An employer may contribute to the health savings account (“HSA”) of its employees who are covered under high deductible health plan (“HDHP”).  If an employee contributes, it must make “comparable contributions” to “comparable participating employees” in the HDHP or pay a substantial excise tax.  The IRS recently released proposed regulations that provide employers with guidance on comparability where an employee has not established an HSA by the end of the calendar year or has not notified the employer that he has established an HSA.  The proposed regulations also allow employers to accelerate contributions to employees who have incurred qualified medical expenses that exceed their year-to-date HSA contributions. 

 

The proposed regulations authorize the payment of comparable contributions for an employee who has not established an HSA by the end of the calendar year or failed to notify the employer that he has established an HSA.  The employer must notify all eligible employees that if a HSA is established and the employer is notified by the last day of February, the employer will make comparable contributions (plus reasonable interest) to the HSA by April 15th of that year.

 

Additionally, an employer may accelerate part or all of its comparable contributions for an employee who incurs qualified medical expenses that exceed the employer’s cumulative contributions to their HSA.  Accelerated contributions must be available to all qualified employees, and the employer should establish uniform methods and requirements for determining such medical expenses and accelerating contributions.

 

Until the regulations are finalized, employers may (a) rely on the proposed regulations, (b) wait until the regulations are finalized, or (c) continue to rely on prior proposed regulation, which do not require “comparable contributions” for an employee who has not established an HSA by the end of the year.

 

Employers also should note that the IRS recently published the maximum annual contributions to HSAs for 2007, which were modified by the Health Opportunity Patient Empowerment Act of 2006.  Previously, annual contributions were limited to the lesser of the annual deductible under the HDHP associated with the HSA or an indexed statutory amount.  However, beginning in 2007, the maximum annual contribution to an HSA is the indexed statutory amount, which is $2,850 for an individual with self-only coverage under an HDHP and $5,650 for an individual with family coverage under a HDHP.