Tax News

CCH (cch.taxgroup.com) reports:

The Treasury and IRS have issued proposed pension excise tax regulations that provide guidance on employer comparable contributions to Health Savings Accounts (HSAs) under Code Sec. 4980G. Pension excise tax regulations are also proposed covering the return requirements for excise tax payments for failure to meet the continuing coverage requirements under Code Sec. 4980B and Code Sec. 4980D, as well as the comparable coverage requirements for Archer MSAs under Code Sec. 4980E
and for HSAs.
Special Rule for Non-Highly Compensated Employees
The proposed regulations allow an employer to contribute to the HSAs of non-highly compensated employees in an amount that is larger than the employer's contribution to the HSAs of the highly compensated employees with comparable coverage during a period. Contributions to highly compensated employees may not exceed employer contributions to the HSAs of non-highly compensated employees with comparable coverage during a period.
The comparability rules will still apply with respect to contributions to HSAs for those eligible individuals who are in the same category of employees with the same category of high deductible health plan coverage (HDHP).
The proposed regulations define a highly compensated employee as either (1) a five-percent owner during the tax year or the preceding year or (2) an employee who for the preceding year has compensation from the employer in excess of $105,000 (indexed for inflation for 2008) and, if elected by the employer, was in the group consisting of the top 20 percent of employees when ranked on compensation.
Maximum HSA Contribution Allowed for Employees Who Become Eligible Mid-Year
Eligible individuals may make or have made the maximum annual HSA contribution based on their HDHP coverage during the last month of the tax year. Under the proposed regulations, a employer can contribute up to this maximum contribution on behalf of all employees who are eligible individuals during the last month of the tax year, including employees who become eligible after January 1 of the calendar year and eligible individuals who are hired after that date ("midyear eligible individuals").
Special Comparability Rules for Qualified HSA Distributions
A qualified HSA distribution is a direct distribution of an amount from a health flexible spending arrangement (health FSA) or from a health reimbursement arrangement (HRA) to an HSA. Under the proposed regulations, if an employer offers this type of distribution to any employee covered under any HDHP, the employer must offer qualified HSA distributions to all employees who are eligible individuals covered under any HDHP. Employers who offer qualified HSA distributions only to employees who are eligible individuals covered under the employer's HDHP are not required to offer qualified HSA distributions to employees who are eligible individuals, but who are not covered under the employer's HDHP.
Return Requirements for Excise Tax Payments
Under the proposed regulations, persons liable for the excise taxes under Code Sec. 4980B, Code Sec. 4980D, Code Sec. 4980E or Code Sec. 49980G must file Form 8298, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code. The tax must be paid at the time prescribed for filing the return, without extensions. With respect to the excise tax under Code Sec. 4980B and Code Sec. 4980D for failure to continue coverage, the return is due on or before the due date or filing the person's federal income tax return for employers and third parties. For multi-employer or specified multiple health plans, the return is due on or before the last day of the seventh month after the end of the plan year. The excise tax return for non-comparable contributions under Code Sec. 4890E or Code Sec. 4980G is due on or before the 15th day of the fourth month following the calendar year in which the non-compabrable contribution was made.
Public Hearing
A public hearing has been scheduled for the proposed regulations on October 30, 2008, at 10:00 a.m.
Proposed Regulations, NPRM REG-120476-07, 2008FED ¶49,821
Other References:
Code Sec. 4980B
CCH Reference - 2008FED ¶34,600E
CCH Reference - 2008FED ¶34,600I
Code Sec. 4980D
CCH Reference - 2008FED ¶34,610D
Code Sec. 4980E
CCH Reference - 2008FED ¶34,615D
Code Sec. 4980G
CCH Reference - 2008FED ¶34,619R
CCH Reference - 2008FED ¶34,619V
CCH Reference - 2008FED ¶34,619X
CCH Reference - 2008FED ¶34,619YC
CCH Reference - 2008FED ¶34,619YE
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