On September 8, 2009, the IRS published final regulations addressing aspects of the comparability rules applicable to health savings accounts ("HSAs") and addressing certain excise tax filing requirements. The regulations are effective September 8, 2009, but the applicability date is later. The comparability rules apply to contributions made on and after January 1, 2010. The excise tax rules apply to returns due on or after January 1, 2010.
A. HSA Comparability Requirements
An HSA may be maintained by an eligible individual who is covered by a high deductible health plan ("HDHP"), who is not covered by any other non-HDHP and who meets other requirements. An eligible individual may make deductible contributions to his or her HSA, subject to the maximum statutory limit adjusted annually for inflation (for 2009 $3,000 for employee only coverage and $5,950 for family coverage). An employer may also make contributions to an HSA that, when combined with the contributions made by the eligible individual, do not exceed the applicable statutory limit as adjusted.
Contributions to an HSA by an employer are subject to a comparability requirement. In general, the contributions made by an employer to HSAs must be in a uniform amount, with certain exceptions. The final regulations address some of these exceptions.
Full Contribution for a Partial Year
So long as an employee is an eligible individual on the first day of December, a full year's contribution may be made to that employee's HSA. If the employee does not remain an eligible individual for the following twelve (12) months, there is a tax penalty to pay for the privilege of having made a full year's contribution to an HSA for a partial year of eligible individual status.
The final regulation makes it clear that an employer who chooses to contribute to the HSAs of employees who are eligible individuals must do so in a uniform manner applicable to all such employees. Therefore, if the employer's contributions are made on a monthly prorata basis, such contributions must apply uniformly. In the alternative, if an employer chooses to contribute the maximum amount for any mid-year hire, the employer must do the same for all.
Additional Contributions for NHCEs
For purposes of applying nondiscrimination rules under the tax code, an employer's workforce is divided into highly compensated employees ("HCEs") and non-highly compensated employees ("NHCEs"). In general, an HCE is an employee who earned above a specified income threshold in the prior year and the NHCEs are all other employees. For 2009, the income threshold is $110,000 and in 2008 it was $105,000.
The final regulation implements a rule that allows larger contributions to be made on behalf of NHCEs than HCEs. Nevertheless, the comparability rules must still be met as applied within each distinct group of HCEs and NHCEs.
Qualified HSA Distributions
A qualified HSA distribution is a permitted distribution from a health care flexible spending account or from a health reimbursement arrangement made after December 20, 2006 and before January 1, 2012 which is then contributed to an HSA. The amount of the qualified HSA distribution cannot exceed the lesser of the balance in the health flexible spending account or health reimbursement arrangement on September 21, 2006 or the balance in the same on the date of the distribution.
The amount of the contribution to an HSA attributable to a qualified HSA distribution is not, itself, subject to the comparability rules. Nevertheless, if the ability to make a qualified HSA distribution is offered to any employee then it must be offered on the same terms to all employees.
B. Excise Taxes
The final regulation addresses the filing requirements for excise taxes related to failures to meet the COBRA requirements, certain group health plan requirements (for example, HIPAA creditable coverage rules and mental health parity rules), HSA comparability rules and the Archer MSA comparability rules. The excise taxes are reported on Form 8928. When the excise tax is payable by an employer, the form and payment of the tax are due at the time the employer's income tax return is due without extensions.