Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans

Spouse is not the designated beneficiary. If your

The comparability rules do not apply to contributions made

spouse is not the designated beneficiary of your HSA:

through a cafeteria plan.

•

The account stops being an HSA, and

Comparable participating employees. Comparable

participating employees:

•

The fair market value of the HSA becomes taxable

•

to the beneficiary in the year in which you die.

Are covered by your HDHP and are eligible to estab-

lish an HSA,

If your estate is the beneficiary, the value is included on

•

your final income tax return.

Have the same category of coverage (either

self-only or family coverage), and

The amount taxable to a beneficiary other than

•

Have the same category of employment (part-time,

the estate is reduced by any qualified medical

TIP

full-time, or former employees).

expenses for the decedent that are paid by the

beneficiary within 1 year after the date of death.

To meet the comparability requirements for eligible em-

ployees who have not established an HSA by December

Filing Form 8889

31 or have not notified you that they have an HSA, you

must meet a notice requirement and a contribution require-

You must file Form 8889 with your Form 1040 or Form

ment.

1040NR if you (or your spouse, if married filing a joint

You will meet the notice requirement if by January 15 of

return) had any activity in your HSA during the year. You

the following calendar year you provide a written notice to

must file the form even if only your employer or your

all such employees. The notice must state that each eligi-

spouse’s employer made contributions to the HSA.

ble employee who, by the last day of February, establishes

If, during the tax year, you are the beneficiary of two or

an HSA and notifies you that they have established an

more HSAs or you are a beneficiary of an HSA and you

HSA will receive a comparable contribution to the HSA for

have your own HSA, you must complete a separate Form

the prior year. For a sample of the notice, see Regulation

8889 for each HSA. Enter “statement” at the top of each

54.498G-4 A-14(c). You will meet the contribution require-

Form 8889 and complete the form as instructed. Next,

ment for these employees if by April 18, 2011, you contrib-

complete a controlling Form 8889 combining the amounts

ute comparable amounts plus reasonable interest to the

shown on each of the statement Forms 8889. Attach the

employee’s HSA for the prior year.

statements to your tax return after the controlling Form

8889.

Note. For purposes of making contributions to HSAs of

non-highly compensated employees, highly compensated

Employer Participation

employees shall not be treated as comparable participat-

ing employees.

This section contains the rules that employers must follow

if they decide to make HSAs available to their employees.

Excise tax. If you made contributions to your employees’

Unlike the previous discussions, “you” refers to the em-

HSAs that were not comparable, you must pay an excise

ployer and not to the employee.

tax of 35% of the amount you contributed.

Health plan. If you want your employees to be able to

Employment taxes. Amounts you contribute to your em-

have an HSA, they must have an HDHP. You can provide

ployees’ HSAs are generally not subject to employment

no additional coverage other than those exceptions listed

taxes. You must report the contributions in box 12 of the

previously under

Other health coverage.

Form W-2 you file for each employee. This includes the

amounts the employee elected to contribute through a

Contributions. You can make contributions to your em-

cafeteria plan. Enter code “W” in box 12.

ployees’ HSAs. You deduct the contributions on the “Em-

ployee benefit programs” line of your business income tax

return for the year in which you make the contributions. If

Medical Savings Accounts

the contribution is allocated to the prior year, you still

deduct it in the year in which you made the contribution. If

(MSAs)

you are filing Form 1040, Schedule C, this is Part II, line 14.

For more information on employer contributions, see

Archer MSAs were created to help self-employed individu-

Notice 2008-59, 2008-29 I.R.B. 123, questions 23 through

als and employees of certain small employers meet the

27, available at

medical care costs of the account holder, the account

holder’s spouse, or the account holder’s dependent(s).

Comparable contributions. If you decide to make contri-

butions, you must make comparable contributions to all

After December 31, 2007, you cannot be treated

comparable participating employees’ HSAs. Your contri-

as an eligible individual for Archer MSA purposes

butions are comparable if they are either:

unless:

CAUTION

•

The same amount, or

•

The same percentage of the annual deductible limit

1. You were an active participant for any tax year end-

under the HDHP covering the employees.

ing before January 1, 2008, or

Page 10

Publication 969 (2010)

Publication 969 - Health Savings Accounts And Other Tax-Favored Health Plans - 2010 Page 10

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