Is your employee really HSA-eligible? Enrolling in a high-deductible health plan (HDHP) is only part of the equation. An employee can have HDHP coverage and still not qualify to contribute to a Health Savings Account (HSA). So, does that mean employers are responsible for verifying eligibility before making HSA contributions?
The short answer is no.
What Employers Are Responsible For
Before making HSA contributions, employers generally only need to determine:
- Whether the employee is enrolled in the employer's HDHP (and not another employer-sponsored non-HDHP, such as a general-purpose health FSA or HRA).
- The employee's age to determine eligibility for age 55 catch-up contributions. Employers may rely on an employee's representation of their date of birth.
What Employees Must Determine
The employee is primarily responsible for confirming they meet all HSA eligibility requirements. For example, they must:
- Not have disqualifying health coverage from other employers or obtained independently
- Not be enrolled in Medicare
- Not be eligible to be claimed as another person's tax dependent
Because these factors often involve personal circumstances outside the employer's knowledge, employers generally are not expected to verify them.
A Best Practice Worth Considering
Although verification is not required, employers should have a reasonable belief that their HSA contributions are tax-free. Making contributions for an ineligible employee could create payroll tax consequences.
To help avoid mistakes, many employers:
- Provide educational resources explaining HSA eligibility
- Ask employees to certify that they meet the eligibility requirements before employer contributions are made
The Bottom Line
Employers don't have to police HSA eligibility, but they do play an important role in educating employees. Clear communication and a simple certification process can help employees make informed decisions while reducing the risk of unintended tax and administrative issues.
Resource: Thomson Reuters
