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Compliance Corner

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Reminder: 2020 HSA Contributions and Corrections Deadline May 17

Individuals who were HSA-eligible in 2020 have until the tax filing deadline to make or receive contributions. The IRS recently extended the 2020 tax-filing deadline, so 2020 HSA contributions must generally be made by May 17, 2021. This includes employer contributions. The 2020 contribution limit is $3,550 for self-only coverage and $7,100 for any tier of coverage other than self-only. Those aged 55 and older are permitted an additional catch-up contribution of $1,000. An individual’s maximum annual contribution is limited by the number of months they were eligible for the HSA.

There is an exception to this rule. An individual that was HSA eligible on December 1 is permitted to contribute the full statutory maximum for the year. However, if eligible employees do not remain HSA eligible through December of the following year, they may experience tax consequences.

Individuals who contributed more than the allowable amount for 2020 should be refunded the excess contributions and associated interest by May 17, 2021. The excess would be subject to income tax. If the excess is not refunded from the account, it will not only be subject to income tax, but also a 6% excise tax penalty. If an employer is aware of an employee who was not eligible for a contribution or who has contributed more than the allowable amount for 2020, they should work with the HSA bank/trustee to process the excess contribution.

View this article on NFP.com.

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