What does the employer need to report if they make contributions to the HSA or allow employees to make payroll contributions on a pre-tax basis?
Both employer HSA funding and employee pre-tax payroll deductions to their HSA are considered employer contributions for both the employer’s Section 125 non-discrimination testing and reporting pre-tax contributions on the employee’s W-2 forms. Employer HSA contributions and all employee payroll deductions should be added together and reported in Box 12, and coded with a “W” on the employee’s W-2 form. IRS Publication 969‡ indicates that employee contributions made by the employer via salary reduction (pre-tax payroll contributions) are not included in the employee’s income. This means these contributions should not be included with income in Box 1.
‡When you click this link, you will leave UMB’s Web site and will go to a Web site that is not controlled by or affiliated with UMB. We have provided this link for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other Web sites may not follow the same privacy policies and security procedures that UMB does so please review their policies and procedures carefully.