trying to get an employer HSA contribution to an individual HDHP

[junkman]

A good friend of mine works for a small (ie 4 person) non-profit (c3 corporation). The employer doesn't have group medical and won't for several reasons. Each employee buys their coverage from whatever source is available.

My friend has a family coverage under an HDHPwith Farm Bureau. The employer is willing to fund the entire HSA contribution and the employee has an existing HSA account with a local bank. The bank won't accept a direct employer contribution because the employer isn't registered with the bank as having an HSA set up for its employees.

The current plan is to pay the entire contribution in a lump sum as W2 income. The employer doesn't want to gross up the amount to cover taxes.

Is there an easy (or any) way to make the contribution tax free? If it goes through payroll, both sides of Medicare and SSI will be incurred and federal tax will be withheld.

 

[Yagents]

If they own a private HDHP, then it should be privately funded by the employee, and the employer should fund through his payroll check, the employee gets the tax deduction. Sorry, no way that I know of to skirt it. Plus, it's probably discriminatory to not offer to the other employees.

Maybe somebody else can chime in........I'm not 100% sure

 

[somarco]

If they own a private HDHP, then it should be privately funded by the employee, and the employer should fund through his payroll check, the employee gets the tax deduction. Sorry, no way that I know of to skirt it. Plus, it's probably discriminatory to not offer to the other employees.

Maybe somebody else can chime in........I'm not 100% sure

It is indeed discriminatory for the employer to single out an employee to receive special treatment (including funding an HSA for Joe but not for Jim or Mary). This would be considered an ad hoc arrangement and would be disallowed in the event of an IRS audit.

Employer would owe fines and penalties, not the employee.

 

[Truce]

Why not have the employer do an ICHRA to let the employees pay their share of their individual premiums pre tax? Make the employer contribution zero and you'll overcome most of the "several reasons" not to have a group plan. The HSA is small potatoes (that's my Farm Bureau joke) compared to the monthly insurance premiums, and the HSA as stated above already has federal tax benefits.