Employer denying HSA to eligible employee

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perl
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Employer denying HSA to eligible employee

Post by perl » Wed Feb 01, 2017 2:32 pm

My employer provides HSAs to employees with high deductible health insurance. The employer doesn't contribute funds, but does take contributions pre-tax and pays the fees for the Optum HSA ($2.50 per month and a lower cash requirement).

Recently the employer informed my partner that he will no longer be allowed to participate in the HSA, even though he is eligible. We are in an unusual situation: we both work for the same employer and are unmarried domestic partners. My partner and our kids are covered under a single HDHP through me. As a result, each of us can establish our own HSAs and contribute the family limit of $6750. (See for example http://money.stackexchange.com/question ... nder-hdhps). We have done this for the last few years.

As of last week my employer says my partner is no longer allowed to participate in the work HSA. I am aware that non-payroll contributions can still be made and deducted, but we will lose the benefit of decreased FICA and Medicare taxes and the employer-paid fees.

I plan to point out that my employer will lose money by doing this because of the higher payroll taxes they will have to pay. Beyond that, are there any HSA or cafeteria plan rules I can use to argue to my employer that this decision should be reversed? Any problems with allowing some eligible employees to have employer sponsored HSAs while others are excluded?

Dottie57
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Re: Employer denying HSA to eligible employee

Post by Dottie57 » Wed Feb 01, 2017 2:45 pm

Just a thought, but I think it might be 1 family health ins policy. =. 1 family HSA. It seems like you are double dipping. If your partner also pays for. Health insurance on a family policy, I bet he could do the family HSA.

perl
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Re: Employer denying HSA to eligible employee

Post by perl » Wed Feb 01, 2017 2:47 pm

Dottie57 wrote:Just a thought, but I think it might be 1 family health ins policy. =. 1 family HSA. It seems like you are double dipping. If your partner also pays for. Health insurance on a family policy, I bet he could do the family HSA.
What you wrote - 1 policy means 1 HSA - is an IRS requirement for married couples, but not unmarried. See the link I posted: it's not double dipping.

To be clear, my question is not "Is my employer correctly following IRS HSA rules?" They are not. My question is "Are there any good arguments I can make to persuade them to reverse their decision?"

jeremyi
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Re: Employer denying HSA to eligible employee

Post by jeremyi » Wed Feb 01, 2017 3:32 pm

Is your partner considered a "highly compensated employee" or what is their justification for not allowing him to make the cafeteria HSA contributions?

I know that "highly compensated employees" at my company, because of limited participation in the HDHP/HSA, are not eligible to make pre-tax HSA contributions through the cafeteria plan.

Nate79
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Re: Employer denying HSA to eligible employee

Post by Nate79 » Wed Feb 01, 2017 5:12 pm

Wow, I had never heard of these rules and the loophole for unmarried domestic partners. Quite interesting.

I don't think you mentioned in your OP but just to clarify you each have separate family health insurance plans correct? Each paying the full premium for self + children?

Also, I would think that from the employers prospective you are not married, should be on separate health insurance plans so how would they even know there is a red flag in their mind? Are they confused because you have the same children on each other's health insurance plan?

perl
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Re: Employer denying HSA to eligible employee

Post by perl » Wed Feb 01, 2017 5:18 pm

To answer the questions: jeremyi, partner is not highly compensated, he actually makes less than I do. They gave no justification, just that it wouldn't be allowed anymore.

Nate79, it's only one family health insurance plan, which (I believe) is the problem. My employer allows health insurance benefits for domestic partners (which we are). So I am primary on the plan and he is covered as part of my family, along with our children. However, my understanding of IRS rules (as I said in my links) is that we still can each have a family HSA.

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Re: Employer denying HSA to eligible employee

Post by BruDude » Wed Feb 01, 2017 5:34 pm

perl wrote:To answer the questions: jeremyi, partner is not highly compensated, he actually makes less than I do. They gave no justification, just that it wouldn't be allowed anymore.

Nate79, it's only one family health insurance plan, which (I believe) is the problem. My employer allows health insurance benefits for domestic partners (which we are). So I am primary on the plan and he is covered as part of my family, along with our children. However, my understanding of IRS rules (as I said in my links) is that we still can each have a family HSA.
I don't see how you can have two family HSA's under one single family plan. Can you provide an IRS source that allows this? I've never heard of it before.

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Re: Employer denying HSA to eligible employee

Post by Nate79 » Wed Feb 01, 2017 5:47 pm

perl wrote:To answer the questions: jeremyi, partner is not highly compensated, he actually makes less than I do. They gave no justification, just that it wouldn't be allowed anymore.

Nate79, it's only one family health insurance plan, which (I believe) is the problem. My employer allows health insurance benefits for domestic partners (which we are). So I am primary on the plan and he is covered as part of my family, along with our children. However, my understanding of IRS rules (as I said in my links) is that we still can each have a family HSA.
I think you are correct but I am no expert. I read the links you provided as saying exactly what you referenced. According to IRS documents publication 969 as long as you are not married you are not considered married for federal tax purpose.
https://www.irs.gov/publications/p969/a ... 1000255714
Federal tax benefits for same-sex married couples. For federal tax purposes, marriages of couples of the same sex are treated the same as marriages of couples of the opposite sex. The term "spouse" includes an individual married to a person of the same sex. However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that isn't considered a marriage under state law aren't considered married for federal tax purposes.
So, unless something has changed it looks like the articles you referenced are still correct.

Another reference and it is specifically mentioned in the myth section:
https://www.associatedbrc.com/Resource- ... mmon-myths
Myth: If both the employee and their domestic partner have family HDHP coverage, they must share the maximum family contribution between them, just like spouses.

Reality: The rule requiring spouses to divide the maximum family contribution applies only to individuals who are legally married, not domestic partners. An employee and domestic partner who are enrolled in an HDHP each have family coverage and, since they are not legally married, they can each contribute up to the family maximum into their respective HSAs. (Same-sex couples who are legally married under state law are spouses, not domestic partners; those couples must split the maximum family contribution the same as opposite sex spouses.)

jane1
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Re: Employer denying HSA to eligible employee

Post by jane1 » Wed Feb 01, 2017 6:06 pm

I would think that who can participate in cafeteria plans are employer policies. For instance, if I and my spouse (married) were covered under my spouse HDHP, his employer would allow him to contribute full HSA amount. However, if he wanted to contribute half and I wanted to contribute half (even though I worked for the same employer), they wouldn't. As far as they are concerned, the plan is under spouse's name and the HSA cafeteria plan can be under his. I can feel free to open another account outside of the payroll deductions and contribute my half if I wish.
Other employers may have different policies.
In your case it gets more complex, since they may not want to deal with the legality of the contribution limits and have to defend their actions for some unique cases.
The examples in this regarding HSAs for adult children on a parent's HDHP may help. They refer to domestic partner as well.
http://www.lasd.k12.pa.us/hr/documents/ ... ndHSAs.pdf

I also view this situation similar to the scenario - you were employed by employer A and had family HDHP. Spouse worked for employer B but didn't participate in employer B coverage. However employer B offers HDHP and HSA. Should you expect employer B to allow spouse to contribute to HSA via payroll deductions (if they show HDHP proof eligibility and combined contribution will stay within overall IRS limits)? Probably not. Most HSA payroll deductions are linked to the primary healthcare plan participant and not across all covered family members.

If I were you, I would let it go. Be glad they allowed past few years and that both of you can contribute family max.

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Re: Employer denying HSA to eligible employee

Post by Artsdoctor » Wed Feb 01, 2017 7:21 pm

perl wrote:To answer the questions: jeremyi, partner is not highly compensated, he actually makes less than I do. They gave no justification, just that it wouldn't be allowed anymore.

Nate79, it's only one family health insurance plan, which (I believe) is the problem. My employer allows health insurance benefits for domestic partners (which we are). So I am primary on the plan and he is covered as part of my family, along with our children. However, my understanding of IRS rules (as I said in my links) is that we still can each have a family HSA.
Interesting loophole.

However, what may be happening is this, and I believe this is the way the HSA rules apply to unmarried couples.

Partner A has a family plan; this plan is paid by the employer and/or the employee, and Partner A can contribute the family plan maximum into his account. Partner A and Partner B are both on the plan.

Partner B also has a family plan; someone's paying for this plan as well (either the employer and/or the employee). If the premiums are paid, then Partner B can also contribute the family plan maximum. Partner A and Partner B are both on the plan.

Married couples cannot do this, but unmarried can--provided there are two plans.

If you're saying that you are Partner A and the plan is in your name with your partner also being on the plan, fine; you get to contribute the family maximum to your HSA. But if your partner doesn't actually have a plan (meaning there's no plan number, no ID number, no member names, etc.), then he cannot possibly be permitted to contribute to an HSA plan. If there was only ever one single plan, and Partner B never even had a policy, that person should not have been contributing to a plan to begin with.

I could be wrong, and we have a couple of HSA experts on the forum. However, that would make the most sense to me. And the article you linked is too old to be applicable at this point because it predates national marriage equality. Domestic partnership laws have also changed since national marriage equality (depending on the state). But the link does open with "Suppose two unmarried individuals each have independent family coverage HDHPs that provide coverage for both individuals. Irrelevant, but for simplicity, assume this family coverage is free of charge (perhaps sponsored by their respective employers)."

But one last addendum. The attachment above by Jane is interesting. The parents contribute the maximum family amount to their HSA(s) while the adult child is able to contribute the maximum amount as well. So clearly, there are loopholes that do exist.

Addendum: After looking into this further, my thoughts above did not turn out to be correct. Each individual can contribute the family maximum to his individual HSA even if there is only one plan.
Last edited by Artsdoctor on Thu Feb 02, 2017 8:45 pm, edited 1 time in total.

Spirit Rider
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Re: Employer denying HSA to eligible employee

Post by Spirit Rider » Thu Feb 02, 2017 1:02 am

I'm no expert, but I pretty well know my way around the Internal Revenue Code, IRS regulations and guidance for HSAs. I have reason to believe the OP's employer is totally wrong on this issue. I lead the OP to the following road map in justification of my position. Which he might use to show his company the error of their ways, before contacting the DOL, if necessary.

From IRS 969, Page 3, Qualifying for an HSA, the OP's partner is clearly an eligible individual:

To be an eligible individual and qualify for an HSA, you must meet the following requirements.
  • You must be covered under a high deductible health plan (HDHP), described later, on the first day of the
    month.
  • You have no other health coverage except what is permitted under Other health coverage, later.
  • You are not enrolled in Medicare.
  • You cannot be claimed as a dependent on someone else's 2015 tax return.
From IRS Notice 2008-59, Q&A 26.

Note: This specific Q&A disallows the exclusion from an employee's income of contribution to the HSA account of a non-employee spouse or other individual. However, don't look at the No, look at the italicized sentence which is specifically on point for the legitimate contribution of the OP's partner who is both an eligible individual and an employee.

Q-26. Are employer contributions to the HSA of an employee’s spouse (who is not an employee of this employer) excluded from the employee’s gross income and wages?
A-26. No. The exclusion under § 106(d)(1) is limited to contributions by an employer to the HSA of an employee who is an eligible individual. Any contribution by an employer to the HSA of a non-employee (e.g., a spouse of an employee or any other individual), including salary reduction amounts made through a § 125 cafeteria plan, must be included in the gross income and wages of the employee.

For further reference here is the actual Internal Revenue Code section dealing with HSA employer contributions. Note: Employee contributions by payroll deduction are considered employer contributions.

26 U.S. Code § 106 - Contributions by employer to accident and health plans, (d) Contributions to health savings accounts, (1) In general

In the case of an employee who is an eligible individual (as defined in section 223(c)(1)), amounts contributed by such employee’s employer to any health savings account (as defined in section 223(d)) of such employee shall be treated as employer-provided coverage for medical expenses under an accident or health plan to the extent such amounts do not exceed the limitation under section 223(b) (determined without regard to this subsection) which is applicable to such employee for such taxable year.

In my opinion any failure to provide such employer-provided coverage would make the company non-compliant and their action discriminatory.

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Re: Employer denying HSA to eligible employee

Post by jane1 » Thu Feb 02, 2017 1:58 am

Wow. So Spirit Rider, can the regulations you posted also be interpreted in a similar way under this scenario -

Spouse 1 works for Employer A and enrolls family in HDHP but chooses not participate in Employer A HSA
Spouse 2 working for Employer B is therefore an eligible individual and hence can demand that Employer B enroll them in Employer B HSA (via payroll deduction)

Maybe the couple wants to do this since Spouse 2 earnings are less than SS tax limit but Spouse 1 earns more and will not benefit as much.

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Re: Employer denying HSA to eligible employee

Post by Spirit Rider » Thu Feb 02, 2017 2:32 am

Jane1, I believe the answer is no, even though it is not addressed in these cites.

I seem to remember that unlike an ordinary HSA provider ( who is not required to perform any verification), an employer must verify that the employee is covered by their HDHP. This would not be true for the other spouse.

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Re: Employer denying HSA to eligible employee

Post by tfb » Thu Feb 02, 2017 3:00 am

Spirit Rider wrote:In my opinion any failure to provide such employer-provided coverage would make the company non-compliant and their action discriminatory.
The OP isn't complaining about the employer not contributing to the partner's HSA because the employer doesn't contribute funds to any employee's HSA. No discrimination there. The OP wants the employer to allow the partner to contribute to the HSA through payroll. Although the IRS makes the partner eligible, they don't oblige the employer when the partner is not primary in the health plan.
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Re: Employer denying HSA to eligible employee

Post by celia » Thu Feb 02, 2017 5:01 am

Suppose two unmarried individuals each have independent family coverage HDHPs that provide coverage for both individuals. Irrelevant, but for simplicity, assume this family coverage is free of charge (perhaps sponsored by their respective employers).
The way I read the link referenced in the original post, each of the individuals has a separate family HDHP policy, which doesn't seem to apply in the OP's case.

tfb wrote:The OP wants the employer to allow the partner to contribute to the HSA through payroll. Although the IRS makes the partner eligible, they don't oblige the employer when the partner is not primary in the health plan.
What if OP's partner worked at another company? Should the other employer allow the partner to contribute to the HSA through payroll? I don't think so.

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Re: Employer denying HSA to eligible employee

Post by BruDude » Thu Feb 02, 2017 7:32 am

I still don't see how they can both be claiming the kids as dependents to allow for two family contributions under a single plan. The kids are attached to one HSA or the other. They can't be attached to both when you only have one plan. If you had two separate plans with one employee and one child on each plan would be different.

OP - have you asked a CPA to make a statement on this? Seems like a complicated situation to be relying on the advice of a message board, even BH.

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Re: Employer denying HSA to eligible employee

Post by kd2008 » Thu Feb 02, 2017 9:09 am

OP, you are correct that each of you can contribute family max to HSA. As TFB pointed out, per IRS rules, your employer may not allow partner to just have an HSA if your partner is not buying primary health insurance from the employer. It is perfectly legal.

Your partner may open HSA independently and will not save on fica taxes. $500-$600 loss for sure but your partner at least gets to contribute to family max.

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Re: Employer denying HSA to eligible employee

Post by Spirit Rider » Thu Feb 02, 2017 10:37 am

I do not believe these objections are correct.
tfb wrote:The OP isn't complaining about the employer not contributing to the partner's HSA because the employer doesn't contribute funds to any employee's HSA. No discrimination there. The OP wants the employer to allow the partner to contribute to the HSA through payroll. Although the IRS makes the partner eligible, they don't oblige the employer when the partner is not primary in the health plan.
tfb, I normally agree with you in most cases, but not this time. As you said 26 U.S. Code 106(d)(1) permits the contribution for an HSA eligible employee. DOL regulations would make it impermissible to discriminate against a eligible individual.
celia wrote:The way I read the link referenced in the original post, each of the individuals has a separate family HDHP policy, which doesn't seem to apply in the OP's case.
You are correct that the link example is different, but that does not change the facts that the OP's partner is both a QHDHP covered HSA eligible individual and an employee of the same company where the policy is issued.
celia wrote:What if OP's partner worked at another company? Should the other employer allow the partner to contribute to the HSA through payroll? I don't think so.
No, a different employer can not permit HSA payroll deductions. As I said the two requirements are that you are an HSA eligible individual and employed by the same company where the QHDHP policy is issued and the HSA contributions are deducted.
BruDude wrote:I still don't see how they can both be claiming the kids as dependents to allow for two family contributions under a single plan. The kids are attached to one HSA or the other. They can't be attached to both when you only have one plan. If you had two separate plans with one employee and one child on each plan would be different.
The are not both claiming the dependents. What qualifies you for the family plan contribution limit is being covered by a family plan. Under the "rule for married people", two spouses are limited to one limit. However, just like a non-dependent adult child, an adult partner gets their own family plan contribution limit.
kd2008 wrote:OP, you are correct that each of you can contribute family max to HSA. As TFB pointed out, per IRS rules, your employer may not allow partner to just have an HSA if your partner is not buying primary health insurance from the employer. It is perfectly legal.
See my response to tfb. There is nothing in sections 223 (HSAs) and 106 (Employer health plan contributions) that would disallow section 125 payroll deductions.

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Re: Employer denying HSA to eligible employee

Post by tfb » Thu Feb 02, 2017 10:53 am

Spirit Rider wrote:There is nothing in sections 223 (HSAs) and 106 (Employer health plan contributions) that would disallow section 125 payroll deductions.
The partner did not enroll in the employer's health plan and therefore did not sign up for the section 125 plan. The employer made participation in the 125 plan contingent on enrolling in its health plan, not just being covered as a dependent. I don't see it as discriminatory.
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Spirit Rider
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Re: Employer denying HSA to eligible employee

Post by Spirit Rider » Thu Feb 02, 2017 11:18 am

tfb wrote:
Spirit Rider wrote:There is nothing in sections 223 (HSAs) and 106 (Employer health plan contributions) that would disallow section 125 payroll deductions.
The partner did not enroll in the employer's health plan and therefore did not sign up for the section 125 plan. The employer made participation in the 125 plan contingent on enrolling in its health plan, not just being covered as a dependent. I don't see it as discriminatory.
This might be possible. I am not familiar with the details of section 125. My familiarity with cafeteria plans is as a an employee. Section 125 plans are a list of options, not just health insurance and HSAs. This can include; dental plans, disability insurance, etc...

Can a company place such a restriction? Why would a company place this restriction, specially as pointed out by the OP, this increases their FICA responsibility? Why change it now?

Finally, we do not know why company has changed this policy. My post was an attempt to see what the IRC, CFR, and other guidance said on this issue. The OP should attempt to determine the backstory, but it would not be the first time that a company made an uniformed/unsupportable policy change.

We have seen several cases here on BH, where push back has resulted in a reevaluation and change by companies. So I don't think the OP should take the change at face value, but rather to challenge the company to justify the change.

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Re: Employer denying HSA to eligible employee

Post by tfb » Thu Feb 02, 2017 4:13 pm

Spirit Rider wrote:Finally, we do not know why company has changed this policy.
The OP can tell us more about the circumstance. My interpretation is the partner had enrolled separately in the health plan and in the HSA last year. After the first payroll in 2017, when the partner asked why the HSA deductions stopped, the employer explained because the partner didn't enroll in the health plan for 2017, the partner is also not enrolled in the HSA for 2017. The OP says because the partner is covered as a dependent, the IRS still makes the partner eligible. True, but the employer only enrolls people who also enroll in the health plan. This can happen to a married couple working for the same employer as well. When one spouse is covered as a dependent, the employer only gives the HSA to the primary enrollee.
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Pajamas
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Re: Employer denying HSA to eligible employee

Post by Pajamas » Thu Feb 02, 2017 4:21 pm

Can your partner ask HR the reason why he is no longer allowed to participate in the HSA?

Also, did they actually tell him that he is eligible to participate?

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Re: Employer denying HSA to eligible employee

Post by alaskantraveler » Thu Feb 02, 2017 6:57 pm

perl wrote:My employer provides HSAs to employees with high deductible health insurance. The employer doesn't contribute funds, but does take contributions pre-tax and pays the fees for the Optum HSA ($2.50 per month and a lower cash requirement).


As of last week my employer says my partner is no longer allowed to participate in the work HSA. I am aware that non-payroll contributions can still be made and deducted, but we will lose the benefit of decreased FICA and Medicare taxes and the employer-paid fees.

I plan to point out that my employer will lose money by doing this because of the higher payroll taxes they will have to pay. Beyond that, are there any HSA or cafeteria plan rules I can use to argue to my employer that this decision should be reversed? Any problems with allowing some eligible employees to have employer sponsored HSAs while others are excluded?
Maybe I misunderstand. I believe HSA contributions are treated similar to IRAs in that they are tax deductible and not subject to FIT, but you still have to SS and medicare payroll taxes.

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Re: Employer denying HSA to eligible employee

Post by RubyTuesday » Thu Feb 02, 2017 7:20 pm

Back to the OP's question, I think the employer FICA savings and maybe an appeal to fairness or precedent set in previous years are your arguments.

Good luck
RT

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Re: Employer denying HSA to eligible employee

Post by alaskantraveler » Thu Feb 02, 2017 7:34 pm

alaskantraveler wrote:
perl wrote:My employer provides HSAs to employees with high deductible health insurance. The employer doesn't contribute funds, but does take contributions pre-tax and pays the fees for the Optum HSA ($2.50 per month and a lower cash requirement).


As of last week my employer says my partner is no longer allowed to participate in the work HSA. I am aware that non-payroll contributions can still be made and deducted, but we will lose the benefit of decreased FICA and Medicare taxes and the employer-paid fees.

I plan to point out that my employer will lose money by doing this because of the higher payroll taxes they will have to pay. Beyond that, are there any HSA or cafeteria plan rules I can use to argue to my employer that this decision should be reversed? Any problems with allowing some eligible employees to have employer sponsored HSAs while others are excluded?
Maybe I misunderstand. I believe HSA contributions are treated similar to IRAs in that they are tax deductible and not subject to FIT, but you still have to SS and medicare payroll taxes.
I'll take that back! Its time to max out my HSA Cafeteria plan this year. I was unaware that Employee contributions through an Employer sponsored Cafeteria plan were not subject to FICA.

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Re: Employer denying HSA to eligible employee

Post by perl » Thu Feb 02, 2017 7:45 pm

tfb wrote:
Spirit Rider wrote:Finally, we do not know why company has changed this policy.
The OP can tell us more about the circumstance. My interpretation is the partner had enrolled separately in the health plan and in the HSA last year. After the first payroll in 2017, when the partner asked why the HSA deductions stopped, the employer explained because the partner didn't enroll in the health plan for 2017, the partner is also not enrolled in the HSA for 2017. The OP says because the partner is covered as a dependent, the IRS still makes the partner eligible. True, but the employer only enrolls people who also enroll in the health plan. This can happen to a married couple working for the same employer as well. When one spouse is covered as a dependent, the employer only gives the HSA to the primary enrollee.
This is almost right, except that my partner was always enrolled as a dependent on my health plan. Last year, he was enrolled in the HSA - our employer allowed him to participate in the HSA by payroll deduction. This year, the employer says they will no longer allow that and the employer will now only enroll people who also enroll in the health plan. We don't have information about why the policy changed.

I was hoping to determine whether there are specific rules that I could use to argue that the policy change is inappropriate/unfair/not allowed for some reason Barring this, I will follow RubyTuesday's line of argument and mention FICA savings and precedent.

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Re: Employer denying HSA to eligible employee

Post by inbox788 » Thu Feb 02, 2017 9:20 pm

Artsdoctor wrote:
perl wrote:To answer the questions: jeremyi, partner is not highly compensated, he actually makes less than I do. They gave no justification, just that it wouldn't be allowed anymore.

Nate79, it's only one family health insurance plan, which (I believe) is the problem. My employer allows health insurance benefits for domestic partners (which we are). So I am primary on the plan and he is covered as part of my family, along with our children. However, my understanding of IRS rules (as I said in my links) is that we still can each have a family HSA.
Interesting loophole.
Crazy situation. Are you even eligible to take a distribution? If not, that's more justification for your own HSA account.
Qualified medical expenses are those incurred by the following persons.
You and your spouse.

All dependents you claim on your tax return.

Any person you could have claimed as a dependent on your return except that:

The person filed a joint return,

The person had gross income of $4,000 or more, or

You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2015 return.
https://www.irs.gov/publications/p969/a ... 1000204145
Rules for married people. If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2015 is $6,650. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.


The rules for married people apply only if both spouses are eligible individuals.
If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,650. Each spouse must make the additional contribution to his or her own HSA.
https://www.irs.gov/publications/p969/a ... 1000204045

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Re: Employer denying HSA to eligible employee

Post by tfb » Thu Feb 02, 2017 10:55 pm

perl wrote:This is almost right, except that my partner was always enrolled as a dependent on my health plan. Last year, he was enrolled in the HSA - our employer allowed him to participate in the HSA by payroll deduction. This year, the employer says they will no longer allow that and the employer will now only enroll people who also enroll in the health plan. We don't have information about why the policy changed.
It sounds like the employer used to allow anyone to enroll in the HSA. Now they were told they were supposed to enroll only those in the HDHP. Did the employer change to a different health insurance company? Some HSA providers are bundled with the health insurance company. It's the health insurance company that actually opens the HSA for you. It's possible this health insurance company only opens accounts for primary enrollees. If that's the case the employer isn't going to be motivated by a few hundred dollars in FICA savings to make system changes. When it's handled through the insurance company, the employer isn't able to make a change anyway.
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teen persuasion
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Re: Employer denying HSA to eligible employee

Post by teen persuasion » Fri Feb 03, 2017 11:13 am

inbox788 wrote:
Artsdoctor wrote:
perl wrote:To answer the questions: jeremyi, partner is not highly compensated, he actually makes less than I do. They gave no justification, just that it wouldn't be allowed anymore.

Nate79, it's only one family health insurance plan, which (I believe) is the problem. My employer allows health insurance benefits for domestic partners (which we are). So I am primary on the plan and he is covered as part of my family, along with our children. However, my understanding of IRS rules (as I said in my links) is that we still can each have a family HSA.
Interesting loophole.
Crazy situation. Are you even eligible to take a distribution? If not, that's more justification for your own HSA account.
Qualified medical expenses are those incurred by the following persons.
You and your spouse.

All dependents you claim on your tax return.

Any person you could have claimed as a dependent on your return except that:

The person filed a joint return,

The person had gross income of $4,000 or more, or

You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2015 return.
https://www.irs.gov/publications/p969/a ... 1000204145
Rules for married people. If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2015 is $6,650. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.


The rules for married people apply only if both spouses are eligible individuals.
If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,650. Each spouse must make the additional contribution to his or her own HSA.
https://www.irs.gov/publications/p969/a ... 1000204045
The part about being not eligible to take distributions (for partner) is important. I have 2 kids that are non-dependents but on our insurance, and I cannot use our family HSA to reimburse for their medical expenses. They each need to open their own HSA, something I have yet to convince them of, unfortunately.

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Re: Employer denying HSA to eligible employee

Post by clutchied » Fri Feb 03, 2017 3:26 pm

that sounds like an amazing loophole and completely against the spirit of the plan.

super jealous...

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Re: Employer denying HSA to eligible employee

Post by Traveler » Fri Feb 03, 2017 10:16 pm

clutchied wrote:that sounds like an amazing loophole and completely against the spirit of the plan.

super jealous...
Me too. As a single person, once again I'm shafted. Not shocking since the IRS is involved.

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Re: Employer denying HSA to eligible employee

Post by an_asker » Sat Feb 04, 2017 11:17 am

Spirit Rider wrote:I do not believe these objections are correct.
tfb wrote:The OP isn't complaining about the employer not contributing to the partner's HSA because the employer doesn't contribute funds to any employee's HSA. No discrimination there. The OP wants the employer to allow the partner to contribute to the HSA through payroll. Although the IRS makes the partner eligible, they don't oblige the employer when the partner is not primary in the health plan.
tfb, I normally agree with you in most cases, but not this time. As you said 26 U.S. Code 106(d)(1) permits the contribution for an HSA eligible employee. DOL regulations would make it impermissible to discriminate against a eligible individual.
celia wrote:The way I read the link referenced in the original post, each of the individuals has a separate family HDHP policy, which doesn't seem to apply in the OP's case.
You are correct that the link example is different, but that does not change the facts that the OP's partner is both a QHDHP covered HSA eligible individual and an employee of the same company where the policy is issued.
celia wrote:What if OP's partner worked at another company? Should the other employer allow the partner to contribute to the HSA through payroll? I don't think so.
No, a different employer can not permit HSA payroll deductions. As I said the two requirements are that you are an HSA eligible individual and employed by the same company where the QHDHP policy is issued and the HSA contributions are deducted.
BruDude wrote:I still don't see how they can both be claiming the kids as dependents to allow for two family contributions under a single plan. The kids are attached to one HSA or the other. They can't be attached to both when you only have one plan. If you had two separate plans with one employee and one child on each plan would be different.
The are not both claiming the dependents. What qualifies you for the family plan contribution limit is being covered by a family plan. Under the "rule for married people", two spouses are limited to one limit. However, just like a non-dependent adult child, an adult partner gets their own family plan contribution limit.
kd2008 wrote:OP, you are correct that each of you can contribute family max to HSA. As TFB pointed out, per IRS rules, your employer may not allow partner to just have an HSA if your partner is not buying primary health insurance from the employer. It is perfectly legal.
See my response to tfb. There is nothing in sections 223 (HSAs) and 106 (Employer health plan contributions) that would disallow section 125 payroll deductions.
I am sorry. Didn't read the rest of the thread (so I am hoping this was not answered elsewhere).

I didn't think that if I am have an HDHP, I could have an HSA unless the HDHP was in my name. In other words, if my HDHP is dependent on my wife (who has family HDHP through her employer), I cannot even open an HSA. I understand (from what I read of the thread thus far) that it appears that OP and his/her partner are eligible for the HSA, but I don't understand how the person who does not "own" the HDHP can open an HSA.

May be it is a loophole and maybe the OP has been doing it for a while, but to me it just is morally wrong. But looks like it is perfectly legal. Reminds me of the other HSA thread I read a few months back (you might remember that one too, Spirit Rider, where also I did not think the OP was eligible but turned out that he/she was!)

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Re: Employer denying HSA to eligible employee

Post by tfb » Sat Feb 04, 2017 11:29 am

an_asker wrote:I didn't think that if I am have an HDHP, I could have an HSA unless the HDHP was in my name.
You can have an HSA in your name if you go to a bank directly, just not through your employer.
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Re: Employer denying HSA to eligible employee

Post by Spirit Rider » Sat Feb 04, 2017 11:43 am

tfb wrote:
an_asker wrote:I didn't think that if I am have an HDHP, I could have an HSA unless the HDHP was in my name.
You can have an HSA in your name if you go to a bank directly, just not through your employer.
I am still of the opinion that you are being too declarative here. An employer/benefits administrator may be able to have that policy, but the I do not believe the tax code prevents an employer from allowing it.

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Re: Employer denying HSA to eligible employee

Post by flybynite » Sat Feb 04, 2017 11:59 am

perl wrote:This is almost right, except that my partner was always enrolled as a dependent on my health plan. Last year, he was enrolled in the HSA - our employer allowed him to participate in the HSA by payroll deduction. This year, the employer says they will no longer allow that and the employer will now only enroll people who also enroll in the health plan. We don't have information about why the policy changed.
Not commenting on whether this is "right or wrong", but for what it's worth I've worked for several Megacorps and none of them allowed you to enroll in an HSA (versus FSA) if you didn't elect the HDHP. Probably the employer is just switching to the industry norm due to some systems/compliance/provider change. I don't think this has anything to do with your partners status on your family plan or domestic partner versus federally recognized marital status, only his choice not to elect the HDHP in his benefits choices. The same limitation would likely apply even if you didn't work there, maybe ask the HR department about this scenario.

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Re: Employer denying HSA to eligible employee

Post by tfb » Sat Feb 04, 2017 12:11 pm

Spirit Rider wrote:
tfb wrote:
an_asker wrote:I didn't think that if I am have an HDHP, I could have an HSA unless the HDHP was in my name.
You can have an HSA in your name if you go to a bank directly, just not through your employer.
I am still of the opinion that you are being too declarative here. An employer/benefits administrator may be able to have that policy, but the I do not believe the tax code prevents an employer from allowing it.
I agree. In theory maybe you can but in practice you can't. I just don't think any employer will go out of its way to verify you are covered as a dependent.
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