Tag Archives: Employer Contributions

How to Handle HSA Excess Employer Contributions

I was covered under a high deductible plan but also by my parents’ plan. I didn’t realize my employer would be putting money in an HSA for me. I tried to request a distribution for ineligible contribution from my HSA but the HSA custodian wouldn’t release the money to me since my employer put it in. What are my options?

Add Excess Contributions to Income

It sounds like you had excess employer contributions in 2018. Often this occurs when an employer contributes more than your contribution limit for the year. It also occurs when you receive contributions but are HSA ineligible, like in your case due to multiple insurance coverage. This isn’t the worst thing in the world as it is free money, and all you need to do is add it to income to pay taxes on it. Per Form 969:

HSA-excess-employer-contributions

As you can see, you just add the excess contributions to income and leave the employer contributions in the HSA.

Excess Contributions made by your employer are included in your gross income.

By paying tax on them and keeping them in your HSA, this fulfills their original intent of the contribution being used for qualified medical expenses. The downside here is you have less flexibility on your post tax dollars (compared to if they were in your pocket), but it was free money to begin with.

Note: If you need help preparing your HSA tax form 8889, please consider my service EasyForm8889.com. It asks you simple questions and fills out Form 8889 correctly for you in about 10 minutes.

HSA Contributions from Others on Form 8889

This question was submitted by HSA Edge reader James. Feel free to send in your question today to evan@hsaedge.com.

I read your article on “Contributing to HSA’s with a Cafeteria Plan” and have a question. I am a federal employee with the Aetna High Deductible Health Plan. The government automatically deducts my premiums from each paycheck pretax through premium conversion. Aetna contributes $1,500 to my HSA each year. Where do I report Aetna’s $1,500 contribution on Form 8889?

One of the benefits of Health Savings Accounts is that literally anyone willing can make a contribution to your HSA on your behalf. This means that if you have a parent, grandparent, rich uncle, friendly employer, or random organization that wants to give you money for your medical care, you can accept it in your HSA.

HSA Contributions from Others are Tax Deductible

As if receiving free money wasn’t enough, the IRS gives you another special bonus for HSA contributions from others on your behalf. Incredibly, these contributions from others are deductible on your return. Yes, you read that right: if you receive HSA contributions from another person, you receive a tax deduction for this money. Per Form 969:

HSA-contributions-from-others-on-your-behalf-tax-free

In the above, “eligible individual” is the term for the HSA account holder. The result of this amazing tax treatment is that it trues up these other funds going into your HSA, and in effect gives them the same tax preferred status as your regular HSA contributions. In other words, if you receive a an HSA contribution from another on your behalf, you get the contribution as well as the deduction equal to the contribution amount times your marginal tax rate. Score!

Reporting Other HSA Contributions on Form 8889

Come tax time, reporting these contributions on Form 8889 can be a complication. Two lines on that form are used to report regular contributions to the HSA. Line 2 is used to report pre-tax contributions that you made during the year. Amounts on this line will reduce your taxable income. Line 9, on the other hand, is called Employer Contributions and amounts here do not reduce your taxable income. The “contributions from others” do not fall neatly into these categories, and are sort of in an “in between” zone.

Luckily, the Form 8889 instructions provide guidance on this situation. Comparing the two tax form lines, you can see that this situation is explicitly handled:

HSA-Form-8889-Line-2-tax-deductible-contributions
HSA-Form-8889-Line-9-employer-contribution-info

Per your question, it is not entirely clear if Aetna is contributing as your employer or as another entity. Since they are an insurance company, my guess is as another entity i.e. as another on your behalf. In this case, it is the best possible scenario, as you get the free money and get to deduct the contribution.

Note: if you need help recording your contribution on your HSA taxes this year, please consider using my service EasyForm8889.com to complete Form 8889. It is fast and painless, no matter how complicated your HSA situation.

HSA Employer Contributions on W2 Box 12 “W”

Come tax time when you need to file Form 8889, you may be wondering how to find your contributions to your HSA. We know that you should be receiving Form 5498-SA from your HSA custodian that outlines the total contributions that went into your HSA during the year. However, this form is a lump sum total: it does not break out employer (no tax impact) vs. employee (tax deductible contributions); it just shows how much went into the account that year. Also remember that form 5498-SA may be missing prior year contributions made in the current year.

So how can you figure out your employer contributions that were made? How can you use this information to complete Line 3 and Line 9 of Form 8889?

A word about Cafeteria Plans

For one, let’s clarify that cafeteria plan contributions are counted as employer contributions. Cafeteria plans are when your employer withholds your contributions which they send to the HSA custodian for you. So these are employee contributions but your employer is doing the work for you. The benefit of cafeteria plans is that they are already pre-tax; not just income tax, but medicare / social security / other tax. So you save the taxes up front and get them deposited automatically into

You will see that for both the W2 and Form 8889, cafeteria plan contributions function just like employer contributions, not employee contributions.

Employer vs. Employee Contributions on W2

When you receive your W2 at year end, you will have a Box 12 marked with “W” and your employer contributions for the year. As mentioned, this amount will contain:

Amounts your employer contributed to your HSA
Amounts you contributed to your HSA through your employer via a cafeteria plan

Here is what Form W2 looks like for 2018 with HSA contriibutions:

HSA-employer-contributions-W2-example

So this box indicates any employer contributions for the fiscal year. Note that this box will not contain any prior year contributions – these will need to be added to the amount. If your employer pays a bonus or end of year contribution into your HSA that occurs in the following year, be sure to add that in.

Around the same time you will receive Form 5498-SA from your custodian. It will detail the total contributions made to your HSA. Again, be sure to add any prior year contributions before filing Form 8889. Using this and your W2, you can calculate the employee contributions to your HSA.

Employee Contributions equal contributions on Form 5498-SA minus those on your W2 Box 12 “W”

What this is saying is, “Total HSA contributions – Employer Contributions = Employee Contributions.” Using these two documents, you can back out and determine your contribution amount.

Alternatively, you may be able to access your HSA custodian’s website to see a breakdown of employee vs employer contributions. But it is always best to confirm with the official documentation in case you need to correct anything.

Impact on Form 8889

Now that we know the difference between employee and employer contributions, you need to handle them correctly on IRS tax form 8889 for Health Savings Accounts. You will report your (post-tax) employee contributions on Line 2, and employer (including cafeteria plan) contributions on Line 9.

Note: if you need help accounting for your HSA contributions, please consider my service EasyForm8889.com to complete Form 8889. It asks simple questions in a straightforward way and will generate your HSA tax form in 10 minutes. It is fast and painless, no matter how complicated your HSA situation.