Updated December 16, 2020.
If your organization sponsored a high deductible health plan (HDHP) with employees contributing to a health savings account (HSA), there are unique reporting requirements you must follow to be in compliance with the Affordable Care Act. Contributions made to the HSA by your organization and by employees through salary reduction must be reported on Form W-2.
As the employer, you are responsible for determining if:
- The employee was covered by a HDHP sponsored by your organization.
- The employee was not covered by any impermissible non-HDHP employer plan (think full flexible spending account).
- The employee was 55 or older and eligible for catch-up contributions. You may rely on the employees’ self-reporting for date of birth.
Employee contributions made pre-tax through a cafeteria plan are considered employer contributions. These pre-tax cafeteria plan contributions should be combined with any contributions made by your organization. This total is reported on Form W-2, Box 12 using code W.
Contributions to a HSA by any Sub-chapter S 2% (or more) shareholders, members of an LLC or LLP are not allowed through a cafeteria plan. These groups, and any others who made their HSA contributions outside of the payroll system, deduct their contributions on their personal Form 1040. 2019 instructions for Form W-2 state that employer HSA contributions that are not excludable from the employee’s income must be reported in Boxes 1, 3 and 5. Please consult with your payroll and tax advisor for these special circumstances.
HSA Reporting Guidance for Employees
Employees who contribute to or receive distributions from a HSA in 2020 must report both on their personal tax returns using IRS Form 8889. As with all tax issues, your employees should contact a tax advisor with their specific issues or questions. However, you may wish to communicate this requirement to your employees. Leverage your existing internal communication strategy to create awareness. You can also grab this HSA reporting guidance for your employees.
The IRS provides access to forms and instructions online. You can also reference the Form 1095-C Reporting Guide for tips and to guide you through your review and completion of the form for your employees. Below are quick-access links to the IRS resources:
- IRS Form 8889 (2020 form not yet released by IRS)
- IRS Instructions for Form 8889
- IRS Form 1095-C
- IRS Instructions for 1095-C
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