Health Savings Account Blog

Employers may rely on these regulations for guidance pending the issuance of final regulations. Alternatively, until the publication of final regulations, employers may continue to rely on the last sentence of Q&A-6(a) of Proposed Reg. §54.4980G-4, which provides that an employer is not required to make comparable contributions for a calendar year to an employee's HSA if the employee has not established an HSA by December 31st of the calendar year.

Employee has not established a Health Savings Account by December 31

The proposed regulations provide a means for employers to comply with the comparability requirements with respect to employees who have not established an HSA by December 31, as well as with respect to employees who may have established an HSA but not notified the employer of that fact. To comply with the comparability rules for a calendar year with respect to such employees, the employer must comply with a notice requirement and a contribution requirement.

Notice requirement

Pursuant to the proposed regulations, to comply with the notice requirement, an employer must provide written notice:

- to all such employees (as discussed above);
- by January 15 of the following calendar year;
- that each eligible employee who, by the last day of February, both establishes an HSA and notifies the employer that he or she has established the HSA, will receive a comparable contribution to the HSA.

The notice may be delivered electronically. In addition, the proposed regulations provide sample language that employers may use as a basis in preparing their own notices.

Contribution requirement

For each such eligible employee who establishes an HSA and so notifies the employer by the end of February, the employer must contribute to the HSA by April 15 comparable contributions (taking into account each month that the employee was a comparable participating employee) plus reasonable interest.

Acceleration of employer contributions

The proposed regulations also address the acceleration of employer contributions to employees' Health Savings Accounts. For any calendar year, an employer may accelerate part or all of its contributions for the entire year to the HSAs of employees who have incurred, during the calendar year, qualified medical expenses exceeding the employer's cumulative HSA contributions at that time. If an employer accelerates contributions for this reason, these contributions must be available on an equal and uniform basis to all eligible employees throughout the calendar year and employers must establish reasonable uniform methods and requirements for acceleration of contributions and the determination of medical expenses. An employer is not required to contribute reasonable interest on either accelerated or non-accelerated HSA contributions.

The proposed regulations also provide that an employer that accelerates contributions to the Health Savings Accounts of its employees will not fail to satisfy the comparability rules because an employee who terminates employment prior to the end of the calendar year has received more contributions on a monthly basis than employees who work the entire calendar year.

Comments and public hearing

Written or electronic comments on these proposed regulations must be received by August 30, 2007. Send submissions to: CC: PA: LPD: PR (REG-143797-06), Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044.

A public hearing has been scheduled for September 27, 2007, beginning at 10 a.m. in the Auditorium, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. (72 FR 30501, June 1, 2007.)