HSA Contribution from Health Insurance Company

[Katej1213]

Hi there! I participate in the UHC Motion program though my health insurance company (UnitedHealthcare) which allows me to earn money by hitting different fitness goals every day (FIT credits) that add up as wellness contributions on a quarterly basis. Every quarter, UHC Motion transfers those wellness contributions (FIT credits) directly to my HSA. The wellness contributions from UHC Motion are not included on my W-2, but they do show on my 5498-SA. 

Do I need to include the wellness contributions from UHC Motion on my personal tax return? If so, which section do I need to include them under?

Thank you in advance for any assistance!

[dmertz]

This sounds like something that you would report as miscellaneous income and as a personal HSA contribution.  The deduction for the HSA contribution would offset the miscellaneous income so there would be no change in your AGI, but the entry of the HSA contribution is necessary for Form 8889 to be prepared correctly.

Alternatively you could indicate that your employer told you about this amount of HSA contribution and that the employer did not include it on your W-2.  The taxable result would be the same as above but the reporting of the amount would be on Form 8889 line 9 instead of line 2 and there would be no miscellaneous income  to report or any HSA deduction.

[Katej1213]

So my fear with doing it the first way you suggested is that I'm afraid I will enter the information incorrectly within TurboTax. I may just have to do the option where I can talk to an expert, but I am worried that they may not know either because I really can't find any information on this type of contribution.

My question about reporting it the second way you suggested is this: would these contributions be considered an "employer contribution" because the credits that I earn by hitting goals each day are distributed on a quarterly basis directly from UnitedHealthcare Motion to my HSA account? 

[dmertz]

It's probably more correct to report it the first way, but either way results in no change to your AGI and the sum of Form 8889 lines 2 and 9 agreeing with your Form 5498-SA.

[Katej1213]

I definitely understand what you're saying about reporting it the first way, and I do agree that that would be a better way to report it. 

On one of the brochures for UHC Motion, it says:

"Balance transfers: Once each quarter, members' earnings are transferred to their HSAs. Earnings distribution: Think of the quarterly transfers as their distributions."

I think this means, as you said, that I should treat it like my own contribution? The use of "distribution" there confuses me. I have attached the full page for review. 

[dmertz]

It appears that "distribution" is referring to a distribution from the UnitedHealthcare Motion account (which is then directed to the HSA as a personal contribution), certainly not a distribution from the HSA.

[Katej1213]

Yes I agree with that - I think the wording is just a bit confusing since it definitely wouldn’t be an HSA distribution (definitely a distribution by UHC). After further research, I think I should just count it as my own personal contribution (based on the brochure I posted above and the other info I’m sharing in this post). It states that I should claim any contribution made by “others” or “anyone on my behalf,” and I don’t think I need to claim it as income. I also read through a publication published by the IRS and it said the same thing, and I stumbled upon another Intuit post where it said to simply claim as my own contribution. So I think I’m good now and understand what to do!

[dmertz]

If you paid for the health insurance with after-tax money (and did not claim a deduction for the health insurance premiums), this money would probably just be considered to be a nontaxable return of premium.  However, if the health insurance was paid for with before-tax money or you claimed a deduction for this amount, I think it would be taxable income.  Getting money back that you never paid tax on and then claiming a deduction for putting this money into an HSA would be double dipping.

[Katej1213]

That part is not clear to me because my employer pays health insurance premiums if you are the only one covered under the plan (e.g., my husband and I have insurance through our respective employers so I don’t pay anything for mine, but if I were to have a family plan my company would only pay a portion). 

I still feel like based on what the Blackhawk Bank information was saying is that a benefit of if someone else puts money in is that I still get to claim it to offset my income?

[Katej1213]

I also found this which makes it seem like I’m supposed to claim:

[dmertz]

Since you didn't pay tax on the money that ended up in the HSA, you don't get a deduction for this HSA contribution.  It appears that the HSA is effectively being funded from the premiums paid by your employer (equivalent to  a discount on the premiums paid by your employer and an HSA contribution by your employer), so I don't think that I see any problem reporting it as an HSA contribution made by your employer that was not reported on your W-2, resulting in it being included on Form 8889 line 9 instead of line 2 and no need to include it as miscellaneous income.

[Katej1213]

But the HSA is not being funded by premiums when it comes to the wellness contributions. I have to meet certain fit goals each day to earn the money that becomes my wellness contributions each quarter from UnitedHealthcare Motion (I have 3 goals each day and each goal is worth $1 when met, so I get a maximum of $3 per day when goals are hit). If I don’t meet the goals and earn the money myself, $0.00 goes into my HSA. 

I don’t understand how these contributions wouldn’t be included on line 2, since that is where any contributions on my behalf are supposed to go (whether or not they are made by me or anyone other than my employer). This has really become such a headache over such a small amount of money. 

[Katej1213]

Sorry for double responding again, but

I also found this in searching on Cigna’s incentive information. 

[RobertB4444]

@Katej1213 Your insurance company is paying you to work out.  If you get paid to do a thing then it is taxable income.  The IRS expects you to report 100% of taxable income.

@dmertz is right - you can't take a deduction for the money that is contributed to your HSA account if you haven't paid tax on it.  So you need to first enter it as taxable income and THEN it can be a deduction.  

[Katej1213]

Okay, thank you for your assistance! So I will include the wellness contribution incentive payment total as income and then include it as my own contribution (line 2) of the Form 8889 to offset that income… now my question is which section in TurboTax am I supposed to use for the income from the UHC wellness incentives since I don’t have a tax form that it corresponds to?

I didn’t think it would be right to include under my employer’s contribution but am not sure where to put it then.