HSA Contributions In Controlled Group

We have a client in a controlled group offering the same group health plan benefits with the same employee contributions per employer ID number. The client would like to offer different HSA contributions to manufacturing employees and mill employees. Can they do this? This is not a Section 105(h) situation. The employees in both EINs are not highly compensated employees.

Yes, as long as employees are allowed to make pre-tax contributions. If so, this means employer contributions are made through a cafeteria plan and the Section 125 cafeteria plan nondiscrimination rules apply. The cafeteria plan nondiscrimination rules allow employer contributions in different amounts to different groups of employees as long as the contributions do not discriminate in favor of highly compensated employees.

If employees are not permitted to make pre-tax contributions, the much stricter “comparability rules” apply. These rules require employer contributions to be the same amount or the same percentage of the annual HDHP deductible. Employers can treat full-time and part-time employees separately for determining comparability, but it cannot vary its contributions based on other classifications such as job type or location.

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