Compliance Alert: IRS Allows Employers to Recover Mistaken HSA Contributions – Apex Benefits

Compliance Alert: IRS Allows Employers to Recover Mistaken HSA Contributions

Compliance Alert: IRS Allows Employers to Recover Mistaken HSA Contributions
Compliance Alert: IRS Allows Employers to Recover Mistaken HSA Contributions

Overview

The IRS recently released an information letter describing circumstances that would allow an employer to recover contributions mistakenly made to its employees’ HSAs.

Previously, IRS guidance allowed employers to recover HSA contributions in very limited situations, such as when the contribution exceeded the applicable annual limit. The new guidance also allows employers to recover HSA contributions when there is clear documentary evidence showing there was an administrative or process error.

In addition, the new IRS information letter provides specific examples of common administrative or process mistakes that occur when administering HSA contributions.

 

Action Steps

This is helpful guidance for employers that administer HSA contributions. Employers that recover mistaken HSA contributions should maintain documentation showing that a mistake occurred. Also, any correction should put the employer and employees in the same position they would have been had the mistake not occurred.

 

Highlights

  • As a general rule, amounts in an employee’s HSA are not forfeitable and cannot be returned to the employer.
  • However, the IRS allows for the return of HSA contributions in limited situations.
  • The IRS recently recognized an employer’s ability to recover HSA contributions that were made by mistake.

 

Resources

 

 

Source: © 2018 Zywave, Inc.

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