HSA Payroll Deduction and FICA

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cheapsaver
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Joined: Sun Jan 01, 2012 2:57 pm

HSA Payroll Deduction and FICA

Post by cheapsaver » Sun Jan 01, 2012 3:28 pm

If your employer allows you to make the maximum HSA contribution at the beginning of the year over 1-2 checks and you lose your HDHP coverage (from a job loss, life event, etc) later in the year, what are the ramifications? Is this considered an excess contribution where the employer would be responsible for returning the money? I wouldn't imagine so, since the employer wouldn't know if you got other HDHP coverage.

From what I understand, you can withdraw the excess contribution over the prorated amount you are allowed to contribute before the filing deadline without penalty. However, what about the savings on the FICA through the payroll deduction on the excess amount?

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wlpotts
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Re: HSA Payroll Deduction and FICA

Post by wlpotts » Mon Jan 02, 2012 12:17 am

If your employer allows you to make the maximum HSA contribution at the beginning of the year over 1-2 checks and you lose your HDHP coverage (from a job loss, life event, etc) later in the year, what are the ramifications? Is this considered an excess contribution where the employer would be responsible for returning the money?
I do not profess to know the laws applicable, but IMO, if you had elected to contribute to your HSA and you had exceeded the maximum qualified amount allowed, it is soley up to you report the excessive contribution. You might need to file a tax form to ammend your excessive qualified contribution.

In my experience, it is not the company that bears the responsibilty of an employee elective deferral if the product is not an ERISA qualifying product. The responsibilty falls upon the individual. That said, you can work with the Payroll department of your former employer and have them reverse the excessive contributions so that you may be able to imeliorate some future and potential issues.

I would go to the IRS site to determine the facts or seek a tax proffesional for guidance.

As to simply withdrawing your excessive contributions, you'd have to report the withdraw and also have to pay the FICA plus a penatly for a non-qualified distribution.

Respectfully,

WLPotts
Some have it. Some don't. Either way, here I am!

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