Question

Our company is thinking about adding a high-deductible health plan (HDHP) that would include a health savings account (HSA) option.  Must we verify each employer's HSA eligibility before we make contributions to their accounts?

Answer

An employer is not required to verify an employee’s HSA eligibility before contributing to the employee’s HSA.

The employer is only responsible for determining the following with respect to each employee:

• whether the employee is covered under an HDHP or a non-HDHP (e.g., a general-purpose health FSA or HRA) sponsored by that employer; and
• the employee’s age, for determining whether the employee is eligible for age 55 catch-up contributions (the employer may rely on employees’ representations as to their dates of birth)

An IRS official has informally commented that the burden of determining HSA eligibility falls almost entirely on the employee and that the employer generally will not be liable if it turns out the employee is ineligible for an HSA. When employers contribute to their employees’ HSAs, however, they must have a reasonable belief that the contributions will be excludable from the employees’ income. Without this reasonable belief, the contribution will be subject to federal employment taxes (e.g., income tax withholding and FICA).

It is important that the employer provide educational materials or interactive tools to help employees determine whether they are eligible for an HSA. Employees who are enrolled in the HDHP would be eligible for HSA contributions if they have no disqualifying coverage (e.g., from another employer or obtained independently), are not entitled to (i.e., eligible for and enrolled in) Medicare benefits, and cannot be claimed as another individual’s tax dependent.

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