There are some general rules pertaining to timeliness of HSA account contributions. While employer contributions to an HSA don’t have a particular “due date,” the employer should sufficiently follow the plan terms. So if an employer communicates to employees that employer contributions will be contributed at a specific interval (such as per pay period), the employer should contribute based on that timetable. As an outside compliance limit, the IRS generally allows employers to contribute to employees’ HSAs through the tax filing deadline for the year in which the HSA contributions were due.
On the other hand, participant contributions withheld from employee paychecks, including employee-deferred HSA contributions, are subject to the DOL’s plan asset regulations governing welfare and pension benefits. Specifically, participant contributions become plan assets “as of the earliest date on which such contributions can reasonably be segregated from the employer’s general assets, but in no event later than 90 days after the payroll deduction is made.” This generally means the outside limit for submitting contributions is 90 days, but this is not to be considered a safe harbor because contributions should nearly always be segregated in a matter of days rather than weeks.
This deadline applies to participant contributions coming into an employer’s possession under the welfare benefit plan, including personal checks used to pay COBRA contributions, premiums during FMLA leave, retiree premiums, salary reductions under a cafeteria plan, and HSA contributions. As such, employers should contribute employee-deferred HSA contributions to their accounts as soon as the funds can be separated from the employer’s general account. In this way, the deadline for forwarding HSA contributions is similar to the deadline for forwarding employee 401(k) deferrals.
Keep in mind, though, that there is a safe harbor for small employers for this purpose. Employers with fewer than 100 participants can utilize a DOL “safe harbor” that gives them up to seven business days to deposit plan assets (including HSA contributions) to an employee’s account.
When an employer has failed to forward participant contributions on a timely basis, there are procedures available to correct both the fiduciary breach and the prohibited transaction that has occurred. There is a DOL correction program available to employers that commit this failure. The Voluntary Fiduciary Correction Program (VFCP) allows employers to correct failures (such as failure to forward HSA contributions on a timely basis) by submitting an application for the program and filing a Form 5330, acknowledging the prohibited transaction. However, as with any compliance failure, an employer that fails to timely forward contributions should consult with legal counsel.
Source: NFP Benefit Partners Compliance and Regulatory Frequently Asked Questions; October 1, 2019
My employer has failed to contribute my bi-weekly contributions to my HSA account for up to 100 days at least 4 times in my 2 years of employment. They don’t even bother until I confront them. Isn’t there anything I can do to protect myself as an employee?
I would like an answer to this too. I tried to use my HSA at the dentist and come to find out that my money was in my employer’s account. How is a deduction from my paycheck in my employer’s account?
I would like an answer to this too. I tried to use my HSA at the dentist and come to find out that my money was in my employer’s account. How is a deduction from my paycheck in my employer’s account?
Amber,
I am so sorry for the delay, my comments must not have gotten posted. There are multiple things you can do to protect yourself and make sure your employer is going things correctly. Please know, in these circumstances I would prefer a phone call to discuss. Are you free, I can schedule a time to talk this week.
Amber,
I am so sorry for the delay, my comments must not have gotten posted. There are multiple things you can do to protect yourself and make sure your employer is going things correctly. Please know, in these circumstances I would prefer a phone call to discuss. Are you free, I can schedule a time to talk this week.
Dale,
This is very concerning and should not happen – this means your employer may not be distributing your funds appropriately however each group may have unique time periods when these get distributed. H.S.A.s, F.S.A.s (Flexible Spending Account) and H.R.A.s (Health Reimbursement Arrangements) all are different pre-tax funding arrangements for insureds to use to pay claims. Not all of these may be offered at an employer but I think it is good for us to discuss further, it will help me provide you more specific information on how to work with your employer to make sure this is done correctly.
who would someone contact if HSA funds have been withheld for long periods of time and never transferred to the recipients account. Is that a DOL issue?
There are a few options, would you like to talk through those options? My office line is: 608.442.3734 and I would be happy to meet/ talk with you this coming week.
Chris Noffke
Can the HSA be dispersed in 4 parts over the whole year? What if I need to use my HSA money in the beginning of the year but it’s not available?
An HSA unlike a FSA (flexible spending account) only allows you access to the money in the account at time of expense. In order to have access to all the funds you plan to contribute for the year, you would need to “front load” your account. Please know you can however make distributions to the HSA in any increments and frequency as long as it is at or under the single and family allowances.
An HSA also can allow for you to invest more money into investment strategies. To make this even more attractive, these funds never expire, or have a use it or lose it requirement. The HSA will also not require you to start taking money out at a specific age.
If you would like to talk more I would be happy to schedule some time with you!