4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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There are no income limits that restrict an individual's eligibility to contribute to an HSA nor is there a requirement that the account owner have earned income to make a contribution. Exceptions. An individual is not a qualified individual if he or she can be claimed as a dependent on another person's tax return. Also, an employee's participation in a health flexible spending arrangement (FSA) or health reimburse- mentarrangement (HRA) generally disqua{hies the individ- ual (and employer) from making contributions to his or her HSA. Employer contributions. Up to specified dollar limits, you can generally exclude your contributions (must be in cash) to the Health Savings Account (HSA) of a qualified individual (determined monthly) from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. For calendar year 2008, you can contribute up to 82,900 for self-only coverage or $5,800 for family coverage to a qualified individual's HSA. The contribution amount determined above is increased 8900 for 2008 for qualified individuals who are age 55 or older at any time during the year. No contributions can be made to an individual's HSA after he or she becomes enrolled in Medicare Part A or Part S. The maximum annual contribution (including ad- ditional amount for individuals who are age 55 or older) must be reduced to reflect any portion of the year during which the individual was not a qualified individual. Nondiscrimination rules. Your contribution amount to an employee's HSA must be comparable for all employees who have comparable coverage during the same period. Otherwise, there will be an excise tax equal to 35% of the amount you contributed to all employees' HSAs. Exception. The Tax Relief and Health Care Act of 2006 allows employers to make larger HSA contributions for a nonhighly compensated employee than for a highly com- pensated employee. A highly compensated employee for 2008 is an employee who meets either of the following tests. 1. The employee was a 5°i° owner at any time during the year or the preceding year. 2. The employee received more than $100,000 in pay for the preceding year. You can choose to ignore test (2) if the employee was not also in the 20°% of employees when ranked by pay for the preceding year. Partnerships and S corporations. Partners and 2% shareholders of an S corporation are not eligible for salary reduction (pre-tax) contributions to an HSA. Employer con- tributions to the NSA of a bona fide partner or 2% share- holderare treated as distributions or guaranteed payments as determined by the facts and circumstances. Cafeteria plans. You may contribute to an employee's HSA using a cafeteria plan and your contributions are not subject to the statutory comparability rules. However, cafe- teria plan nondiscrimination rules still apply. For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Contributions that favor lower-paid employees are not prohibited. Reporting requirements. You must report your contribu- tions to an employee's HSA on Form W-2 in box 12 using code "W." The trustee or custodian of the HSA, generally a bank or insurance company, reports distributions from the HSA using Form 1099-SA, Distributions from an HSA, Archer MSA, or Medicare Advantage MSA. Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the follow- ing tests. • It is furnished on your business premises. • It is furnished for your convenience. • The employee must accept it as a condition of em- ployment. Different tests may apply to lodging furnished by educa- tional institutions. See section 119(d) of the Interna# Reve- nue Cade for details. The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging. On your business premises. For this exclusion, your business premises is generally your employee's place of work. (For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations.) For your convenience. Whether or not you furnish lodg- ing for your convenience as an employer depends on all the facts and circumstances. You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the em- ployee with additional pay. This is true even if a law or an employment contract provides that the lodging is furnished as pay. However, a written statement that the lodging is furnished for your convenience is not sufficient. Condition of employment. Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Examples include employ- ees who must be available at all times and employees who could not perform their required duties without being fur- nished the lodging. It does not matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. Example. A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. If Joan chooses to live at the hospital, the hospital cannot exclude the value of the lodging from her wages because she is not required to live at the hospital to properly perform the duties of her employment. S corporation shareholders. For this exclusion, do not treat a 2% shareholder of an S corporation as an employee of the corporation. A 2% shareholder is someone who directly or indirectly owns (at any time during the year} Publication 15-B (2008) Page 13