IRS Clarifies When an Employer May Recover Mistaken HSA Contributions
On December 28, 2018, the IRS Office of the Chief Counsel released Informational Letter 2018-0033 to clarify when employers can request to recover mistaken HSA contributions. This letter should be used to interpret IRS Notice 2008-59, the previous guidance that served as a primary source of information on HSA issues and administrative procedures.
The letter states that situations previously set forth in IRS Notice 2008-59 were not intended to be an exclusive list, and as long as the parties are put in the same position they would have been had the error not occurred, employers can request excess contributions be returned when they were a result of an administrative or process error.
Correctable errors under Notice 2008-59
- Contributions made on behalf of employees who were never HSA-eligible
- Contributions that exceed annual statutory contribution limits
Examples of clarified correctable errors under Informational Letter 2018-0033
- HSA contribution that exceeds the employee’s payroll withholding election
- Incorrect contribution amounts due to an incorrect spreadsheet being transmitted or because employees with similar names were confused with each other
- Contribution was incorrectly entered by a payroll administrator (in-house or third-party)
- Duplicate payroll transmittals resulted in a double HSA contribution
- Contribution amount was incorrect because the employee’s payroll election was not processed in a timely manner
- Mathematical errors were made when determining the HSA contribution amount
- Incorrect contribution due to an erroneous decimal place that resulted in a contribution greater than intended
If you have additional questions or comments, please reach out to your Sales Executive or Account Manager to discuss them. Thank you.
Links
- IRS Private Letter Ruling 2018-0033
- IRS Notice 2008-59
Related articles
As per Notice 2023-70, the IRS is adjusting the fee that insurers or self-insured health plan sponsors will pay to fund the federal Patient-Centered Outcomes Research Institute (PCORI) trust fund for...
Employers who encourage their employees to leverage their available paid time off benefits oftentimes realize increased productivity levels amongst their employee population. Paid time off is often...
Since the pandemic, there has been a growing trend of using extended employee paid time off and sabbaticals in the workforce. To avoid any disruptions in productivity within the organization, it is...