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IRS Highlights Circumstances Permitting Recoupment of Erroneous HSA Contributions

Section 223 of the Internal Revenue Code provides that an individual’s interest in the balance of her health savings account (“HSA”) is not subject to forfeiture. Consequently, contributions made by an employer to an employee’s HSA may be recouped only in very limited circumstances. In IRS Notice 2008-59 (the “Notice”), the IRS described several specific circumstances in which an employer may recoup contributed amounts from the HSA trustee. However, in its recently released Information Letter 2018-0033 (the “Letter”), the IRS confirmed that the circumstances discussed in the Notice were not intended to be exclusive and clarified that if there is clear documentary evidence demonstrating an administrative or process error on the part of the employer or the HSA trustee (an “HSA Process Error”), an employer may request that the HSA trustee return the amounts to the employer, with any correction needed to put the parties in the same position they… Continue Reading

March 2019
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