Reminder: Employees Are Largely Responsible for Ensuring HSA Eligibility

Many clients may assume that their employers are determining whether they are eligible to fund health savings accounts (HSAs). In reality, that burden falls largely upon the employee. Employers are not responsible for verifying an employee's eligibility before they can contribute to the HSA. Employers must verify only two key elements: (1) whether the employee is covered by an high deductible health plan (HDHP) or a non-HDHP (such as an HRA or general purpose FSA) that the employer sponsors and (2) the employee's age, to determine whether they are eligible for additional age 55+ catch-up contributions. When employers themselves contribute to employee HSAs, they must have a reasonable belief that the contributions are excludable from the employee's income. Absent that belief, the amounts will be subject to FICA and income tax withholding obligations. Employees are eligible to contribute if they are enrolled in an HDHP, have no disqualifying coverage (including Medicare) and cannot be claimed as a dependent on someone else's tax return. While employers can require employees to verify these facts, they are not required to do so. For more information on the rules governing HSA eligibility, visit Tax Facts Online. Read More: Link to Q393. Note: Q is updated.