Former employer's erroneous HSA contributions

4 replies
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Hello! For 2025, I can contribute up to $9550 to my HSA including catch-up. Through Oct 2025, my payroll deductions were $8000. My employer however transferred about $1800 more into my HSA account by error even though they did not withhold that amount from my paychecks. I was planning on contributing the remaining $1550 myself but the HSA trustee is indicating that there is already an excess contribution of $250 to my account that I must withdraw before April 15th to avoid excise tax. The 5498-SA from the trustee would have the $9800 amount reported to the IRS. I understand that an employer can withdraw the erroneous contribution any time. So my conundrum is whether or not I should contribute the $1550 myself into a different HSA account in anticipation of my employer withdrawing the excess contribution. If I do contribute, is there a way to indicate to the IRS that there has been an erroneous contribution that must be returned to the employer. If I don't contribute and also proceed to withdraw the excess contribution of $250, and then later my former employer withdraws the erroneous contributions, I would have missed out on maxing out my contributions and miss the deduction. The twist here is that in Oct 2025 my former employer went out of business and I am unable to contact them anymore. Thanks.

Deduction

RobertB4444

Alumni - Intuit

You should withdraw the $250 regardless. Then you can take the deduction for the $1550 contribution that your employer made. You can't contact them and you can't control what they do but you should do what is best for you and then react if they do something different.

If they pull out the $1800 that they contributed you can amend later. You can't contribute $1550 to another HSA because $9550 is your max across all HSAs. So the only thing that you can do is what is best for you and then amend the tax return later if your former employer decides to pull the money out.

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sgn0Author

Level 2

Thanks RobertB4444. Just to make sure I understand your suggestion correctly: after I withdraw the excess contribution of $250, even though the $1550 was contributed by my employer (albeit erroneously), because it was contributed into my account (doesn't matter who contributed how much into the account), I can still indicate in my filing that I contributed $1550 and take a deduction for that amount? Basically, it is an IOU to my former employer.

If I do this, I am thinking that I will roll my account over to another institution by which the former employer cannot take the amount from my HSA without my knowledge but will have to ask me to repay which I will happily do so out of pocket with after tax dollars.

RogerD1

Alumni - Intuit

You are correct, the amount of $1550 that was not reported on the W-2 can be added in the HSA sections as Contributions you personally made - that way they get account for in an income adjustment for 2025.

Probably not a bad idea to do a rollover of your HSA to another plan - there are plenty of good offerings out there. And also to repay with your own funds rather than seeing a sneaky withdrawal from your ex-employer.

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