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HSA Comparability Rules

A Health Saving Account (HSA) is designed to help people save for health expenses on a tax-free basis. The Internal Revenue Services (IRS) has released HSA comparability rules. These rules provide guidance to employers who contribute to the employee's HSA outside of a “Section 25 or salary reduction plan.” These rules are applicable to those employees who have not enrolled in an HSA. The rules are also applicable for those employers who increase the comparable contributions for the calendar.

  1. Employee Eligibility

    • Comparable employees are those who come under the same class of employees or fall under the same group of High Deductible Health Care plan. Any employee who has coverage under the employer's HDHC plan but do not fall within the scope of an insurance policy or any other protective or health guard plan will be eligible for Health Savings Account.

    Requirements for Employers

    • Employers do not own the employees' HSAs. Employer contributions made to the HSA, however, are fully owned by the employee. The contributions to the account can either be made on a pre-tax basis or after-tax. If contributions are made on an after-tax basis, it would be tax-free. If contributions are made on a pre-tax basis, it can be carried out through a plan called the "salary reduction" or "cafeteria plan" or "Section 125 plan". According to these plans, the contributions made by both the employer and the employee need to meet the "non-discrimination" rules. This means that the employer needs to ensure that the contributions made does not in any way favor the employees who get a higher renumeration. An employer needs to satisfy a couple of requirements to comply with the HSA comparability rules. First, the employers are required to send notice to all eligible employees who either have not been enrolled to an HSA. This notice can also be distributed via Internet and email as long as it complies with the applicable IRS rules. Before the last day of February, employees are required to follow the instructions for proper notice. Second, the employer must provide a comparable contribution to the HSA account of each qualified employee who sends a notice to the plan. The eligible employees should also receive a sufficient interest by April 15 of the next calendar year.

    Employee Contributions

    • The employer can choose to accelerate the HSA contributions of its employees if the eligible medical expenses that are subject to the employee surpass the employer's collective HSA contributions. But, the employer should ensure that there is a uniform method for the availability of accelerated HSA contributions to every employee. Also, the employees must receive the same amount of contribution or an equal percentage for the calendar year. The statutory annual limit on the contributions for employees with only self-help HDHP (High-deductible health plan) is $2,900. Those who have family HDHP coverage have a limit of $5,800.

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