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Do I Have to Declare HSA Contributions by My Employer?

Health savings accounts (HSAs) are tax-deductible accounts that are coupled with qualified high-deductible health insurance plans to save for medical expenses. Anyone can contribute to your HSA on your behalf, even your employer. Because the funds deposited in an HSA are tax-deductible and withdrawn tax-free for qualified medical expenses, the IRS monitors the deposits into your account through your income tax return.

  1. Employer Contributions

    • Employers are permitted to make deposits into employee HSAs as long as the company follows IRS guidelines. Employers can contribute a specific dollar amount or a percentage of the deductible you choose. Employers can also contribute different amounts to employees who hold family HSA plans instead of individual plans. Contributions that your employer makes to your HSA are not taxable income to you in most circumstances.

    Reporting Contributions

    • Contributions that your employer makes on your behalf will appear on your W-2 statement, but they are not included in your taxable income. When you file your 1040 income tax form, you will need to include Form 8889 with your return if you have an HSA. For your 2010 tax return, you will list the deposits your employer made on line 9 of Form 8889. Your employer will report the amount contributed on your behalf through its corporate tax return as well, since it is a deductible expense for your employer.

    Contribution Limits

    • The IRS limits contributions into your HSA in a way similar to how contributions to traditional and Roth IRA contributions are limited. The IRS sets the contribution limit by evaluating the inflation rate and healthcare costs. For the tax year 2010, the contribution limit from all sources for an individual HSA was $3,050, and for families the limit was $6,150. Like an IRA, you can designate contributions to the previous year until April 15 or the date you file your income tax return, if it is before that.

    Excess Employer Contributions

    • If you leave your job before the end of the year and do not enroll in another HSA-qualified health insurance plan, the IRS will prorate the amount of tax-deductible contributions you were allowed to make for that year. If your employer contributed more than this amount, the excess contributions will be included in your W-2 statement as taxable income.

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