Important Clarification for HSA Contribution Reporting on W-2 Forms

With 2008 winding down and tax time rapidly approaching, employers who have a Health Savings Account (HSA) should be aware of some important points regarding contribution reporting. Whether you complete your own W-2s or use a payroll service, you will want to ensure that all employer contributions made to an employee’s HSA are recorded on the employee’s W-2 in Box 12 with Code “W”. This is described on page 6 of the W-2 instructions on the IRS website. Furthermore, this figure should also include amounts the employee contributed to the HSA through a section 125 cafeteria plan (explained on page 13 of the W-2 instructions).

In addition to reporting HSA information on your employees’ W-2 forms, you should be aware of other forms your employees may receive throughout the year that are associated with their HSA. The following is a brief explanation of these forms:

Form 8889
This is the main form on which employees should report all contributions to their HSA account (including contributions made by their employer). It is also used by the employee to report distributions made from their account during the course of the year. The form 8889 should be filed when employees do their taxes along with their 1040.

Form 1099-SA
This form is used by trustees or banks to report account distributions to both the employee and the IRS. The trustee must send this form to the HSA owner by January 31 and must report this to the IRS by March 31. Employees can use this information to help complete the distribution section of form 8889.

Form 5498-SA
This form is used by trustees to report annual participant contributions, as well as the fair market value of any existing HSA accounts. Trustees must send this report to the HSA owner and the IRS by May 31. This form is for the HSA owner’s informational purposes only and does not need to be filed with the IRS. The contribution amount contained on this form should have already been filed on form 8889.

Should you have additional questions regarding HSA contribution reporting, please contact our office at 919-403-1986.

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December 22, 2008

Hill, Chesson & Woody Employee Benefit Services

194 Finley Golf Course Rd, Suite 200,
Chapel Hill, NC 27517
Phone: 919.403.1986
Fax: 919.913.0237

www.hcwbenefits.com