HSA & Employer Contribution?

SamIam

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Is it true an employee can qualify for a subsidy even though the employer contribute to her HSA Account. The employer does not pay for the premium. I thought that was not allowed another agent is telling me they are doing that for their clients.

Please shed some light on this for me.
 
Yes, it is true. There are some posts on this forum about that issue. An employer cannot pay the premium for a non-group plan without turning that contribution into taxable income. However, the employee can enroll in a QHDHP and contribute that premium into their HSA account, and tax deduct it.

This also solves the problem of MAGI going up. The extra money makes MAGI go up, but the HSA tax deduction makes MAGI go down for Federal and State income taxes. The only tax hit would be the 7.65% FICA tax for the employee and matching FICA for the employer.

Since the maximum contribution into an HSA is $6,550, this doesn't work well if the employer is accustomed to contributing more than that toward the employee's cost.
 
Ann,

To put this in layman's speak:
If an employer pays an employee's individual plan, it's taxable income to the employee (but still allowed).

An employer can contribute up to $6,550 into an employee's HSA, which they (employee) can then utilize to pay individual premium. The change to MAGI kind of cancels out due to the HSA deduction, and the only tax is the relatively small FICA on both sides.

Is that accurate?
 
Ann,

To put this in layman's speak:
If an employer pays an employee's individual plan, it's taxable income to the employee (but still allowed).

An employer can contribute up to $6,550 into an employee's HSA, which they (employee) can then utilize to pay individual premium. The change to MAGI kind of cancels out due to the HSA deduction, and the only tax is the relatively small FICA on both sides.

Is that accurate?

All true except the part where the employer contributes into the employee's HSA account, and the employee uses the money to pay his premium. The employee uses the money to pay his medical expenses, up to the QHDHP's deductible.

Also, I'm not sure the employer can contribute directly into the employee's HSA account any more when it's IFP rather than true group insurance. I know that the employer can increase W2 income, and then the employee would contribute the money (tax-deductible) into his own HSA account.
 
Thanks for the clarification, Ann.

I ask because we have quite a few sole props that no longer qualify as groups. A few guys had asked me if there was a way to (somehow) have the business pay their individual contract, without having to claim it as personal income. (Of course, some are trying to get a subsidy too, but that's another story).

This is a nice tax-advantaged way to have an employer help cover the OOP expense of an employee, but it doesn't help pay premium. It's good to know, but unfortunately doesn't help my scenario.

Thanks again!
 
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