The IRS issued final regulations providing guidance on emplyer comparable contributions to Health Savings Accounts when an employee has not established an HSA by December 31st and when an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses.  The final regulations apply to employer contributions made for calendar years beginning on or after Jan 1, 2009. 

The final regulations provide that an employer does not fail to satisfy the comparability rules merely because it fails to make a contribution where an employee has not set up an HSA or when the employer does not know that the employee has set up an HSA, if it meets the following notice and contribution requirements:

     Notice:  The employer must provide notice to all eligible employees who have not established an HSA by Dec 31 and to those who may have established an HSA but have not informed the employer.  The notice must be provided by Jan 15 of the following year and must inform employees that the employer will make comparable contributions for the prior year for eligible employees who, by the last day of Feb, both establish an HSA and notify the employer that they have established an HSA.  The regulations provide a model notice that employers may use and state that the notice may be provided electronically. 

     Contribution:  With regard to each eligible employee who establishes an HSA and so notifies the employer on or before the last day of Feb, the employer must contribute to the HSA comparable amounts for the prior year -- taking into consideration each month that the employee was a comparable participating employee -- and reasonable interest.  The contribution must be made by Apr 15. 

The regulations permit an employer to accelerate all or part of its contributions to the HSAs of employees who have incurred qualified medical expenses exceeding the employer's cumulative HSA contributions at that time.  If an employer accelerates contributions to the HSA of any eligible employee, it must make accelerated contributions available throughout the calendar year on an equal and uniform basis to all such eligible employees.  Employers must establish reasonable, uniform methods and requirements for accelerated contributions and the determination of medical expenses. 

The IRS will not consider that an employer has violated the comparability rule because an employee who has received an accelerated contribution for qualifying medical expenses has received, for a given period of time, HSA contribution that exceed those received by comparable employees who have not incurred such expenses, so long as all comparable employees ultimately receive HSA contributions in the same amount or same percentage for the calendar year.  An employer is not required to pay interest on accelerated contributions.

Susan Fahey Desmond