Employee Benefits Corporation | Advanced HSA Concepts Webinar
Webinar Title Q&A – the following questions were asked during the two
Advanced HSA Concepts webinar sessions in June 2016
Q: Employee elects HDHP and then enrolled automatically into the HSA. The Bank runs an identity
check and several employees have failed. They have the option to correct that by providing additional
documentation to the Bank but so far have not complied. EE had deductions as well as the employer
contributions to a pending bucket. Can the employer pull back the money for the contribution?
A: If the employee does not have a valid HSA bank account, the employer is not obligated to make
employer contributions to the HSA. If the employer has withheld employee contributions and there is no
valid HSA account, after a period of time the employer should return the dollars as taxable income to
the employee if they originally withheld pre-tax.
Q: Can an employer offer a regular Health FSA to those employees who do not wish to contribute to
an HSA and/or opt for another deductible tier?
A: Yes, the employer can have a regular Health FSA for employees that do not want to be HSA eligible or
who are not enrolled in a HDHP.
Q: How much do you charge to administer HSA's?
A: I have relayed your question to our sales team and they will provide you with a proposal.
Q: Can you please clarify the situation of the employee being ineligible for HSA if spouse has FSA with
their plan. Is this only if either spouse is on the other's plan? Could the employee with the HDHP plan
have the HSA as long as he isn't covered on his spouses?
A: Generally, there is no single Health Care FSA. So if your spouse is enrolled in a regular Health Care
FSA through his/her employer, that plan is generally going to cover expenses for the employee, spouse
and children up to the age of 26, whether the dollars are used for family members expenses or not. The
mere fact that you could potentially get reimbursed for medical expenses attributed to other family
members, would disqualify the HSA tax deduction for any employee or employer contributions.
Q: Is an employee's spouse has a HDHP and the employee is not covered under that plan. Is the
employee HSA eligible if enrolled for single coverage under his/her employer's plan?
A: If the employee has a single plan and his/her spouse has their own HDHP plan that they are not
covered under, the spouse would be HSA eligible assuming there is no other disqualifying coverage.
The material provided in this Q&A is by Employee Benefits Corporation and is for general information purposes only. The information does not
constitute legal advice and may not be relied upon by anyone as such.
© 2016 Employee Benefits Corporation
Employee Benefits Corporation | Advanced HSA Concepts Webinar
Q: What is the difference in Slide 17 vs. Slide 18 regarding an employer match? Is it allowed or would
it be deemed discriminatory?
A: Employer matching contributions are ok as long as it is done within the cafeteria plan and otherwise
does not cause a failure in the Section 125 plan nondiscrimination testing. If an employer attempts to
make matching contributions outside of the cafeteria plan they would likely fail the HSA comparability
rules and would be subject to the excise tax.
Q: Can an employee enroll in Medicare, then put Medicare on hold and then enroll in a HDHP?
A: You can be enrolled in the HDHP while you are on Medicare, however you would not be permitted to
contribute to the HSA. I am not aware of a way to disenroll in Medicare once you have enrolled.
Q: If your POP allows for HSA pre-tax contributions and the employer makes an HSA contribution each
year, what is the employer obligation if an eligible employee does not set up an HSA account?
A: If the employee does not set up the HSA bank account, there is no obligation by the employer to
make HSA contributions. It would also be best practice to include that condition in any HSA enrollment
materials.
Q: If someone goes on COBRA with an HSA plan how do we give them their employer HSA
contribution?
A: The HSA is not subject to COBRA and you are no longer required to make contributions to the HSA.
Q: Our slide 13 seems to contradict an earlier EBC webinar "HSA Basics", slide 22, which state "Annual
maximum contribution is the sum of the monthly contribution limits (annual/12) for the months the
individual was eligible to make contributions (IRS Publication 969)". Can you clarify?
A: Using single limits as an example, they can either contribute 1/12 the annual maximum for each
month they have HDHP coverage, which for 2016 is 1/12 of $3,350 = $279.17/month for example. Or,
they could contribute the full annual amount for single ($3,350) using the full contribution rule; but,
they would then have to remain HSA eligible all of the next calendar year or pay taxes on the excess
11/12ths contributed plus a 10% excise tax for failing the rule.
If you have HDHP coverage on 12/1 of the tax year, you are allowed to contribute the full annual
contribution for the tax year ($3,350 Single or $6,750 Family-2016/2017), as long as they remain
covered under the HDHP for the next tax year. If the individual does not remain covered for the entire
next tax year, the maximum they are allowed for the prior tax year is 1/12 of the annual contribution for
each month that they had HDHP coverage in that tax year. So if you are not certain what coverage you
will have in a future year, you may want to use the prorating method to err on the conservative side to
The material provided in this Q&A is by Employee Benefits Corporation and is for general information purposes only. The information does not
constitute legal advice and may not be relied upon by anyone as such.
© 2016 Employee Benefits Corporation
Employee Benefits Corporation | Advanced HSA Concepts Webinar
avoid any income tax penalties and tax form amendments. So in a nutshell there are 2 reasons when
prorating would apply: 1) if you took the full annual contribution in one year and the following year did
not maintain HDHP for the next 12 months; 2) if the employee has been covered in the HDHP for the full
prior year and in the current year, they terminate the HDHP coverage or become entitled to Medicare
(enrolled) before the end of the year, he/she is only eligible for 1/12 of the annual contribution and the
catch up contribution for each month they had HDHP in that final year.
Q: If an employer has an FSA with a grace period and will be changing to an HSA at year end and
wants to keep the grace period, can the employer contribute to employees' HSAs who still have an
FSA balance at year end?
A: The employee is not eligible to make or receive HSA contribution if they have disqualifying coverage.
If the employee has a balance in the regular Health Care FSA on the last day of the plan year they will
trigger the 2 ½ month grace period, which will delay their HSA eligibility to the first day of the month
following the end of the grace period. This would be true even if the employee had incurred all of their
expenses in the prior year and just had not gotten around to filing their paperwork. Once the grace
period is triggered, HSA eligibility is delayed until after the first of the month following the grace period.
Q: With any of the ER contrib. HSA/FSA/HRA options into which the ER is funding dollars for the EE,
what sort of ACA-reporting or MVP calculation problems will arise?
A: All amounts contributed by an employer for the current plan year to an HSA offered in connection
with an eligible employer-sponsored plan could be taken into account in determining the plan’s share of
costs for purposes of minimum value and are treated as amounts available for first dollar coverage.
Amounts newly made available for the current plan year under an HRA that is integrated with an eligible
employer-sponsored plan would count for that year toward the plan's minimum value if the amounts
could only be used to reduce cost-sharing for covered medical expenses.
To count the flex credit in the cafeteria plan for affordability purposes, three conditions must be met:
1. The employee does not have the option to take the flex credit as a taxable benefit (i.e. cash);
2. The flex credit may be used to purchase MEC; and
3. The flex credit may only be used to pay for benefits providing medical care under Internal
Revenue Code §213.
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Prior to this guidance, assumption was that the entire flex credit could be counted as an
employer contribution for affordability purposes.
Now, employers may need to designate a portion of the total flex credit amount that may
only be spent on benefits providing medical care (i.e. medical, dental, vision and health
FSA) to be able to count the flex credit in the affordability calculation.
The material provided in this Q&A is by Employee Benefits Corporation and is for general information purposes only. The information does not
constitute legal advice and may not be relied upon by anyone as such.
© 2016 Employee Benefits Corporation
Employee Benefits Corporation | Advanced HSA Concepts Webinar
Q: In an existing group HSA administered by another HSA TPA has been taking pre-tax deductions all
year when the group's health plan was not an HDHP, how you advise those ineligible contributions be
handled?
A: They should contact a tax accountant. If the employees and/or employer have been contributing to
the HSA when they were not eligible, they should discontinue the practice as soon as possible. If the
employee was never HSA eligible, the employer may be able to get their contributions back; however
the employee would need to work with the HSA custodian to remove their own excess contributions.
Q: What are some creative HSA contributions strategies using a S125 plan? What tiers are
permissible?
A: Typically we would see an employer make varied contributions relative to the type of insurance
coverage someone is enrolled in Single, Ltd Family, Family for example. The employer could also do
matching contributions to provide incentive to employees to also make contributions.
Q: RE Page 44: Would you be converting everyone? Even those who do not have an HSA?
A: If the employer is going to amend the plan to convert to Limited-Purpose or Post HSA Deductible,
they would need to do this at the plan level, not at the participant level. All participants would have the
grace period converted in this work around described on slide 44.
Q: For HSA Eligibility when the employee turns 65 and is automatically enrolled in Part A; how does
the employee stop the automatic enrollment into Part A?
A: I would recommend contacting the Social Security Office or referring to Medicare’s website
https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-how-to-sign-up-for-part-aand-part-b.html to determine if you can postpone Medicare Part A.
Q: If an employee starts taking social security at 62 are they automatically put on Medicare Part A
when they turn 65?
A: Yes
Q: I think they are so then they cannot have an H.S.A. even if they stay on our health insurance
correct?
A: Correct, once they are enrolled in Medicare, they cannot contribute to a HSA. They can however,
spend down a balance they may have accumulated prior to becoming enrolled in Medicare on medical
expenses tax free and for non-medical expenses as taxable withdrawals.
The material provided in this Q&A is by Employee Benefits Corporation and is for general information purposes only. The information does not
constitute legal advice and may not be relied upon by anyone as such.
© 2016 Employee Benefits Corporation