If an employer makes a contribution directly to an employee's HSA, is it tax deductible to the employer? If the employee contributes to the HSA through payroll deductions, is it pre-tax?

As long as it is an employer group plan and deductible qualified, the answer to both questions is yes.

If an employer makes contributions, is the employer allowed to keep those contributions if the employee leaves the company?

No, that is an HRA plan. With HSA, once an employer makes a contribution to an employee's Health Savings Account, the money belongs to the employee. When the employee leaves, since the money is the employee's, it goes with the employee.

Where can I find a list that contains the specific items one may pay for through a HSA? e.g. over the counter drugs, orthodontia, lasik eye surgery, flu shots, etc.

An abbreviated list and the link to the IRS Document 502 can be found on this website. In the Menu section go to Medical Expense Guidelines. The list is long, and most things are approved expenses. However, some expenses may not count towards your health insurance deductible; it depends on your health plan.

If a small employer pays insurance premiums for an HSA plan through his business, what are the rules for his employees?

The employer must offer the same plan to their employees to meet the non-discrimination rules. If the employer does not fully fund the account, employees can elect varying amounts to which they contribute, and their contribution can be set up either as a pre-tax contribution or as an above the line deduction. If the HSA is set up through a salary reduction in a Section 125 plan, the contribution amounts will also vary.

Are the HSA maximum contribution limits inclusive of EMPLOYER contributions?

Yes. The approved deductible amounts can be review on this website by going to the main menu and selecting Allowable Contribution/Deductible Amounts.

Must a compliant HDHP plan be a fully-insured plan? Or can an employer self-insure (using stop-loss insurance) to create a compliant HDHP plan design?

Yes, self-insured plans do qualify if the plan design is compliant. You can do as you suggest by creating health insurance plan design below your stop loss level.

Our company is interested in setting up an HSA. The company will credit each participant with $1800 per year. This amount will be made available at the beginning of the year so if a participant has an expense in March, for example, he or she can use the full $1800. Every month, since the beginning of the year, the company deducts $150 and "pays down" a portion of the employer contribution. Our concern is regarding exiting employees. What would happen if a participant incurred a significant medical expense in March and used the full $1800? If that participant later leaves in May, can the company collect the amount that has not been deducted from the employee's pay?

Once the funds are deposited in the employee's account, the employee owns the money. Therefore, perhaps a better arrangement would be that the employer purchases a rider that many insurers selling HSA insurance plans offer, which will pay the employee the amount of the funds that would have been deposited into their account over the course of a year, whenever they need it -- should they hit their deductible before they build up that amount in their account. Typically, after three or four years of HSA participation, most employees will have the funds in their account to cover their deductible and the rider can be dropped.

Regarding discrimination requirements for HSAs; can an employer decide to fully fund one individual, or one group or class of individuals, and not another? Is there going to be discrimination testing required?

The rule is, essentially, that if an employer is going to contribute to a full-time employee's account, the same amount must be offered to every full-time employee.

For a PPO plan (a "network plan"), does it matter if out of network expenditures apply to in network deductible and max out of pocket?

Yes, but keep in mind that out-of-network benefits are typically less than in-network benefits. Therefore, the relative percentage would be calculated and credited towards your maximum out of pocket deductible. However, when paying for qualified expenses through the HSA portion of your plan, incurred expenses can be paid from the first dollar of expense regardless if you are in or out of network. The only time the out of network difference comes in to play is if and when you exceed your annual deductible and start using benefits from the insured medical portion of your plan.

If an employee begins depositing money into their HSA account and then incurs a claim that exceeds the amount they have deposited into the account, I understand there are two remedies. Distribute funds from the account to pay as much of the bill as possible and pay the balance with after tax funds, Or, deposit enough funds to pay- up the balance of the annual contribution for that year (or enough to cover the bill) and then once the deposit is made into the HSA account, pay the entire bill (assuming the max contribution is enough to cover the bill) tax free. Is this correct?

Yes, and here is another option. Some insurers who sell HSAs offer a rider that allows those just starting out with an HSA to access the full amount of a year's contribution to the HSA should they need it. The employee or the individual then pays back the amount to the insurer on a month by month basis. Once the employee's or the individual's HSA balance exceeds their deductible, or once they feel they have enough funds in their account, they can elect to drop the rider.

Each quarter an employer is required to file a 941 tax report. How does he treat the HSA contributions?

An employer would treat the HSA contributions as any other pre-tax business expense. For example, the same way the employer treats the contribution to the health insurance plan.

Our company just installed an HSA plan for the employees. Could they use money from their HSA account to join Weight Watchers?

Yes.

Can a HSA funds be used for lasik surgery to eliminate eye glasses?

Yes

Can an employer offer two qualified HSA plan designs to their employees?

Yes, even more, if you like.

How can large self-funded companies meet the high deductible definition?

You can have a self insured health plan with a qualified high deductible for the employee that will satisfy the law, below the overall amount the company is insured for. The company can then use a potion of the saved medical premium and contribute to each employees’ HSA account.

How are expenses verified to be qualified medical expenses? Are receipts required to be sent to insurance carriers? Are there audits? If I have a debit card linked to HSA funds, where does the burden of proof lay in the event of an audit, with the individual or with the third party debit card provider?

The owner of the HSA account is responsible and accountable to the IRS, in the event of an audit. The insured, once their deductible is reached will provide the expenses to the insurer. The burden of proof lies with the owner of the HSA and not with the entity providing the debit card.

Can a small group employer pay the full HDHP group premium and also contribute to the employee's HSAs? If so, what are the IRS reporting requirements?

Yes you can, and the reporting requirements are the same as any other pre-tax business expense; for example, the employer contribution you already make to your employee health insurance plan. It’s fully tax deductible.

As a small business with 15 employees on our health insurance, we are having a difficult time paying these outrageous premiums. Is HSA a solution for a company like ours? If so, how do we go about getting an insurance provider to give us the information?

Yes, an HSA medical plan may be the perfect solution for you and your employees.

Go to the Contact Us section of this website and request an HSA Medical Plan specialist contact you. They are ready to help by answering your questions and can point you in the right direction.

1. Is the employer subject to any liability (tax or otherwise) if the employee misuses the HSA?
2. What are the reasons most employers may decide to not offer HSAs?

1. No, the burden remains with each employee to manage their HSA.
2. Some employers may believe that they are not ready to empower their employees to self-manage their health care responsibilities. Consider this, people treat their own money a whole lot differently than they treat a third party's money. It is like the difference in going out for dinner on an expense account, vs. going out to dinner when you are paying yourself. Your menu choices would probably be different. Employers at all levels must come to understand this is a much more cost effective approach to health care, one that can save them enormous amounts of money over time.

If an employer allows employees to fund their HSAs through pre tax salary reduction, the contributions are not deductible to the employee and there would be normal withholding tax on the employees but the employer would still benefit from the savings in withholdings (payroll taxes) because the employees' salary is reduced. Correct?

If an employer allows employees to fund their HSAs through pre-tax salary reduction, the contributions would not be deductible to the employee. In addition, the employee with a pre-tax employer contribution could take a tax deduction either. It would be treated by the employer and the employee the same as any other type of pre-tax health insurance benefit.

We are under the impression that our plan is not a qualified HSA plan because there is a requirement that the Rx Co-pays have to track toward the member out of pocket. Is this correct?

For both family and single health insurance plans:

If your plan provides co-pays prior to reaching the deductible then you do not have an HSA qualified plan, unless the co-pay is for prescription drugs. In that case, your health insurance will qualify for an HSA until 1/1/2006 because the U.S. Treasury has issued special transition rules for such plans. However, if you pay co-pays for prescription drugs, or are otherwise insured below your deductible for prescription drugs, the drug coverage you have must be a separate plan or a rider to your plan. You can go to the U.S. Treasury website and read the media release about this transition rule, or the actual HSA transition rule issued by Treasury.

If an employer contributes to individual employees HSA account, does the employer have to contribute the same amount to every employees HSA?

Yes, an employer must make the same contribution offer to all full-time employees.

If an employer only offers health insurance to a specific class of employee, such as management, can he then contribute 100% of the employees' deductible to the employees' HSA, even though he is not contributing at all to his other full time employees?

No, that will not work. All full time employees must be offered the same benefit.

When an eligible employee has an HSA account with dependents, can the dependents continue to contribute to the account once the employee turns age 65?

No, not at this time. Not because the dependents can not contribute, they can, but as of now, if you are 65 or older you can not participate in an HSA. Medicare Savings Accounts should be available in the near future.

What is the difference between an HRS, HSA, and MSA?

Go to the Comparing Plans section of this website for further information.

Can an S Corp take a tax deduction for HSA contributions to partners?

The contributions to an HSA are tax free to the partners (owners) of an S Corp through an above the line deduction.