Comment on FR Doc # E7-10529

Proposed ?54.4980G-4 Q/A-15(b) discusses the affects accelerated Employer HSA contributions have on satisfying comparability when employees receive more contributions during a period based on the amount of qualifying medical expenses or receive more contributions on a monthly basis due to termination of employment. But the proposed regulations do not discuss the affect on payroll taxes (FICA, FUTA, RRTA and Income tax withholding) if some or all of the Employer Contributions to an HSA are recharacterized as Excess HSA contributions. Employer Contributions to an HSA are not subject to withholding from wages for income tax or subject to FICA, FUTA or RRTA taxes if, at the time of the contribution, it is reasonable to believe that the employee will be able to exclude the contribution under ?106(d). Under ?106(d)(1) Employer Contributions to an HSA area treated as employer paid health coverage to the extent such amounts do not exceed the HSA maximum limit under ?223(b). Consequently, if an Employer?s HSA contribution exceeds an employee?s HSA maximum limit the ?106(d) protection is lost and the amounts are now taxable. What are the consequences to the Employer? What corrective action, if any, must the employer take? Are the Employer?s Contributions now subject to all payroll taxes, payroll tax withholding and payroll tax reporting? Does it make a difference if this is brought to the attention during the year (when payroll adjustment can be made) or after the tax year? I would like these regulations to go a little further than just discussing the impact on comparability of Employer Contributions and clarify the payroll issues if an Employer Contribution results in an Excess Contribution. Thank You.