HSA question

[kstein]

Anyone have thoughts on this?

Are you familiar with HSA discrimination rules? I could use your help with a unique client situation. Below are the relevant facts.



· S-Corp owned 90% by primary corporate employee and 10% by part-time employee. The 90% owner is highly compensated. The 10% owner is not – he earns about $10,000/year for part-time work.


· They executed a group, high-deductible plan (HSA eligible) for 2019. The 90% owner wants the company to fund a pro-rata contribution to their respective HSA accounts up to the max this year. So, he would receive $3,150 (90% X individual limit of $3,500) and the 10% owner would receive $350 (10% X $3,500). Again, this would be a corporate contribution.


I’m no HSA expert, but this sounds like discrimination in favor of the highly compensated 90% owner.



Thoughts?

 

[leevena]

Assuming this is outside of Section 125, correct. Comparablility rule appears to be violated, meaning employer needs to contribute either the same $ amount to both, or the same % of deductible to both. (Btw, you can contribute more to non-HCE.). If true, there is no tax deductibility.

 

[LostDollar]

I am having to use a telephone right now and have no clue how to copy a link.

I found some hsa information on a site called upcounsel.

If I am following the info correctly, it says what he should be doing is establishing a full time and a part time employee class. He can then define a flat contribution or percent of limit contribution for each class.

I believe you are right that his current idea will cost him penalties.

 

[leevena]

I am having to use a telephone right now and have no clue how to copy a link.

I found some hsa information on a site called upcounsel.

If I am following the info correctly, it says what he should be doing is establishing a full time and a part time employee class. He can then define a flat contribution or percent of limit contribution for each class.

I believe you are right that his current idea will cost him penalties.

Yes, class structure would work.

 

[Yagents]

I gave lost dollar a like for this one. First one ever. He taught me something, and might have added value to this thread, and didn't talk about some non relevant topic.
He has me on block, so.....

 

[junkman]

I gave lost dollar a like for this...
He has me on block, so.....

I once made the mistake of going to the Open Discussion forum on one of the boards for my old Mercedes diesel. People I like on the tech forums who are knowledgeable and competent are on the opposite end of the political spectrum and we'll never agree. I just quit the OD. It saves headaches.