2023 HSA Excess Contribution Employer contributions not on W-2

[flying-skyler]

I have been in a High Deductible Plan contributing the maximum amount to HSA for a number of years. In all of the prior year's my W-2 Code W was the sum of my contributions to the HSA and my employer contributions.  

i.e. 2022

Employee payroll deductions = 6,300

Employer contributions = 2,000

2022 W-2 code W = 8,300

In December 2023 I retired with severance.    The 2023 W-2 only shows my contributions and does not include my employers' contributions.   

i.e. 

Employee payroll deductions = 6,750

Employer contributions = 2,000

2023 W-2 code W = 6,750

Because I also signed up for Social Security which automatically signs me up to Medicare part A backdated 6 months (part B 1/2024).   I now need to backout the excess contributions from the backdated part A coverage.  Since the W-2 does not show my employer's contributions, Turbo Tax will only calculate backing out the employee excess contributions and not the employer's excess contributions.  

I called my company for a corrected W-2 but the person I spoke to says it is correct (with only employee contributions) ... and said that the tax rules changed this year ... but created a ticket for back office (wait 5-7 business days to hopefully get a call back) to check that answer.

1.  Are the employer's excess contributions required to be backed out?

2. Are there special rules for severance/retirement related to employer excess contributions? 

3. Are there changes in 2023 in this area? 

4. If they are required to be backed out, how can Turbo Tax correctly calculate the amount if I can't get a corrected W-2 from my employer? 

Thanks in advance for looking at this Post.

[BillM223 · Accepted solution]

1. Are the employer's excess contributions required to be backed out?

If the employer over contributions to your HSA because you were never an eligible individual (Q23) or because they contributed more than the maximum (Q24), then the employer can retrieve the excess. This is from IRS Notice 2008-59. To be fair, the IRS may have released additional Notices, but these have to be searched for individually (i.e., not easy).

2. Are there special rules for severance/retirement related to employer excess contributions? 

Not that I am aware of, but see the answer to #1.

3. Are there changes in 2023 in this area? 

There have been a number of Notices issued in 2023, but they concentrate on COVID, changes in allowable treatment, and so on.

4. If they are required to be backed out, how can Turbo Tax correctly calculate the amount if I can't get a corrected W-2 from my employer? 

What you need to do is this:

1. Reopen your tax return in TurboTax.

2. Go to the HSA interview and navigate to this screen (note when you click YES, three extra lines appear):

Enter the extra amount that the employer told you in the box where the $2,000 is on this screen.

Now, TurboTax knows how much your employer actually contributed to you.

See if TurboTax updates the excess HSA contribution amount to match the code W amount plus the extra employer contribution. Then, when you say, "yes, I will withdraw all this", assuming you have the money in your HSA, then you will notify your HSA custodian who will refund all of it - to you. Yes, TurboTax will add this to your taxable income, but this way, you get to keep it, not your employer.

Remember that this needs to be done before April 15th.

[Mike9241]

what you have to find out is whether or not the employer pulled the 2023 $2K from your HSA which might have been in 2024. if it did the W-2 would be correct. contact the custodian/trustee or look at any statements furnished by the HSA showing activity

then  the only excess contributions would be yours for the backdated months you were covered by Medicare.