8831 / What are the contribution rules for employers who establish HSAs for employees when an employee has not established an HSA at the time the employer makes contributions or is not eligible to participate for the entire year?

If there are employees who have not established an HSA at the time the employer makes contributions, the employer must provide each such eligible employee a written notice containing certain information no later than January 15. The notice must explain that if the employee, by the last day of February, (a) establishes an HSA and (b) notifies the employer that he or she has done so, the employee will receive a comparable contribution to that HSA for the prior calendar year. This notice may be delivered electronically.

The employer must then make comparable contributions by April 15, taking into account each month that the employee was a comparable participating employee, for each eligible employee that notifies an employer that he or she has established an HSA. These retroactive comparable contributions must also include reasonable interest.¹

There is a maximum contribution permitted for all employees who are eligible individuals during the last month of the taxable year. An employer may contribute up to the maximum annual contribution amount for the calendar year based on the employees' HDHP coverage to HSAs of all employees who are eligible individuals on the first day of the last month of the employees' taxable year. This rule also applies to employees who worked for the employer for less than the entire calendar year and employees who became eligible individuals after January 1 of the calendar year. For example, contributions may be made on behalf of an eligible individual who is hired after January 1 or an employee who becomes an eligible individual after January 1.²

Employers are only required to provide a pro rata contribution based on the number of months that an individual was an eligible individual and employed by the employer during the year. If an employer contributes more than a pro rata amount for a calendar year to an HSA of any eligible individual who is hired after January 1 of the calendar year, or any employee who becomes an eligible individual any time after January 1 of the calendar year, the employer must contribute that same amount on an equal and uniform basis to HSAs of all comparable participating employees who are hired or become eligible individuals after January 1 of the calendar year.³

Similarly, if an employer contributes the maximum annual contribution amount for the calendar year to an HSA of any eligible individual who is hired after January 1 of the calendar year or any employee who becomes an eligible individual any time after January 1 of the calendar year, the employer also must contribute the maximum annual contribution amount on an equal and uniform basis to HSAs of all comparable participating employees who are hired or become eligible individuals after January 1 of the calendar year.⁴

An employer who makes the maximum calendar year contribution or more than a pro rata contribution to HSAs of employees who become eligible individuals after the first day of the calendar year or to eligible individuals who are hired after the first day of the calendar year does not fail to satisfy comparability merely because some employees will have received more contributions on a monthly basis than employees who worked the entire calendar year.⁵