Final Regulations: Comparability Requirements for Employer Contributions to Health Savings Accounts

In August of 2005, proposed regulations (REG-138647-04) pertaining to HSA comparability requirements were issued. The proposed regulations clarified and expanded upon the guidance regarding the comparability rules for HSAs published in IRS Notice 2004-2 and in Notice 2004-50 (2004-33 IRB…

In August of 2005, proposed regulations (REG-138647-04) pertaining to HSA comparability requirements were issued. The proposed regulations clarified and expanded upon the guidance regarding the comparability rules for HSAs published in IRS Notice 2004-2 and in Notice 2004-50 (2004-33 IRB 196), Q & A-46 through Q & A-54. Today, the IRS has issued final regulations (which you can access here) adopting the provisions of the proposed regulations with certain modifications.

One of the modifications is that the final regulations provide additional guidance on how employer HSA contributions are made through a cafeteria plan:

Specifically, the final regulations provide that employer contributions to employees’ HSAs are made through the cafeteria plan if under the written cafeteria plan, the employees have the right to elect to receive cash or other taxable benefits in lieu of all or a portion of an HSA contribution (i.e., all or a portion of the HSA contributions are available as pre-tax salary reduction amounts), regardless of whether an employee actually elects to contribute any amount to the HSA by salary reduction. The final regulations also provide several examples that illustrate the application of the cafeteria plan exception to the comparability rules.

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