HSA Contributions by employer

[gjgogol]

Hello - I was in an HSA eligible HDHP plan by employer. My employer was the federal government, thus I had health insurance through them (FEHP). TT asks for contributions amount made by employer, however, my W2, Box 12 did not identify any contributions. My insurance administrator HSA issued a 5498-SA Tax Form. In that tax form, Box 2 shows Total contributions made in 2024. Is this a nuance of working with the federal government health insurance? Do I still indicate the contributions made by the employer in TT even though the amount doesn't show up in my W2?

[BillM223]

No, your employer just made a mistake.

All HSA contributions made either by your employer or by you through payroll deduction are reported with code W in box 12 on your W-2. This is not optional.

However, employers do make mistakes.

So, when you know the numbers (the total of how much your employer contributed PLUS how much you contributed through payroll deduction), then do the following:

1. Enter the HSA interview.

2. When you are asked if the employer told you about any other contributions, answer YES.

3. Three more lines will appear. The bottom one will say something like "Employer contributions for 2024 not reported on the W-2".

4. Enter your HSA contributions that should have been on your W-2 on this bottom line.

NOTE: these HSA contributions SHOULD HAVE BEEN REMOVED from Wages in boxes 1, 3, and 5 on your W-2. You have no way of knowing of your employer did that just by looking at your W-2; you have to ask them.

If your employer also did not remove these HSA contributions from Wages in boxes 1, 3, and 5 on your W-2, then right now, these contributions are still taxable. That is, your employer has made two mistakes.

To deduct these HSA contributions in this case, then, you would go into the HSA interview (Deductions & Credits->Medical->1099-SA, MSA, HSA), and look for the screen, "Let's Enter [name's] HSA contributions." On the second line, where it says "personal contributions", enter your dollar amount there.

This is not normally the right place, but if your employer also made the second mistake of not removing the HSA contributions from Wages 1, 3, and 5 on your W-2, then this is how you fix it.

You should talk to your employer first and ask them what they did.

[gjgogol]

@BillM223So after doing a lot of additional searching and talking to my agency's payroll office, I think I learned something a little different. I have GEHA HDHP health insurance plan associated with an HSA. A portion of my HDHP premiums are deposited monthly into my HSA, i.e. “premium – pass through” by GEHA.  My agency does not pass through or contribute to my HSA, however, my insurance company (GEHA) does. For each month that am enrolled in their HDHP and eligible for an HSA, the HDHP will pass through (contribute) a portion of the health plan premium to my HSA. In addition, I may contribute my own money to my HSA up to an allowable amount determined by IRS rules. Your HSA dollars earn tax-free interest.

From my insurance brochure...

Federal tax tip: There are tax advantages to fully funding your HSA as quickly as possible. Your HSA contribution payments (not GEHA’s pass through contributions) are fully deductible on your Federal tax return. By fully funding your HSA early in the year, you have the flexibility of paying qualified medical expenses from tax-free HSA dollars or after-tax out-of-pocket dollars. If you don’t deplete your HSA and you allow the contributions and the tax-free interest to accumulate, your HSA grows more quickly for future expenses.

Conclusion (I think)...the contribution by the insurance company that comes out of my premium is not tax deductible.

[BillM223]

Ah, the old "pass-through". That's important to know.

Let's make some assumptions (you can tell me if they are true or not):

1. When the "pass-through" premiums are sent to your HSA administrator, they appear in box 12 with a code of DD. Thus, they are removed from Wages box 1 just like regular insurance premiums.

2. Any HSA contributions that you made by payroll deduction were also removed from Wages (somehow). Did you make any by payroll deduction?

To enter your contributions, go into the HSA interview. When you get to the screen, "Did your employer tell you about any other contributions?", answer YES.

Three new lines will appear. On the bottom line it reads, "Employer and payroll contributions not reported in box 12 of your W-2". Enter the total contributions (from box 2 on the 5498-SA) here.

This works ONLY if your employer removed all HSA contributions from Wages in Box 1 on your W-2. If this is done right, it will not change your tax due or refund, but will make your paperwork right.

NOTE: a funny thing is that your insurance premiums (code DD in box 12) are removed from Wages, but only from Wages. Employer contributions and your contributions through payroll deductions (code W in box 12) are removed from Wages in boxes 1, 3, and 5. So the result is that when your employer (or you, whoever is paying your health insurance premiums) sends money to the insurance company who then sends some of it to your HSA, that because it is reported with code DD instead of code W, you end up paying Social Security and Medicare tax on the amount of the pass-through.

"From my insurance brochure..." All the things said here are true. The HSA is one of the best deals tax-wise in town, because not only are your contributions tax-free, but also all of your earnings, and so long as you use the money taken out for qualified medical expenses, it will stay tax-free even as you spend it. Smart people use the as a special savings account for when they retire, because you can pay for things like Medicare premiums which you normally can't deduct because the Standard Deduction is so high.

"the contribution by the insurance company that comes out of my premium is not tax deductible." On the contrary, it IS tax-free, if it was part of the code DD amount.

[gjgogol]

@BillM223So I had two codes in box 12...D and DD.  When I looked at Boxes 1, 3 and 5, the only amount that appears to be taken out (of Box 1) is the amount shown in Box 12 with code D.  I do not know where the amount showing in Box 12 with code DD came from or how it is being treated in TT. 

I had no additional HSA contributions taken out of my pay other than the "pass-through" premiums. The "pass-through" premiums do not seem to be in boxes 1, 3, or 5. The insurance company takes a portion of my premiums and forwards them to the HSA administrator. In my case, it appears that $2K is deposited into my HSA account for the year (deposited on a monthly basis). On 5498-SA Tax Form, Box 2 Total contributions made in 2024 shows $2K. The 5498-SA Tax Form instructions states, "Generally, contributions you or someone other than your employer make to your HSA are deductible on your tax return.
be excluded from your income and aren’t deductible by you." Since it appears that my "pass-through" premiums did not get taken out of my pay, i.e. W2 Box 1, I SHOULD be able to deduct the portion of my premiums deposited in my HSA account, correct?

[BillM223]

"D" in box 12 = your 401(k) (or whatever qualified plan federal employees have).

"DD" in box 12 = the amount that your employer (and you) paid towards premiums for health insurance.

Both of these amounts are removed from Box 1 on the W-2. 

In your case, you don't appear to have any employer contributions or contributions by means of payroll deduction to your HSA. So in fact, you should not have had a code W in box 12. Your situation is not customary, hence the reason why I reacted the way I did.

Your HSA contributions as "pass-through" were all in that code DD amount, so they WERE removed from Wages in box 1. That is, they were excluded.

You don't need to deduct these contributions on your tax return, because they were excluded already.

You can verify this by asking your HR people to confirm that the pass-through contributions came from your health insurance premiums and therefore were part of the code DD amount.

[gjgogol]

@BillM223Thank you (again). As you suggested I will contact HR to confirm that the pass-through contributions came from your health insurance premiums and therefore were part of the code DD amount.

This is what I have on my W2...

Box 1: 118,045.05

Box 3: 126,873.37

Box 5: 126,873.37

Box 12: D: 8,828.32

Box 12: DD: 15,940.70

Doesn't this show that both of these amounts (i.e. D and DD) were NOT removed from Box 1 on the W-2?

[BillM223]

No, this shows that the code D amount (8,828.32) WAS removed from Wages in box 1, but not from boxes 3 and 5, which is correct.

The code DD amount (15,940.70) has been removed from boxes 1, 3, and 5. Of course, since it was removed from all three, you can't tell it was done unless you ask your payroll people.

Another way of saying this is that your 401(k) code amount is not subject to income tax but it is subject to Social Security and Medicare tax. Your health insurance premiums are not subject to any of three taxes.

[gjgogol]

@BillM223ugh...still waiting on response from HR. In the meantime, my insurance HSA administrator issued a 5498-SA Tax Form. In that tax form, Box 2 shows Total contributions made in 2024. Could that amount be considered the amount I can deduct?  Wouldn't that be separate and distinct from my W2 form?

[marcia1230]

FYI - code DD is the amount of the health insurance that the government paid on behalf of the employee.  It is the government's portion of the expense and is not deducted from the employee's wages.  The DD amount is the cost of doing business and it doesn't matter if it's the federal government or a public or private corporation.

[gjgogol]

@marcia1230 @BillM223  HR finally got back to me and this is what they explained to me. The amount in DD represents the TOTAL premium that is paid for health insurance. The TOTAL premium amount consists of both the Agency's portion and the employee's portion. The premium amount of the employee's portion is not taxed. To determine how much federal tax to withhold, the agency applies the federal tax rate to the employee's pay less the employee's portion of the premium. 

And then the employee's portion of the total premium is pulled out of the employee's pay and paid to the insurance company. The insurance company then puts a portion of the employee's premium received into an HSA. Based on this, the portion of the employee's premium placed into an HSA is NOT deductible (as it was not taxed in the first place).  Does this make sense? 

[BillM223]

gjgogol

"The TOTAL premium amount consists of both the Agency's portion and the employee's portion. "

Yes, this is what I said above.

"To determine how much federal tax to withhold, the agency applies the federal tax rate to the employee's pay less the employee's portion of the premium. "

I am not sure why they said it this way; the Agency's portion AND the employee's portion are both removed from Wages in box 1.

And then the employee's portion of the total premium is pulled out of the employee's pay and paid to the insurance company. The insurance company then puts a portion of the employee's premium received into an HSA. Based on this, the portion of the employee's premium placed into an HSA is NOT deductible (as it was not taxed in the first place).  Does this make sense? 

Yes, yes, and yes. This is the way a pass-through works.

And to answer your previous question, you don't actively deduct anything, because, as HR told you, the contributions to the HSA were never taxed in the first place.

marcia1230

The code DD amount is the sum of what the employer contributes towards the health insurance premium plus what the employee contributes by means of payroll deduction (if anything). The DD amount is removed from Wages in box 1 on the W-2 therefor, this amount is not taxed.

@gjgogol 

@marcia1230