Tag Archives: Contributions

HSA Employer Contributions on W2 Box 12 “W”

Come tax time when you need to file Form 8889, you may be wondering how to find your contributions to your HSA. We know that you should be receiving Form 5498-SA from your HSA custodian that outlines the total contributions that went into your HSA during the year. However, this form is a lump sum total: it does not break out employer (no tax impact) vs. employee (tax deductible contributions); it just shows how much went into the account that year. Also remember that form 5498-SA may be missing prior year contributions made in the current year.

So how can you figure out your employer contributions that were made? How can you use this information to complete Line 3 and Line 9 of Form 8889?

A word about Cafeteria Plans

For one, let’s clarify that cafeteria plan contributions are counted as employer contributions. Cafeteria plans are when your employer withholds your contributions which they send to the HSA custodian for you. So these are employee contributions but your employer is doing the work for you. The benefit of cafeteria plans is that they are already pre-tax; not just income tax, but medicare / social security / other tax. So you save the taxes up front and get them deposited automatically into

You will see that for both the W2 and Form 8889, cafeteria plan contributions function just like employer contributions, not employee contributions.

Employer vs. Employee Contributions on W2

When you receive your W2 at year end, you will have a Box 12 marked with “W” and your employer contributions for the year. As mentioned, this amount will contain:

Amounts your employer contributed to your HSA
Amounts you contributed to your HSA through your employer via a cafeteria plan

Here is what Form W2 looks like for 2018 with HSA contriibutions:

HSA-employer-contributions-W2-example

So this box indicates any employer contributions for the fiscal year. Note that this box will not contain any prior year contributions – these will need to be added to the amount. If your employer pays a bonus or end of year contribution into your HSA that occurs in the following year, be sure to add that in.

Around the same time you will receive Form 5498-SA from your custodian. It will detail the total contributions made to your HSA. Again, be sure to add any prior year contributions before filing Form 8889. Using this and your W2, you can calculate the employee contributions to your HSA.

Employee Contributions equal contributions on Form 5498-SA minus those on your W2 Box 12 “W”

What this is saying is, “Total HSA contributions – Employer Contributions = Employee Contributions.” Using these two documents, you can back out and determine your contribution amount.

Alternatively, you may be able to access your HSA custodian’s website to see a breakdown of employee vs employer contributions. But it is always best to confirm with the official documentation in case you need to correct anything.

Impact on Form 8889

Now that we know the difference between employee and employer contributions, you need to handle them correctly on IRS tax form 8889 for Health Savings Accounts. You will report your (post-tax) employee contributions on Line 2, and employer (including cafeteria plan) contributions on Line 9.

Note: if you need help accounting for your HSA contributions, please consider my service EasyForm8889.com to complete Form 8889. It asks simple questions in a straightforward way and will generate your HSA tax form in 10 minutes. It is fast and painless, no matter how complicated your HSA situation.

HSA Contribution with FSA Carryover / Grace Period

Overview

We have established that you cannot contribute to an HSA if you or your spouse has a Flexible Spending Account (FSA). This is because FSA coverage is considered “other health coverage” which prevents one from being HSA eligible. Since FSA benefits extend to the holder as well as their spouse and dependents, this can disqualify some otherwise ready people from contributing to HSA’s. Per IRS form 969:

An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally can’t make contributions to an HSA

The exceptions to the above quote include limited purpose health FSA or HRA, Suspended HRA, post-deductible FSA or HRA, and retirement HRA.

Carryover and Grace Period defined

Generally, FSA’s are “use it or lose it” type plans where any unused funds disappear at the end of the year. This contrasts sharply with HSA’s where the funds are yours forever. To cushion this blow, the IRS allows for two FSA options available to the plan administrator. Generally only one of the following can be chosen per FSA:

Grace Period – for 2.5 months following the end of the plan year, you can use prior year funds to pay for qualified medical expenses. This effectively extends the “lose it” deadline. That means up until March 15th you can still use your prior year FSA funds.
Carryover – your plan may allow up to $500 to be brought forward into the current year to spend on qualified medical expenses. You then have access to this money for the entire year. Any amount above this is forfeit. In other words, you can maintain $500 in your FSA indefinitely.

Can I contribute to my HSA if I carryover FSA funds?

These provisions effectively extend the life of your current year FSA funds. However, a fairly common scenario is ending FSA coverage with a carryover / grace period and beginning HSA eligible coverage. What happens when the FSA carryover interferes with HSA coverage? Are these people HSA eligible, and can they contribute?

HSA with FSA Grace Period

Surprisingly, the IRS provides explicit guidance to the carryover or grace period provision that many FSA’s contain. In IRS form 969 they state:

Coverage during a grace period by a general purpose health FSA is allowed if the balance in the health FSA at the end of its prior year plan is zero.

This is great because it allows an exception to the “no other coverage” clause of HSA eligibility. As long as you zero out your FSA by December 31st, you nullify the carryover or grace period impact and can contribute to your HSA per normal. This provides relief for those whose FSA coverage is ending and HSA coverage is beginning. Of course, if your FSA policy ends and you no longer have access to it, there is no effect on your HSA contribution.

HSA with FSA carryover

The IRS does not call out the FSA carryover provision and how it affects HSA contributions. I believe this is implicit since a carryover constitutes a continued access to FSA funds. If you have FSA funds available, you are not HSA eligible. However, if your FSA coverage ends and wipes out any carryover funds, you would then be HSA eligible, assuming all other conditions are met.

FSA / HSA contribution examples

Here are some common scenarios you might encounter with an FSA carryover or grace period and the effect on HSA contributions. Each scenario assumes you have an FSA in the current year and are switching to an HSA eligible plan in the new year:

FSA has carryover but no balance on Dec 31st – since you depleted your FSA by year end, you can contribute to your HSA for each month in the following year.
FSA has grace period of 2.5 months with balance on Dec 31st – since your FSA has a balance on January 1st, you are not HSA eligible until April 1st. This assumes the FSA coverage goes away and additional FSA funds are not made available.
You carryover $500 in your FSA into subsequent year – you cannot contribute to your HSA while covered by an FSA. As long as your FSA coverage continues and funds remain in your account, you cannot contribute to the HSA. Since the carryover period technically lasts all year, in theory this could make you HSA ineligible for the year.

The bottom line: use up any of your FSA funds by December 31st if you wish to be HSA eligible on January 1st.

Note: to fulfill the IRS requirement of tracking HSA receipts, please consider my service TrackHSA.com for your Health Savings Account record keeping. You can store purchases, upload receipts, and record reimbursements securely online.

How Much Did I Contribute to My HSA?

This question was submitted by a user of EasyForm8889.com. Feel free to send in your question today to evan@hsaedge.com.

I don’t know where to find the amount I contributed to my HSA. The IRS says I had $774 in my HSA account. My W2 says my employer contributed $850. Does this make sense?

The bad way to determine your HSA contribution

First off, using your bank account, HSA transaction history, or W2 isn’t the way to determine your HSA contributions for a given year. Why is this? While these numbers may often equal the amount you contributed to your HSA, they may not equal what was reported to the IRS as contributed to the HSA. Mistakes happen, and sometimes your HSA administrator will miss a contribution or mess up the dollar amount. If this happens, they will report a different amount than you report on your taxes. This discrepancy can be a red flag to the IRS, which is why it is critical to have a “source of truth” for your HSA contributions. This serves as the official amount contributed to your HSA for the year, and if it is not correct, you can have your custodian fix it fairly easily.

Form 5498-SA reports contributions for the year

Each year, your HSA custodian (bank where you have account) is required to send you IRS Form 5498-SA. This form provides an accounting of all contributions to your HSA for the tax year, including personal, employer, prior year, and rollover contributions. Form 5498-SA is the “source of truth” we describe above, and is the final say in what was contributed. It is basically the “writing in stone” between you, your HSA custodian, and the IRS. Thus, if it is not correct, contact your custodian and make it so.

Here is an example of what Form 5498-SA looks like:

HSA_Form_5498-SA_2016 completed

For more detailed information on Form 5498-SA, please see this article.

Where is my Form 5498-SA?

Your HSA custodian is required to send you this form each year before you file your taxes. Generally, you should get the form by January 31st. However, mail gets lost or sent to wrong addresses. If you do not have your Form 5498-SA, don’t worry, you should be able to find this form on your custodian’s website in the document archive. Worst case, give them a call and ask to resend it or email it to you.

Why HSA Contribution amounts are important

Getting your HSA contribution amount is critical when you go to file Form 8889 each year, as an incorrect value can cost you money. If you under report your contribution to your HSA, you will not receive the tax deducation that Form 8889 allows you (by means of Form 1040). You basically did all the hard work for the HSA and didn’t get any benefit. On the other hand, if you over report your contribution, you risk taking too much of a deduction. This results in filing your taxes wrong and spending time dealing with fixing them or wost case, a friendly chat with the IRS.

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Note: if you need help calculating your contribution on your HSA taxes this year, please consider using my service EasyForm8889.com to complete Form 8889. It is fast and painless, no matter how complicated your HSA situation.

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