Q. As an employer, do I own my employees' HSAs? Can I control how they spend the money in them?
A. No. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their payroll check.

Q. My employees want to contribute to their HSAs but want to make sure they get a tax benefit out of doing so. How does that work?
A. Employee contributions can be made to HSAs on either an after-tax or pre-tax basis. If made on an after-tax basis they can be counted as an above-the-line deduction on their tax return, effectively making their contributions tax-free. If they want to make the contribution pre-tax it can be done through a Section 125 (also called a "salary reduction" or "cafeteria plan").

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Q. How much do I have to contribute to my employees' HSA, as an employer?
A. As much or as little as you want (while staying below the legal limit on the account of $2,850* or $5,650* for employees with family coverage). *These amounts are for 2007. They are indexed annually for inflation.

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Q. Do HSA contributions have to be made in equal amounts each month?
A. No, you can contribute in a lump sum or in any amount or frequency you wish. However, keep in mind that the funds belong to the employee after they are deposited.

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Q. As an employer, do I have to contribute the same amount to every employee's HSA?
A. Great news! Effective January 1, 2007, the rules now allow greater employer contributions for lower-paid employees. Previously, employer contributions under the comparability rules had to be the same amount or percentage of the deductible for all employees with the same category of coverage. Consequently, employers could not contribute higher amounts to lower-paid employees. The new rules provide an exception to the comparability rules allowing employers to contribute more to the HSAs of non-highly compensated individuals. For this purpose, the definition of "highly compensated employee" is based on the same definition used for qualified retirement plans.

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Q. Our company offers benefits through a Section 125 plan, do contributions have to be comparable under these plans as well?
A. Section 125 plans (also known as "salary reduction" or "cafeteria" plans) must meet a different set of rules. Under these plans, contributions (both from employer and/or employee) must meet "non-discrimination" rules. These rules require the employer to ensure that contributions do not favor higher compensated employees.

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Q. Our company wants to offer "matching" contributions, can we do that?
A. Yes, but your company can only offer "matching" contributions through a Section 125 plan. Remember that the non-discrimination rules still apply.

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Q. I don't offer health insurance, but some of my employees have opened HSAs and I'd like to help them out, what can I do?
A. Your company can make pre-tax contributions to your employees' HSAs as long as you do so for all eligible employees. However, the comparability rules apply. If you have a Section 125 plan, then the non-discrimination rules apply.

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Q. How are contributions treated for owners and shareholders of S corps?
A. Owners and officers with greater than 2% share of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income. However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.

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Q. How are contributions treated for partners in a partnership or limited liability company (LLC)?
A. Partners in a partnership or LLC cannot make pre-tax contributions to their HSAs through the partnership by salary reduction. However, they can make their own personal contributions to their HSAs and take the "above-the-line" deduction on their personal income taxes.

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Q. May a self-employed person contribute to an HSA on a pre-tax basis?
A. No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.

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Q. Can I make pre-tax contributions through my employer?
A. If your employer provides a salary reduction plan (also called a "Section 125" or "cafeteria" plan), you can make contributions to your HSA on a pre-tax basis. Once you claim this tax advantage, you can no longer take the "above-the-line" deduction.

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Q. When I contribute to my employees' HSAs, do I get any tax breaks?
A. Yes, you can deduct your contribution as a business operating expense. Employees get tax breaks too. Their personal contributions are always tax deductible, and they don't pay tax on withdrawals or earned interest used for eligible medical expenses.

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Q. I'm self-employed. Can I contribute to my HSA on a pre-tax basis?
A. No. People who are self-employed, partners or S-Corporation shareholders aren't really considered employees, which is why they don't qualify for pre-tax employer contributions. However, your contributions are eligible for an above-the-line deduction on your tax return.

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