ComplianceTax & AccountingJuly 14, 2019

Health savings accounts: Employer contributions to HSA owned by employee’s spouse

Overview

An individual is responsible for determining his/her health savings account (HSA) regular contribution eligibility and determining his/her allowable annual contribution amount. In addition to an eligible individual’s ability to contribute to his/her HSA, any other person, including an eligible individual’s employer, can contribute to an HSA on behalf of such individual. However, aggregate contributions from all sources cannot exceed an HSA owner’s annual regular contribution limit.

Employer contributions to HSA owned by employee’s spouse

Can an employer make contributions to an HSA of an employee’s spouse who is not an employee of the employer? Per Internal Revenue Service (IRS) Notice 2008-59, Q&A 26, this is permitted; however, any employer contribution (including salary deferrals) made to a non-employee’s HSA, even if through the employer’s cafeteria plan, must be included in the gross income and wages of the employee. Such contributions are usually applied as a deduction on the employee’s and his/her spouse’s joint federal income tax return. It is important to note that some employers may not permit contributions to a non-employee’s HSA based on policy or the terms of the cafeteria plan.

Conclusion

The employer contributions described above may show up on a custodian/trustee’s data system as ACH transactions and are permissible “regular contributions” assuming they do not result in an excess contribution for an HSA owner. The determination of any tax benefit for this type of contribution needs to be discussed by the HSA owner and his/her tax preparer, as this is not the responsibility of an HSA custodian or trustee to monitor.

Randy Heidmann
Senior Specialized Consultant, Tax Advantaged Accounts, Compliance Center of Excellence
With more than 40 years of industry experience, Randy Heidmann has helped hundreds of financial organizations create, implement and maintain their tax-advantaged accounts programs.