E6-15125. Employer Comparable Contributions to Health Savings Accounts Under Section 4980G; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correcting amendment.

SUMMARY:

This document contains a correction to final regulations (TD 9277) that were published in the Federal Register on Monday, July 31, 2006 (71 FR 43056) providing guidance regarding employer comparable contributions to Health Savings Accounts (HSAs) under section 4980G.

DATES:

These corrections are effective July 31, 2006.

FOR FURTHER INFORMATION CONTACT:

Mireille T. Khoury, [phone] (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The correction notice that is the subject of this document is under section 4980G of the Internal Revenue Code.

Need for Correction

As published, the final regulations (TD 9277) contain errors that may prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 54

• Excise taxes
• Pensions
• Reporting and recordkeeping requirements

Correction of Publication

Accordingly, 26 CFR part 54 is corrected by making the following correcting amendments:

PART 54—PENSION EXCISE TAXES

Paragraph 1. The authority citation for part 54 continues to read, in part, as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 54.4980G-0 is corrected by:

1. Revising the entries for 54.4980G-4 Q-5 and Q-11.

2. Revising the entries for 54.4980G-5 Q-3.

§ 54.4980G-0

Table of contents.

* * * * *

§ 54.4980G-4

Calculating comparable contributions.

* * * * *

Q-5: Must an employer use the same contribution method as described in Q & A-2 and Q & A-4 of this section for all employees for any month during the calendar year?

* * * * *

Q-11: If an employer makes additional contributions to the HSAs of all comparable participating employees who are eligible to make the additional contributions (HSA catch-up contributions) under section 223(b)(3), do the contributions satisfy the comparability rules?

* * * * *

§ 54.4980G-5

HSA comparability rules and cafeteria plans and waiver of excise tax.

* * * * *

Q-3: If under the employer's cafeteria plan, employees who are eligible individuals and who participate in health assessments, disease management programs or wellness programs receive an employer contribution to an HSA and the employees have the right to elect to make pre-tax salary reduction contributions to their HSAs, are the contributions subject to the comparability rules?

* * * * *

Par. 3. Section 54.4980G-4 is corrected by:

1. Revising A-2 paragraph (c) Example 2.

2. Revising A-2 paragraph (e) Example 1.

§ 54.4980G-4

Calculating comparable contributions.

* * * * *

A-2: * * *

(c) * * *

Example 2.

In a calendar year, Employer J offers its employees an HDHP and contributes on a monthly pay-as-you-go basis to the HSAs of employees who are eligible individuals with coverage under Employer J's HDHP. In the calendar year, Employer J contributes $50 per month to the HSA of each employee with self-only HDHP coverage and $100 per month to the HSA of each employee with family HDHP coverage. From January 1st through March 31st of the calendar year, Employee X is an eligible individual with self-only HDHP coverage. From April 1st through December 31st of the calendar year, X is an eligible individual with family HDHP coverage. For the months of January, February and March of the calendar year, Employer J contributes $50 per month to X's HSA. For the remaining months of the calendar year, Employer J contributes $100 per month to X's HSA. Employer J's contributions to X's HSA satisfy the comparibility rules.

(d) * * *

(e) * * *

Example 1.

In a calendar year, Employer K offers its employees an HDHP and contributes on a look-back basis to the HSAs of employees who are eligible individuals with coverage under Employer K's HDHP. Employer K contributes $600 ($50 per month) for the calendar year to the HSA of each employee with self-only HDHP coverage and $1,200 ($100 per month) for the calendar year to the HSA of each employee with family HDHP coverage. From January 1st through June 30th of the calendar year, Employee Y is an eligible individual with family HDHP coverage. From July 1st through December 31st, Y is an eligible individual with self-only HDHP coverage. Employer K contributes $900 on a look-back basis for the calendar year to Y's HSA ($100) per month for the months of January through June and $50 per month for the months of July through December. Employer K's contributions to Y's HSA satisfy the comparability rules.

* * * * *

Guy R. Traynor,

Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).