HSA Comparability Rules – Finalized
Regulations relating to two very specific aspects of HSA administration were issued on April 17, 2008. These regulations mirror the proposed regulations issued on June 1, 2007. (See HSA Guidance Again: Comparability Rules Re-Visited, from June ’07 Benefit Beat).
In a nutshell, these regulations address how the employer can satisfy the HSA comparability rules when an HSA-eligible employee has not established an investment account by the end of the calendar year. These rules apply to HSAs which are not a part of a cafeteria plan.
In summary, if an individual has not established an investment account or has not advised the employer about the establishment of an investment account, the employer must send a notice no later than January 15 of the next year advising the individual about the availability of an employer contribution and the necessity to establish an HSA. A sample notice for this purpose is available; see Model Notice in Q&A 14(c).The employee then has until the end of February to establish and advise the employer about the establishment of the account. The employer then has until the tax filing due date (April 15) in order to make the comparable employer contribution.
The other matter addressed in these regulations relates to accelerated employer contributions. In the event an HSA participant has medical needs, according to these regulations, an employer can make an advanced contribution to the HSA as long as the employer would treat other HSA participants with medical needs in a similar manner. An accelerated contribution that meets these requirements would not cause the employer to run afoul of the comparability rules.
These regulations become effective January 1, 2009, though they can be relied on now.
The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.
As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.