generally April 15) does not require any correction to the prior year Form W-2.

Rather, the IRS guidance confirms that employers simply report the prior year HSA contribution on the current year Form W-2 (issued the following January). Note that this may result in the employee’s Box 12, Code W showing an amount larger than the annual statutory HSA contribution limit. However, as long as the amount in excess of the limit is attributable to the prior year contributions made prior to the tax filing deadline, this will not present any issues.

Employee Addresses Additional Prior Year Contributions on Form 8889

On the employee side, the additional contributions made for the prior year are addressed via the Form 8889 that all individuals with HSA contributions or distributions must include with the individual tax return (Form 1040). This will ensure that the contributions are allocated to correct year and are consistent with the Form 5498-SA provided by the HSA custodian.

The Form 8889 Instructions include an “Employer Contribution Worksheet” that accomplishes two purposes to ensure proper reporting of HSA contribution amounts attributable to the tax filing year:

1. Prior Year Contributions Subtracted: The employee subtracts any amounts attributable to the prior year that were included on the current-year Form W-2 (because it was contributed by the prior year tax filing deadline); and
2. Current Year Contributions Added: The employee adds any employer contributions made for the current year after the Form W-2 was issued (because it was contributed by the current-year tax filing deadline).

Potential Complications:

• Employees who have already filed their individual tax return (Form 1040) prior to receiving notice of the additional HSA contribution attributable to that prior year (the tax-filing year) may have to amend their individual tax return (Form 1040-X) to reflect the additional contribution on the Form 8889.
• Employees may argue that they should receive some form of lost earnings compensation for the duration of the failure. Although there are no specific rules addressing this (unlike, for example, the EPCRS lost earnings rules that apply in the 401(k) context), employers might consider accommodating such a request. Any such adjustment should generally be made outside the HSA (i.e., as standard taxable compensation) to avoid the potential for excess HSA contributions.
• If the employee has terminated from employment, the HSA account with the employer’s designated custodian may no longer be open. In this case, employers should consider making the missed payment to the former employee as standard taxable cash compensation.

Example:

• Jason works for his employer Treadstone Security, which offers an HDHP plan option to employees.
• Treadstone Security makes a $3,000 employer contribution ($125 per payroll period) for employees who enroll in the HDHP.
• Upon review of his 2023 Form W-2 in February 2024, Jason discovers that Treadstone Security contributed only $2,875 because it missed one payroll’s HSA contribution.

Result:

• Treadstone Security should correct the mistake by making the missed 2023 employer HSA contribution no later than April 15, 2024.
• Treadstone Security must notify both Jason and the HSA bank that the $125 deposit made in 2024 is to be allocated to the 2023 HSA contribution limit.
• Treadstone Security does not prepare a corrected 2023 Form W-2c for Jason to address the error.
• Instead, Treadstone Security reports the 2023 contribution made in 2024 on Jason’s 2024 Form W-2 provided in January 2025 (aggregated as one amount with the 2024 employer and employee HSA contributions, if any, in Box 12 using Code W).
• Jason will prepare his 2023 Form 8889 to reflect that the additional $125 HSA employer contribution made in 2024 is allocated to the 2023 contribution limit.
• Jason will prepare his 2024 Form 8889 to exclude the $125 additional amount reported on his 2024 Form W-2 that was attributable to the 2023 HSA contribution limit.

Slide summary:

2026 Newfront Go All the Way with HSA Guide