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Employer HSA Contributions

edited September 2009 in Human Resources
Our company offers an HSA plan and at the beginning of every year the employer funds 100% of their contribution to the employees' accounts. If an employee terminates sometime during the plan year, can the employer recoup any portion their contribution? In other words, on January 2, 2009, the employer contributes $1,000 to an employees HSA account and say that employee terminates July 2, 2009, can the employer deduct $500 from the employees' final paycheck?

Comments

  • I highly doubt it. If you don't want them to have all of the money, then you should fund the HSAs on a monthly basis or something else, instead of all at once.
  • Agree with Mindy. It is my understanding that once it goes into the employee's account it is their money and can not be forfeited.

    You might review your plan design to have it deposited less frequently than annual if this is a large enough issue to change.
  • That is what I thought but wanted to make sure. My employer is now having the terminated employee sign an deduction authorization agreement giving them permission to make the deduction from their final pay. I do not agree with this but I am not sure I can do anything about it.
  • Did a little more research for you and directly from the Dept of the Treasury (/home/leaving?target=http%3A%2F%2Fwww.ustreas.gov%2Foffices%2Fpublic-a" class="Popup ... tion.shtml):
    As an employer, do I own my employees’ HSAs? Can I control how they spend the money in them?
    No, you do not own your employees’ HSAs. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation.
    My employees want to contribute to their HSAs but want to make sure they get a tax benefit out of doing so. How does that work?
    Employee contributions can be made to HSAs on either after-tax or pre-tax basis. If made on an after-tax basis they should be counted as an above-the-line deduction on their tax return, effectively making their contributions tax-free. If they want to make the contribution pre-tax it can be done through a Section 125 (also called a “salary reduction” or “cafeteria plan”).

    How much do I have to contribute to my employees’ HSA, as an employer?
    As much or as little as you want (while staying below the annual statutory limit on contributions to the account of $2,900 for employees with self-only HDHP coverage or $5,800 for employees with family HDHP coverage in 2008).

    Do HSA contributions have to be made in equal amounts each month?
    No, you can contribute in a lump sum or in any amounts or frequency you wish. However, keep in mind that the funds belong to the employee after they are deposited.
  • nnovotny wrote:
    That is what I thought but wanted to make sure. My employer is now having the terminated employee sign an deduction authorization agreement giving them permission to make the deduction from their final pay. I do not agree with this but I am not sure I can do anything about it.

    I would make it known to upper management that this is unequivocally not allowed before they actually try it on an employees last check. I would do it in writing, print the email, and take it home so you have proof that you tried your best. Unless they have their heads so far up their a** that they can't see anything else, they will stop it because it's not worth the hassle over a few hundred bucks. An attorney would eat them alive if an employee knew their rights and had their funds taken.

    Have you suggested quarterly or semi-annual deposits instead of all at once?
  • Thank you for taking the time to do the research, this is exactly what I was looking for. I did try to do some research before I posted the question and everything I found said the employer cannot recoup the funds from the account but said nothing about recouping it from the employee. This is how my employer is justifiying this practice.
    They have already taken the funds from several employees and I have been protesting it since they started this practice. I have suggested they make the contributions quarterly or even monthly but they insist on making them annually. I will forward this information to upper management and see what happens.

    Thanks again for all your help!
  • I hope you can get them to change their minds. Whether the deduction is directly from their HSA, from their final wages, or if they repay by personal check is irrelevant. It's plain-as-day not allowed. Your employer is potentially looking at a very expensive lawsuit(s) if they continue this practice and probably regulatory fines on top of that.

    Edit: This type of blatant disregard for the regs really gets my blood boiling. If you want to offer an HSA to your employees, play by the rules. If you don't, then don't offer the benefit. An employer does not have the right to pick-and-choose which rules they like and which they don't.
  • vacpp wrote:
    Edit: This type of blatant disregard for the regs really gets my blood boiling. If you want to offer an HSA to your employees, play by the rules. If you don't, then don't offer the benefit. An employer does not have the right to pick-and-choose which rules they like and which they don't.

    Tell us how you really feel. :lol:
  • OTOH, I have had bosses who felt that because they were the boss, that whatever they said WAS the rules. They could pass a lie detector test on this point. Of course, they could also say that they were King Arthur and pass a lie detector test on that or any other question.

    Anyone notice how psychopathic personnalities tend to rise to the top of the business and political worlds?

    The Boss's rule
    1. The boss is always right.
    2. If payroll people actuall knew anything of importance, then they would be the boss.
    3. Since payroll is not the boss, by definition, they know nothing of importance.
    4. The boss is always right.
  • ARGH! Unfortunately I am experiencing "the boss is always right" this morning... or should I say "that's the way the industry does it?" Can you tell I am a wee bit frustrated?!!! ARGH!
  • I have HSA contributions deducted from my paycheck on a weekly basis. How often is my employer required to deposit the funds into my bank account?

  • I am not a HSA person so this is a guess. No way it is longer then end of month, plus 10 days. Could be end of pay period plus 10 days. Could vary depending on the size of deposits . Those are more or less the 401(k) rules and HSA sort is like 401(k). Employer playing with someone else's money.

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