HSA Contribution-Distribution Question

[Ann H]

IFP = Individual / Family plans (NON Group)
If employee #1 has a HDHP HSA (HMO OR PPO)
employee #2 has a copay plan (non HSA)

How can this employer contribute to EE #1, and not EE #2 , and avoid being discriminatory?

Thanks in advance

Through a Section 125 plan, the employer can contribute the same amount for each. Employee # 1 with a QHDHP HSA plan gets a pre-tax contribution directly into his/her HSA bank account. Employee #2 can get a taxable cash contribution, or else not allowed to participate because s/he doesn't have the qualifying insurance.

Works well with group insurance, especially if the only plan the employer offers is an HSA.

Pre-ACA it was done with IFP plans. With the current news that you cannot use a Section 125 for IFP plans, then funding the HSA for an IFP plan is a concern too. Being non-discriminatory is also a concern.

So, a work-around is to give a taxable raise, then let the employee tax-deduct the HSA contribution on their own Federal Form 1040. Other than the fact that it's not pre-tax for FICA, it works out well.

Non-discrimination is an issue, but at least you're not going through a legal document like a Section 125 to do it. Generally speaking, if 2 employees were similarly situated, they should be treated equally. However, it shouldn't be difficult to say that you offered to contribute to the HSA of any individual who qualified. If the individual doesn't buy a QHDHP HSA health insurance plan, that's their fault. For instance, if a person doesn't buy health insurance through the group, they don't get the employer's contribution to the premium -- their fault. If an employee doesn't contribute to their retirement account, then they don't get an Employer match -- their fault. You offered it, and they didn't accept the qualification requirements.

This is JUST MY OPINION, and I have no legal basis for this. If I'm wrong, and you know legal basis for that, please let me know!

 

[Yagents]

Thanks miss Ann......................

 

[AEMC]

I would say so long as the employer is making this available to all employees it would not be considered discriminatory. If it is communicated to the employee that they have a choice to enroll in the copay plan or enroll in the HSA plan and receive an HSA contribution, your decide mr. employee. Apply this uniformly and there should not be a discrimination issue.

 

[junkman]

The employer has to contribute equally to those employees in the same class on the same plan.

Suppose 2 plans (traditional PPO & a HDHP) both with employee contributions and a 125 plan.

The employer can charge employees whatever they want as their premium share. (Subject to carrier contribution requirements etc etc).

The employee contribution can be different depending on the plan. The employer can contribute to the HSA directly. The employee can contribute to the HSA via the 125 plan. All 125 rules ie qualifying event to stop paying 125 premiums, HSA contributions limits etc have to be followed. The employee can fund the HSA to the max limit outside of the 125 plan taking into consideration employer contributions and his 125 contributions. He has until 4/15 of the following year to make the contribution (same as IRA).

Note that a H & W can contribute slightly more if they are covered as 2 individuals than if they are covered as a "family".

 

[hamben]

No the employer can not contribute to an HSA for an employee that has a copay. The employee has to have a qualified plan before they can open an HSA. Yes an employer can contribute to an employee HSA ..it's not discriminating if the employee chooses not to open an HSA or has a non qualified HSA plan...however empoyers that contribute to employee HSA most do for all. However contribution levels can be set up on a per class bases. So you can't discriminate but you contribute differ amounts per class such as management or length of service.

 

[junkman]

No the employer can not contribute to an HSA for an employee that has a copay. The employee has to have a qualified plan before they can open an HSA. Yes an employer can contribute to an employee HSA ..it's not discriminating if the employee chooses not to open an HSA or has a non qualified HSA plan...however empoyers that contribute to employee HSA most do for all. However contribution levels can be set up on a per class bases. So you can't discriminate but you contribute differ amounts per class such as management or length of service.

Hopefully everyone on this forum understands that the insured needs to be enrolled in an HDHP before anyone can contribute to an HSA and that most plans with copays don't qualify. Some with wellness RX copays do qualify.