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Can an Employer Fund an HSA Contribution?

When you open a health savings account, you can put money aside on a pre-tax basis and use those funds to pay for prescriptions, eyeglasses, doctor visits and other legitimate medical expenses not covered by your health care insurance. Many employers now offer these consumer driven plans as a way to cut costs and provide their employees with greater flexibility. To make these relatively new plans more attractive, some employers even fund part or all of the yearly HSA contribution.

  1. Qualifying Plans

    • Before you can open a health savings account, either through your employer or on your own, you must first have a qualifying health plan in place. Not all health care plans qualify, so it is important to speak to your employer, or your health care broker, if you plan to open and fund an HSA. In order to qualify, the plan you choose must be considered a high deductible health plan, or HDHP. If your employer offers such a plan, the firm can set money aside in an HSA on your behalf. Although not all employers fund their workers' HSA plans, it can be a powerful incentive to get employees to choose a typically lower cost high deductible plan.

    Employer Contributions

    • The amount the employer contributes to an HSA, if any, varies from firm to firm, and it is always a good idea to read the fine print before signing up. Some employers fund the HSA up to the maximum allowable contribution, while others put in part of the money and rely on the employee to fund the rest. Knowing the amount of the employer's HSA contribution is important, since it will affect how much the employee can put into the plan.

    Payroll Deductions

    • If your employer does not fund your entire HSA account, you might have the opportunity to put in additional money through payroll deductions. These payroll deductions are treated much the same way as your 401k contributions, in that the money comes off the top before it is taxed. That reduces your taxable income, which in turn can lower your federal tax liability or increase the size of your refund when you file your annual 1040 form. You can choose how much to put in, as long as you do not exceed the maximum contribution level set by the IRS.

    Contribution Limits

    • The IRS does set contribution limits that must be followed, and it is important to check those limits before you invest any additional money into an employer-funded HSA. For 2011 the maximum a health savings account holder can contribute to a single plan is $3,050. Those with health savings accounts designed for family use can contribute up to $6,150. Those 55 years of age and older can contribute an extra $1,000 to their individual or family plans, for a total contribution limit of $4,050 and $7,150, respectively. These limits apply to the total of employee and employer contributions, so if your employer does contribute to your HSA it is important to keep track of the amounts.

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