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CCH® PENSION AND BENEFITS — 5/02/08

IRS releases final regulations on HSA comparability rules

The IRS has issued final regulations on how employers can comply with the comparable contribution requirements for Health Savings Accounts (HSAs) where an employee has not established an HSA by December 31st or an employee has not notified the employer that he or she has established an HSA. The regulations also address the acceleration of employer contributions for the calendar year for employees who have incurred qualified medical expenses exceeding the employer’s cumulative HSA contributions at that time. The final regulations adopt the provisions of the proposed regulations without substantive revision.

Employee has not established HSA by December 31

The final 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.

The final regulations also address the acceleration of employer contributions to employees’ HSAs. 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.

The regulations affect employers that contribute to employees’ HSAs. The regulations are effective on April 17, 2008, and apply to employer contributions made for calendar years beginning on or after January 1, 2009. However, employers may rely on this guidance beginning on or after April 17, 2008.