Do HSA contributions made through payroll deductions count as Employer Contributions?

[anluan]

Hi. I have a HSA account through my employer. My employer puts in $750 into the account and also deducts from may paycheck to add to the account. Do contributions made through payroll deductions count as Employer Contributions?

If so, does that mean these funds would qualify for the Employer Excess Contribution exception that allows 6 months from the tax due date to withdraw any excess contributions as found on the IRS website: 

https://www.irs.gov/instructions/i8889#en_US_2024_publink37971yd0e1392

Under Employer Excess Contributions

"Note: If you timely filed your return without withdrawing the excess contributions, you can still make the withdrawal no later than 6 months after the due date of your tax return, excluding extensions. If you do, file an amended return with “Filed pursuant to section 301.9100-2” written at the top. Include an explanation of the withdrawal. Make all necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed)."

[Opus 17]

All funds contributed by payroll deduction, whether employer assistance or voluntary salary reduction, are considered "employer contributions" for tax law.

If you have an excess contribution, and you need to remove the excess contribution, there is no difference between money contributed by the employer, the employee, or money contributed by you directly out of pocket.  You just specific a dollar amount, and the HSA bank returns that to you, along with any earnings.  The amount is added to your taxable income because it is not deductible. 

[JCampbellEA]

Contributions made to your Health Savings Account (HSA) through payroll deductions are typically considered employee contributions, not employer contributions. This is because these amounts are deducted from your paycheck and are part of your own funds being contributed to the HSA. However, if your employer allows you to make these contributions through a Section 125 cafeteria plan, they can be made on a pre-tax basis, which provides a tax advantage similar to employer contributions. The $750 your employer directly contributes is considered an employer contribution.

To address an excess contribution to a Health Savings Account (HSA) made by your employer, you need to follow these steps:

1. **Identify the Excess Contribution**: Determine the amount that exceeds the annual contribution limit. For 2024, the contribution limits are $4,150 for self-only coverage and $8,300 for family coverage.

2. **Withdraw the Excess**: Request a corrective distribution from your HSA custodian. This involves withdrawing the excess amount plus any earnings on that excess before the tax filing deadline, typically April 15 of the following year.

3. **Report on Tax Return**: Include the excess contribution amount in your gross income for the year the contribution was made. The earnings on the excess are also taxable in the year they are withdrawn.

4. **Avoid Penalties**: By withdrawing the excess before the tax deadline, you avoid the 6% excise tax on excess contributions. Make sure to keep records of the corrective distribution and any communications with your HSA custodian for your records.

[anluan]

I need to withdraw excess contributions from my HSA account but my HSA provider says they may not be able to by the tax deadline. I am trying to understand if payroll deductions will be included as an Employer Contribution because in that case it seems like I would qualify for the 6 month after tax deadline grace period as is here: 

https://www.irs.gov/instructions/i8889#en_US_2024_publink37971yd0e1392

Under Employer Excess Contributions

"Note: If you timely filed your return without withdrawing the excess contributions, you can still make the withdrawal no later than 6 months after the due date of your tax return, excluding extensions. If you do, file an amended return with “Filed pursuant to section 301.9100-2” written at the top. Include an explanation of the withdrawal. Make all necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed)."