HSA (Non-Employer Sponsored Plans)

sstogner

Hey Folks - We have an employee who brought us information on their personal Health Savings Account, asking our payroll manager to deduct 8% pre-tax on her paycheck. She provided a routing number, an account number, and other pertinent information, BUT this was NOT on an official Bank Statement, although the employee did attach a BLANK Health Bank Deposit Slip, which did not contain her information.

We currently allow for pre-tax (cafeteria / Section 125) deductions for our Employee Health Insurance Plan, as well as our 401k Plan, but we do not sponsor an HSA plan. The question we have is do we have to allow this pre-tax deduction since we don't sponsor a plan?

In doing some research, I've seen people say that as long as you allow a cafeteria/Sec 125 plan pre-tax deductions, you can do this, BUT our payroll system distinguishes these deductions as either Health Plan or 401k. We do not have 'code' that distinguishes HSA, nor do we have any employees (out of the 1100 we have) that have asked us to do this.

Can we tell this employee that we do not sponsor HSA's, and thus we cannot deduct pre-tax dollars to go toward this account, and they will have to claim this on their tax return at the end of the year?

Any guidance would be greatly appreciated. Thanks!

sstogner
san antonio, tx

cnghr

If you do not sponsor an HSA plan yourself, I don't see how you could allow an employee to make pre-tax contributions to an HSA. One of the primary aspects of an HSA is that the person must be enrolled in an HSA-compatible high deductible health plan (HDHP). If you do not offer an HSA-qualified HDHP and they are on your non-HSA insurance plan, that would automatically disqualify them from participating in an HSA.

If your employee is not covered under your non-HSA insurance plan and is covered under a spouse's qualifying HDHP, then they could conceivably make contributions to the spouse's HSA, but because you are not the sponsor of the HSA, I don't think they could do it pre-tax through your payroll, whether or not you offer Section 125 payroll deductions. I believe it would have to be done after-tax by the individual and then claimed as an "above-the-line" tax deduction when they file their income taxes.

Still Need Coffee

I agree with cnghr. You need to be participating in a qualified HSA plan to do the pre-tax contributions.

sstogner

[QUOTE=cnghr;724630]If you do not sponsor an HSA plan yourself, I don't see how you could allow an employee to make pre-tax contributions to an HSA. One of the primary aspects of an HSA is that the person must be enrolled in an HSA-compatible high deductible health plan (HDHP).

-- Just to clarify what you are saying above, and to give a little more detail, the employee is on our Base Plan, which does have a $1500 deductible, which per HSA rules (at least the way I read it) means that our Plan is considered an HDHP, BUT within the Plan itself, we do not offer an HSA. Given that we don't offer an HSA within the Plan, and we don't have the means currently to deduct this item in our payroll system, we are not obligated to do so, correct?

Thanks.

sstogner
satx

NaeNae55

Technically speaking, your ability through your payroll system is immaterial. If the law required you do make this deduction you would need to find a way.

You do not have an HSA plan so you cannot handle her contributions to it pre-tax. You are not qualified by law to do so.

jmcaa

Just tell the employee that you don't offer that benefit.

They can set up an automatic payment from their own checking account directly into their HSA account and then write it off on their taxes at the end of the year.

We offer a HDHP but not the pre-tax contribution to our own HSA account. The employee-paid portion of health insurance HDHP or PPO plan is pre-tax on their paycheck. Employees who want to open their own HSA account do so and are in charge of when and how much money they want to contribute themselves -- no employer involvement.