Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50233

to A made in January is not wages for 2004 

because the $150 cash-remuneration test is 

not met. However, if X pays additional 

remuneration to employees for agricultural 

labor in 2004 that equals or exceeds $2,360, 

the employer’s-expenditures-for-agriculturallabor test will be met and the $140 paid by 

X to A in 2004 will be considered wages. It 

is immaterial that the work was performed in 

2003.

* * * * *

(h) Effective dates. The provisions of 

this section apply to any payment for 

agricultural labor made on or after 

January 1, 1988. For rules applicable to 

any payment for agricultural labor made 

prior to January 1, 1988, see 

§ 31.3121(a)(8)–1 in effect at such time 

(see 26 CFR part 31 revised as of April 

1, 2005). 

Par. 6. Section 31.3121(a)(10)–1 is 

revised to read as follows:

§ 31.3121(a)(10)–1 Payments to certain 

home workers. 

(a) The term wages does not include 

remuneration paid by an employer in 

any calendar year to an employee for 

service performed as a home worker 

who is an employee by reason of the 

provisions of section 3121(d)(3)(C) (see 

§ 31.3121(d)–1(d)), unless the cash 

remuneration paid in such calendar year 

by the employer to the employee for 

such services is $100 or more. The test 

relating to cash remuneration of $100 or 

more is based on remuneration paid in 

a calendar year rather than on 

remuneration earned during a calendar 

year. If cash remuneration of $100 or 

more is paid in a particular calendar 

year, it is immaterial whether such 

remuneration is in payment for services 

performed during the year of payment 

or during any other year. 

(b) The application of paragraph (a) of 

this section may be illustrated by the 

following example:

Example. A, a home worker, performs 

services for X, a manufacturer, in 2003 and 

2004. In the performance of the home work 

A is an employee by reason of section 

3121(d)(3)(C). In March 2004, A returns to X 

articles made by A at home from materials 

received by A from X in 2003. X pays A cash 

remuneration of $100 for such work when 

the finished articles are delivered. The $100 

includes $10 which represents remuneration 

for home work performed by A in 2003. The 

entire $100 is subject to the taxes. Any 

additional cash remuneration paid by X to A 

in 2004 for such services is also subject to the 

taxes.

(c) In the event an employee receives 

remuneration in any one calendar year 

from more than one employer for 

services performed as a home worker of 

the character described in paragraph (a) 

of this section, the regulations in this 

section are to be applied with respect to 

the remuneration received by the 

employee from each employer in such 

calendar year for such services. This 

exclusion from wages has no 

application to remuneration paid for 

services performed as a home worker 

who is an employee under section 

3121(d)(2) (see § 31.3121(d)–1(c)) 

relating to common law employees. 

(d) Cash remuneration includes 

checks and other monetary media of 

exchange. Remuneration paid in any 

other medium, such as clothing, car 

tokens, transportation passes or tickets, 

or other goods or commodities, is 

disregarded in determining whether the 

$100 cash-remuneration test is met. If 

the cash remuneration paid in any 

calendar year by an employer to an 

employee for services performed as a 

home worker of the character described 

in paragraph (a) of this section is $100 

or more, then no remuneration, whether 

in cash or in any medium other than 

cash, paid by the employer to the 

employee in such calendar year for such 

services is excluded from wages under 

this exception. 

(e)(1) For provisions relating to 

deductions of employee tax or amounts 

equivalent to the tax from cash 

payments for services performed as a 

home worker within the meaning of 

section 3121(d)(3)(C), see § 31.3102–1. 

(2) For provisions relating to the time 

of payment of wages for services 

performed as a home worker within the 

meaning of section 3121(d)(3)(C), see 

§ 31.3121(a)–2. 

(3) For provisions relating to records 

to be kept with respect to payment of 

wages for services performed as a home 

worker within the meaning of section 

3121(d)(3)(C), see § 31.6001–2. 

(f) The provisions of this section 

apply to any payment for services 

performed as a home worker within the 

meaning of section 3121(d)(3)(C) made 

on or after January 1, 1978. For rules 

applicable to any payment for services 

performed as a home worker within the 

meaning of section 3121(d)(3)(C) made 

prior to January 1, 1978, see 

§ 31.3121(a)(10)–1 in effect at such time 

(see 26 CFR part 31 revised as of April 

1, 2005). 

Par. 7. Section 31.3121(i)–1 is 

amended as follows: 

1. Redesignating the undesignated 

text as paragraph (a). 

2. Remove the language ‘‘quarter’’

each place it appears and add ‘‘year’’ in 

its place in newly designated paragraph 

(a). 

3. Adding new paragraph (b). 

The addition reads as follows:

§ 31.3121(i)–1 Computation to nearest 

dollar of cash remuneration for domestic 

service.

* * * * *

(b) The provisions of this section 

apply to any cash payment for domestic 

service in a private home of the 

employer made on or after January 1, 

1994. For rules applicable to any cash 

payment for domestic service in a 

private home of the employer made 

prior to January 1, 1994, see 

§ 31.3121(i)–1 in effect at such time (see 

26 CFR part 31 revised as of April 1, 

2005).

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement.

[FR Doc. 05–16944 Filed 8–25–05; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 54

[REG–138647–04] 

RIN 1545–BE30

Employer Comparable Contributions to 

Health Savings Accounts Under 

Section 4980G

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains 

proposed regulations providing 

guidance on employer comparable 

contributions to Health Savings 

Accounts (HSAs) under section 4980G. 

In general, these proposed regulations 

would affect employers that contribute 

to employees’ HSAs.

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by November 25, 2005.

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–138647–04), room 

5203, Internal Revenue Service, POB 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be hand 

delivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–138647–04), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC. Alternatively, 

taxpayers may submit comments 

electronically via the IRS Internet site at 

www.irs.gov/regs or via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS–REG–

138647–04).

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations, 

50234 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

Barbara E. Pie at (202) 622–6080; 

concerning submissions of comments or 

a request for a public hearing, Kelly 

Banks at (202) 622–7180 (not toll-free 

numbers).

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

Pension Excise Tax Regulations (26 CFR 

part 54) under section 4980G of the 

Internal Revenue Code (Code). Under 

section 4980G of the Code, an excise tax 

is imposed on an employer that fails to 

make comparable contributions to the 

HSAs of its employees. 

Section 1201 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (Act), Public 

Law 108–173, (117 Stat. 2066, 2003) 

added section 223 to the Code to permit 

eligible individuals to establish HSAs 

for taxable years beginning after 

December 31, 2003. Section 4980G was 

also added to the Code by the Act. 

Section 4980G(a) imposes an excise tax 

on the failure of an employer to make 

comparable contributions to the HSAs 

of its employees for a calendar year. 

Section 4980G(b) provides that rules 

and requirements similar to section 

4980E (the comparability rules for 

Archer Medical Savings Accounts 

(Archer MSAs)) apply for purposes of 

section 4980G. Section 4980E(b) 

imposes an excise tax equal to 35% of 

the aggregate amount contributed by the 

employer to the Archer MSAs of 

employees during the calendar year if 

an employer fails to make comparable 

contributions to the Archer MSAs of its 

employees in a calendar year. Therefore, 

if an employer fails to make comparable 

contributions to the HSAs of its 

employees during a calendar year, an 

excise tax equal to 35% of the aggregate 

amount contributed by the employer to 

the HSAs of its employees during that 

calendar year is imposed on the 

employer. See Sections 4980G(a) and (b) 

and 4980E(b). See also Notice 2004–2 

(2004–2 I.R.B. 269), Q & A–32. 

Explanation of Provisions 

Overview 

The proposed regulations clarify and 

expand on the guidance regarding the 

comparability rules published in Notice 

2004–2 and in Notice 2004–50 (2004–33 

I.R.B. 196), Q & A–46 through Q & A–

54. 

I. Comparable Contributions in General 

An employer is not required to 

contribute to the HSAs of its employees. 

However, in general, if an employer 

makes contributions to any employee’s 

HSA, the employer must make 

comparable contributions to the HSAs 

of all comparable participating 

employees. Comparable participating 

employees are eligible individuals (as 

defined in section 223(c)(1)) who have 

the same category of high deductible 

health plan (HDHP) coverage. The 

categories of coverage are self-only 

HDHP coverage and family HDHP 

coverage. 

These proposed regulations 

incorporate the rule in Notice 2004–2, Q 

& A–32 that contributions are 

comparable if they are either the same 

amount or the same percentage of the 

deductible for employees who are 

eligible individuals with the same 

category of coverage. An employer is not 

required to contribute the same amount 

or the same percentage of the deductible 

for employees who are eligible 

individuals with self-only HDHP 

coverage that it contributes for 

employees who are eligible individuals 

with family HDHP coverage. An 

employer that satisfies the 

comparability rules by contributing the 

same amount to the HSAs of all 

employees who are eligible individuals 

with self-only HDHP coverage is not 

required to contribute any amount to the 

HSAs of employees who are eligible 

individuals with family HDHP coverage, 

or to contribute the same percentage of 

the family HDHP deductible as the 

amount contributed with respect to selfonly HDHP coverage. Similarly, an 

employer that satisfies the 

comparability rules by contributing the 

same amount to the HSAs of all 

employees who are eligible individuals 

with family HDHP coverage is not 

required to contribute any amount to the 

HSAs of employees who are eligible 

individuals with self-only HDHP 

coverage, or to contribute the same 

percentage of the self-only HDHP 

deductible as the amount contributed 

with respect to family HDHP coverage. 

II. Calculating Comparable 

Contributions 

The proposed regulations clarify that 

contributions to the HSAs of certain 

individuals are not taken into account 

in determining whether an employer’s 

contributions to the HSAs of its 

employees satisfy the comparability 

rules. Specifically, contributions to the 

HSAs of independent contractors, sole 

proprietors, and partners in a 

partnership are not taken into account 

under the comparability rules. In 

addition, the comparability rules do not 

apply to amounts rolled over from an 

employee’s HSA or Archer MSA or to 

after-tax employee contributions.

The proposed regulations also clarify 

that the categories of employees for 

comparability testing are current fulltime employees, current part-time 

employees, and former employees 

(except for former employees with 

coverage under the employer’s HDHP 

because of an election under a COBRA 

continuation provision (as defined in 

section 9832(d)(1)). The proposed 

regulations provide that the 

comparability rules apply separately to 

each of the categories of employees. If 

an employer contributes to the HSA of 

any employee in a category of 

employees, the employer must make 

comparable contributions to the HSAs 

of all comparable participating 

employees within that category. 

Therefore, the comparability rules apply 

to a category of employees only if an 

employer contributes to the HSA of any 

employee within the category. For 

example, an employer that makes 

comparable contributions to the HSAs 

of all full-time employees who are 

eligible individuals but does not 

contribute to the HSA of any employee 

who is not a full-time employee, 

satisfies the comparability rules. 

The categories of employees set forth 

in these proposed regulations are the 

exclusive categories for comparability 

testing. An employer must make 

comparable contributions to the HSAs 

of all comparable participating 

employees (eligible individuals who are 

in the same category of employees with 

the same category of HDHP coverage) 

during the calendar year without regard 

to any classification other than these 

categories. Therefore, the comparability 

rules do not apply separately to groups 

of collectively bargained employees. 

While the comparability rules apply 

separately to part-time employees, there 

is no similar rule permitting separate 

application of the comparability rules to 

collectively bargained employees. 

Neither section 4980E nor section 

4980G provides an exception to the 

comparability rules for collectively 

bargained employees. Accordingly, an 

employer must make comparable 

contributions to the HSAs of all 

comparable participating employees, 

both those who are covered under a 

collective bargaining agreement and 

those who are not covered. Similarly, 

the comparability rules do not apply 

separately to management and nonmanagement employees. 

The proposed regulations also provide 

that the comparability rules apply 

separately to employees who have HSAs 

and employees who have Archer MSAs. 

However, if an employee has both an 

HSA and an Archer MSA, the employer 

may contribute to either the HSA or the 

Archer MSA, but not to both. 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50235

The proposed regulations incorporate 

the rule set forth in Q & A–53 of Notice 

2004–50, which provides that if an 

employer limits HSA contributions to 

employees who are eligible individuals 

with coverage under an HDHP provided 

by the employer, the employer is not 

required to make comparable 

contributions to the HSAs of employees 

who are eligible individuals with 

coverage under an HDHP not provided 

by the employer. However, if an 

employer contributes to the HSAs of 

employees who are eligible individuals 

with coverage under any HDHP, in 

addition to the HDHPs provided by the 

employer, the employer is required to 

make comparable contributions to the 

HSAs of all comparable participating 

employees whether or not covered 

under employer’s HDHP. The proposed 

regulations also provide that similar 

rules apply to employer contributions to 

the HSAs of former employees. For 

example, if an employer limits HSA 

contributions to former employees who 

are eligible individuals with coverage 

under an HDHP provided by the 

employer, the employer is not required 

make comparable contributions to the 

HSAs of former employees who are 

eligible individuals with coverage under 

an HDHP not provided by the employer. 

However, if an employer contributes to 

the HSAs of former employees who are 

eligible individuals with coverage under 

the employer’s HDHP, the employer is 

not required to make comparable 

contributions to the HSAs of former 

employees who are eligible individuals 

with coverage under the employer’s 

HDHP because of an election under a 

COBRA continuation provision (as 

defined in section 9832(d)(1)). 

The proposed regulations also 

incorporate the rule set forth in Q & A–

46 of Notice 2004–50, which provides 

that the comparability rules will not be 

satisfied if an employer makes HSA 

contributions in an amount equal to an 

employee’s HSA contribution or a 

percentage of the employee’s HSA 

contribution (matching contributions) 

because if all comparable participating 

employees do not contribute the same 

amount to their HSAs, they will not 

receive comparable contributions to 

their HSAs. In addition, the 

comparability rules will not be satisfied 

if an employer conditions contributions 

to an employee’s HSA on an employee’s 

participation in health assessments, 

disease management programs or 

wellness programs because if all 

comparable participating employees do 

not elect to participate in all the 

programs, they will not receive 

comparable contributions to their HSAs. 

See Q & A–48 of Notice 2004–50. 

Similarly, the comparability rules will 

not be satisfied if an employer makes 

additional contributions to the HSAs of 

all comparable participating employees 

who have attained a specified age or 

who have worked for the employer for 

a specified number of years, because if 

all comparable participating employees 

do not meet the age or length of service 

requirement, they will not receive 

comparable contributions to their HSAs. 

See Q & A–50 of Notice 2004–50.

III. Procedures for Making Comparable 

Contributions 

The proposed regulations provide that 

in determining whether the 

comparability rules are satisfied, an 

employer must take into account all 

full-time and part-time employees who 

were eligible individuals for any month 

during the calendar year. An employee 

is an eligible individual if as of the first 

day of the month the employee meets all 

of the requirements set forth in section 

223(c). An employer may comply with 

the comparability rules by contributing 

amounts at one or more times for the 

calendar year to the HSAs of employees 

who are eligible individuals, if 

contributions are the same amount or 

the same percentage of the HDHP 

deductible for employees who are 

eligible individuals with the same 

category of coverage and are made at the 

same time (contributions on a pay-asyou-go basis). 

An employer may also satisfy the 

comparability rules by determining 

comparable contributions for the 

calendar year at the end of the calendar 

year, taking into account all employees 

who were eligible individuals for any 

month during the calendar year and 

contributing the correct amount (a 

percentage of the HDHP deductible or a 

specified dollar amount for the same 

categories of coverage) to the employees’

HSAs by April 15th of the following 

year (contributions on a look-back 

basis). 

If an employer makes comparable 

HSA contributions on a pay-as-you-go 

basis, it must do so for each comparable 

participating employee who is an 

employee during the time period used 

to make contributions. For example, if 

an employer makes HSA contributions 

each pay period, it must do so for each 

comparable participating employee who 

is an employee during the pay period. 

If an employer makes comparable 

contributions on a look-back-basis, it 

must do so for each employee who was 

a comparable participating employee for 

any month during the calendar year. 

In addition, an employer may make 

all of its contributions to the HSAs of 

employees who are eligible individuals 

at the beginning of the calendar year 

(contributions on a pre-funded basis). 

An employer that makes comparable 

HSA contributions on a pre-funded 

basis will not fail to satisfy the 

comparability rules because an 

employee who terminates employment 

prior to the end of the calendar year has 

received more HSA contributions on a 

monthly basis than employees who 

worked the entire calendar year. If an 

employer makes HSA contributions on 

a pre-funded basis, it must do so for all 

employees who are comparable 

participating employees at the 

beginning of the calendar year. An 

employer that makes HSA contributions 

on a pre-funded basis must make 

comparable HSA contributions for all 

employees who are comparable 

participating employees for any month 

during the calendar year, including 

employees hired after the date of initial 

funding. 

If an employee has not established an 

HSA at the time the employer funds its 

employee’s HSAs, the employer 

complies with the comparability rules 

by contributing comparable amounts to 

the employee’s HSA when the employee 

establishes the HSA, taking into account 

each month that the employee was a 

comparable participating employee. 

However, an employer is not required to 

make comparable contributions for a 

calendar year to an employee’s HSA if 

the employee has not established an 

HSA by December 31st of the calendar 

year. 

The proposed regulations provide that 

if an employer determines that the 

comparability rules are not satisfied for 

a calendar year, the employer may not 

recoup from an employee’s HSA any 

portion of the employer’s contribution 

to the employee’s HSA because under 

section 223(d)(1)(E), an account 

beneficiary’s interest in an HSA is 

nonforfeitable. However, an employer 

may make additional HSA contributions 

to satisfy the comparability rules. An 

employer may contribute up until April 

15th following the calendar year in 

which the non-comparable 

contributions were made. An employer 

that makes additional HSA 

contributions to correct non-comparable 

contributions must also contribute 

reasonable interest. 

IV. Exception to the Comparability 

Rules for Cafeteria Plans 

The legislative history of the Act 

states that the comparability rules do 

not apply to HSA contributions that an 

employer makes through a cafeteria 

plan. See Conf. Rep. No. 391, 108th 

Cong., 1st Sess. 843 (2003), 2004 

50236 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

U.S.C.C.A.N. 1808. See also Notice 

2004–2, Q & A–32. The 

nondiscrimination rules in section 125 

of the Code apply to HSA contributions 

(including matching contributions) 

made through a cafeteria plan. 

Generally, a cafeteria plan is a written 

plan under which all participants are 

employees and participants may choose 

among two or more benefits consisting 

of cash and qualified benefits. Unlike 

the cafeteria plan nondiscrimination 

rules, the comparability rules are not 

based upon discrimination in favor of 

highly compensated or key employees. 

Therefore, an employer that maintains 

an HDHP only for highly compensated 

or key employees and makes HSA 

contributions through a cafeteria plan 

only for those eligible employees, does 

not violate the comparability rules, but 

may violate the cafeteria plan 

nondiscrimination rules. 

V. Waiver of Excise Tax 

In the case of a failure which is due 

to reasonable cause and not to willful 

neglect, all or a portion of the excise tax 

imposed under section 4980G may be 

waived to the extent that the payment 

of the tax would be excessive relative to 

the failure involved. See sections 

4980G(b) and 4980E(c). 

Proposed Effective Date 

It is proposed that these regulations 

apply to employer contributions made 

on or after the date the final regulations 

are published in the Federal Register. 

However, taxpayers may rely on these 

regulations for guidance pending the 

issuance of final regulations. 

Special Analyses

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations. This notice of 

proposed rulemaking does not impose a 

collection of information on small 

entities, thus the Regulatory Flexibility 

Act (5 U.S.C. chapter 6) does not apply. 

Pursuant to section 7805(f) of the Code, 

these proposed regulations will be 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Requests for Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written comments (a signed original and 

eight (8) copies) or electronic comments 

that are submitted timely to the IRS. The 

Treasury Department and the IRS 

specifically request comments on the 

clarity of the proposed rules and how 

they can be made easier to understand. 

In addition, comments are requested on 

the application of the comparability 

rules to employees who are on leave 

pursuant to the Family and Medical 

Leave Act of 1993, Public Law 103–3, 

(107 Stat. 6, 1993, 29 U.S.C. 2601 et 

seq.). Comments are also requested 

concerning employer matching HSA 

contributions made through a cafeteria 

plan. Specifically, whether the ratio of 

an employer’s matching HSA 

contributions to an employee’s salary 

reduction HSA contributions should be 

limited, and whether employer 

matching contributions exceeding a 

specific limit should be subject to the 

section 4980G comparability rules. All 

comments will be available for public 

inspection and copying. A public 

hearing will be scheduled if requested 

in writing by any person that timely 

submits written comments. 

Drafting Information 

The principal author of these 

proposed regulations is Barbara E. Pie, 

Office of Division Counsel/Associate 

Chief Counsel (Tax Exempt and 

Government Entities), Internal Revenue 

Service. However, personnel from other 

offices of the IRS and Treasury 

Department participated in their 

development.

List of Subjects in 26 CFR Part 54

Excise taxes, Pensions, Reporting and 

recordkeeping requirements.

Proposed Amendment to the 

Regulations 

Accordingly, 26 CFR part 54 is 

proposed to be amended as follows:

PART 54—PENSION EXCISE TAXES 

Paragraph 1. The authority citation 

for part 54 is amended by adding an 

entry in numerical order to read, in part, 

as follows:

Authority: 26 U.S.C. 7805 * * *

Section 54.4980G–1 also issued under 26 

U.S.C. 4980G. * * *

Par. 2. Sections 54.4980G–0 through 

54.4980G–5 are added to read as 

follows:

§ 54.4980G–0 Table of contents. 

This section contains the questions 

for § 54.4980G–1 through § 54.4980G–5.

§ 54.4980G–1 Failure of employer to make 

comparable health savings account 

contributions.

Q–1. What are the comparability rules that 

apply to employer contributions to Health 

Savings Accounts (HSAs)? 

Q–2. What are the categories of HDHP 

coverage for purposes of applying the 

comparability rules? 

Q–3. What is the testing period for making 

comparable contributions to employees’

HSAs? 

Q–4. How is the excise tax computed if 

employer contributions do not satisfy the 

comparability rules for a calendar year?

§ 54.4980G–2 Employer contribution 

defined.

Q–1. Do the comparability rules apply to 

amounts rolled over from an employee’s HSA 

or Archer Medical Savings Account (Archer 

MSA)? 

Q–2. If an employee requests that his or her 

employer deduct after-tax amounts from the 

employee’s compensation and forward these 

amounts as employee contributions to the 

employee’s HSA, do the comparability rules 

apply to these amounts?

§ 54.4980G–3 Definition of employee for 

comparability testing.

Q–1. Do the comparability rules apply to 

contributions that an employer makes to the 

HSAs of independent contractors? 

Q–2. May a sole proprietor who is an 

eligible individual contribute to his or her 

own HSA without contributing to the HSAs 

of his or her employees who are eligible 

individuals? 

Q–3. Do the comparability rules apply to 

contributions by a partnership to a partner’s 

HSA? 

Q–4. How are members of controlled 

groups treated when applying the 

comparability rules? 

Q–5. What are the categories of employees 

for comparability testing? 

Q–6. Is an employer permitted to make 

comparable contributions only to the HSAs 

of comparable participating employees who 

have coverage under the employer’s HDHP? 

Q–7. If an employee and his or her spouse 

are eligible individuals who work for the 

same employer and one employee-spouse has 

family coverage for both employees under the 

employer’s HDHP, must the employer make 

comparable contributions to the HSAs of 

both employees? 

Q–8. Does an employer that makes HSA 

contributions only for non-management 

employees who are eligible individuals, but 

not for management employees who are 

eligible individuals or that makes HSA 

contributions only for management 

employees who are eligible individuals but 

not for non-management employees who are 

eligible individuals satisfy the requirement 

that the employer make comparable 

contributions? 

Q–9. If an employer contributes to the 

HSAs of former employees who are eligible 

individuals, do the comparability rules apply 

to these contributions? 

Q–10. Is an employer permitted to make 

comparable contributions only to the HSAs 

of comparable participating former 

employees who have coverage under the 

employer’s HDHP?

Q–11. If an employer contributes only to 

the HSAs of former employees who are 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50237

eligible individuals with coverage under the 

employer’s HDHP, must the employer make 

comparable contributions to the HSAs of 

former employees who are eligible 

individuals with coverage under the 

employer’s HDHP because of an election 

under a COBRA continuation provision (as 

defined in section 9832(d)(1))? 

Q–12. How do the comparability rules 

apply if some employees have HSAs and 

other employees have Archer MSAs?

§ 54.4980G–4 Calculating comparable 

contributions.

Q–1. What are comparable contributions? 

Q–2. How do the comparability rules apply 

to employer contributions to employees’

HSAs if some employees work full-time 

during the entire calendar year, and other 

employees work full-time for less than the 

entire calendar year? 

Q–3. How does an employer comply with 

the comparability rules when some 

employees who are eligible individuals do 

not work for the employer during the entire 

calendar year? 

Q–4. May an employer make all of its 

contributions to the HSAs of its employees 

who are eligible individuals at the beginning 

of the calendar year (i.e., on a pre-funded 

basis) instead of contributing on a pay-asyou-go or on a look-back basis? 

Q–5. Must an employer use the same 

contribution method as described in Q & A–

3 and Q & A–4 of this section for all 

employees who were comparable 

participating employees for any month 

during the calendar year? 

Q–6. How does an employer comply with 

the comparability rules if an employee has 

not established an HSA at the time the 

employer contributes to its employees’

HSAs? 

Q–7. If an employer bases its contributions 

on a percentage of the HDHP deductible, how 

is the correct percentage or dollar amount 

computed? 

Q–8. Does an employer that contributes to 

the HSA of each comparable participating 

employee in an amount equal to the 

employee’s HSA contribution or a percentage 

of the employee’s HSA contribution 

(matching contributions) satisfy the rule that 

all comparable participating employees 

receive comparable contributions? 

Q–9. If an employer conditions 

contributions by the employer to an 

employee’s HSA on an employee’s 

participation in health assessments, disease 

management programs or wellness programs 

and makes the same contributions available 

to all employees who participate in the 

programs, do the contributions satisfy the 

comparability rules? 

Q–10. If an employer makes additional 

contributions to the HSAs of all comparable 

participating employees who have attained a 

specified age or who have worked for the 

employer for a specified number of years, do 

the contributions satisfy the comparability 

rules? 

Q–11. If an employer makes additional 

contributions to the HSAs of all comparable 

participating employees who qualify for the 

additional contributions (HSA catch-up 

contributions) under section 223(b)(3), do the 

contributions satisfy the comparability rules? 

Q–12. If an employer’s contributions to an 

employee’s HSA result in non-comparable 

contributions, may the employer recoup the 

excess amount from the employee’s HSA?

§ 54.4980G–5 HSA comparability rules and 

cafeteria plans and waiver of excise tax.

Q–1. If an employer makes contributions 

through a section 125 cafeteria plan to the 

HSA of each employee who is an eligible 

individual are the contributions subject to 

the comparability rules? 

Q–2. If an employer makes contributions 

through a cafeteria plan to the HSA of each 

employee who is an eligible individual in an 

amount equal to the amount of the 

employee’s HSA contribution or a percentage 

of the amount of the employee’s HSA 

contribution (i.e., matching contributions), 

are the contributions subject to the section 

4980G comparability rules? 

Q–3. If an employer provides HDHP 

coverage through a cafeteria plan, but the 

employer’s HSA contributions are not 

provided through the cafeteria plan, do the 

cafeteria plan nondiscrimination rules or the 

comparability rules apply to the HSA 

contributions? 

Q–4. If under the employer’s cafeteria plan, 

employees who are eligible individuals and 

who participate in health assessments, 

disease management programs or wellness 

programs receive an employer contribution to 

an HSA, unless the employees elect cash, are 

the contributions subject to the comparability 

rules? 

Q–5. May all or part of the excise tax 

imposed under section 4980G be waived?

§ 54.4980G–1 Failure of employer to make 

comparable health savings account 

contributions. 

Q–1. What are the comparability rules 

that apply to employer contributions to 

Health Savings Accounts (HSAs)? 

A–1. If an employer makes 

contributions to any employee’s HSA, 

the employer must make comparable 

contributions to the HSAs of all 

comparable participating employees. 

See Q & A–1 in § 54.4980G–4 for the 

definition of comparable contributions. 

Comparable participating employees are 

eligible individuals (as defined in 

section 223(c)(1)) who have the same 

category of high deductible health plan 

(HDHP) coverage. See sections 4980G(b) 

and 4980E(d)(3). See section 223(c)(2) 

and (g) for the definition of an HDHP. 

See also Q & A–5 in § 54.4980G–3 for 

the categories of employees and Q & A–

2 in this section for the categories of 

HDHP coverage. 

Q–2. What are the categories of HDHP 

coverage for purposes of applying the 

comparability rules? 

A–2. The categories of coverage are 

self-only HDHP coverage and family 

HDHP coverage. See sections 4980G(b) 

and 4980E(d)(3)(B). 

Q–3. What is the testing period for 

making comparable contributions to 

employees’ HSAs? 

A–3. To satisfy the comparability 

rules, an employer must make 

comparable contributions for the 

calendar year to the HSAs of employees 

who are comparable participating 

employees. See section 4980G(a). 

Q–4. How is the excise tax computed 

if employer contributions do not satisfy 

the comparability rules for a calendar 

year? 

A–4. (a) Computation of tax. If 

employer contributions do not satisfy 

the comparability rules for a calendar 

year, the employer is subject to an 

excise tax equal to 35% of the aggregate 

amount contributed by the employer to 

HSAs for that period. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–4:

Example. In this Example, assume that the 

HDHP provided by Employer A satisfies the 

definition of an HDHP for the 2007 calendar 

year. During the 2007 calendar year, 

Employer A has 8 employees who are eligible 

individuals with self-only coverage under an 

HDHP provided by Employer A. The 

deductible for the HDHP is $2,000. For the 

2007 calendar year, Employer A contributes 

$2,000 each to the HSAs of two employees 

and $1,000 each to the HSAs of the other six 

employees, for total HSA contributions of 

$10,000. Employer A’s contributions do not 

satisfy the comparability rules. Therefore, 

Employer A is subject to an excise tax of 

$3,500 (i.e., 35% x $10,000) for its failure to 

make comparable contributions to its 

employees’ HSAs.

§ 54.4980G–2 Employer contribution 

defined. 

Q–1. Do the comparability rules apply 

to amounts rolled over from an 

employee’s HSA or Archer Medical 

Savings Account (Archer MSA)? 

A–1. No. The comparability rules do 

not apply to amounts rolled over from 

an employee’s HSA or Archer MSA. 

Q–2. If an employee requests that his 

or her employer deduct after-tax 

amounts from the employee’s 

compensation and forward these 

amounts as employee contributions to 

the employee’s HSA, do the 

comparability rules apply to these 

amounts? 

A–2. No. Section 106(d) provides that 

amounts contributed by an employer to 

an eligible employee’s HSA shall be 

treated as employer-provided coverage 

for medical expenses and are excludible 

from the employee’s gross income up to 

the limit in section 223(b). After-tax 

employee contributions to an HSA are 

not subject to the comparability rules 

because they are not employer 

contributions under section 106(d).

50238 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

§ 54.4980G–3 Definition of employee for 

comparability testing. 

Q–1. Do the comparability rules apply 

to contributions that an employer makes 

to the HSAs of independent contractors? 

A–1. No. The comparability rules 

apply only to contributions that an 

employer makes to the HSAs of 

employees.

Q–2. May a sole proprietor who is an 

eligible individual contribute to his or 

her own HSA without contributing to 

the HSAs of his or her employees who 

are eligible individuals? 

A–2. (a) Sole proprietor not an 

employee. Yes. The comparability rules 

apply only to contributions made by an 

employer to the HSAs of employees. 

Because a sole proprietor is not an 

employee, the comparability rules do 

not apply to contributions he or she 

makes to his or her own HSA. However, 

if a sole proprietor contributes to any 

employee’s HSA, he or she must make 

comparable contributions to the HSAs 

of all comparable participating 

employees. In determining whether the 

comparability rules are satisfied, 

contributions that a sole proprietor 

makes to his or her own HSA are not 

taken into account. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–2:

Example. In a calendar year, B, a sole 

proprietor is an eligible individual and 

contributes $1,000 to B’s own HSA. B also 

contributes $500 for the same calendar year 

to the HSA of each employee who is an 

eligible individual. The comparability rules 

are not violated by B’s $1,000 contribution to 

B’s own HSA.

Q–3. Do the comparability rules apply 

to contributions by a partnership to a 

partner’s HSA? 

A–3. (a) Partner not an employee. No. 

Contributions by a partnership to a bona 

fide partner’s HSA are not subject to the 

comparability rules because the 

contributions are not contributions by 

an employer to the HSA of an employee. 

The contributions are treated as either 

guaranteed payments under section 

707(c) or distributions under section 

731. However, if a partnership 

contributes to the HSAs of employees 

who are not partners, the comparability 

rules apply to those contributions. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–3:

Example. (i) Partnership X is a limited 

partnership with three equal individual 

partners, A (a general partner), B (a limited 

partner), and C (a limited partner). C is to be 

paid $300 annually for services rendered to 

Partnership X in her capacity as a partner 

without regard to partnership income (a 

section 707(c)) guaranteed payment). D and 

E are the only employees of Partnership X 

and are not partners in Partnership X. A, B, 

C, D, and E are eligible individuals and each 

has an HSA. During Partnership X’s Year 1 

taxable year, which is also a calendar year, 

Partnership X makes the following 

contributions—

(A) A $300 contribution to each of A’s and 

B’s HSAs which are treated as section 731 

distributions to A and B; 

(B) A $300 contribution to C’s HSA in lieu 

of paying C the guaranteed payment directly; 

and 

(C) A $200 contribution to each of D’s and 

E’s HSAs, who are comparable participating 

employees. 

(ii) Partnership X’s contributions to A’s 

and B’s HSAs are section 731 distributions, 

which are treated as cash distributions. 

Partnership X’s contribution to C’s HSA is 

treated as a guaranteed payment under 

section 707(c). The contribution is not 

excludible from C’s gross income under 

section 106(d) because the contribution is 

treated as a distributive share of partnership 

income for purposes of all Code sections 

other than sections 61(a) and 162(a), and a 

guaranteed payment to a partner is not 

treated as compensation to an employee. 

Thus, Partnership X’s contributions to the 

HSAs of A, B, and C are not subject to the 

comparability rules. Partnership X’s 

contributions to D’s and E’s HSAs are subject 

to the comparability rules because D and E 

are employees of Partnership X and are not 

partners in Partnership X. Partnership X’s 

contributions satisfy the comparability rules.

Q–4. How are members of controlled 

groups treated when applying the 

comparability rules?

A–4. All persons or entities treated as 

a single employer under section 414(b), 

(c), (m), or (o) are treated as one 

employer. See sections 4980G(b) and 

4980E(e). 

Q–5. What are the categories of 

employees for comparability testing? 

A–5. (a) Categories. The categories of 

employees for comparability testing are 

as follows—

(1) Current full-time employees; 

(2) Current part-time employees; and 

(3) Former employees (except for 

former employees with coverage under 

the employer’s HDHP because of an 

election under a COBRA continuation 

provision (as defined in section 

9832(d)(1)). 

(b) Part-time and full-time employees.

Part-time employees are customarily 

employed for fewer than 30 hours per 

week and full-time employees are 

customarily employed for 30 or more 

hours per week. See sections 4980G(b) 

and 4980E(d)(4)(A) and (B). 

(c) In general. The categories of 

employees in paragraph (a) of this Q & 

A–5 are the exclusive categories for 

comparability testing. An employer 

must make comparable contributions to 

the HSAs of all comparable 

participating employees (eligible 

individuals who are in the same 

category of employees with the same 

category of HDHP coverage) during the 

calendar year without regard to any 

classification other than these 

categories. Thus, the comparability rules 

do not apply separately to collectively 

bargained and non-collectively 

bargained employees. Similarly, the 

comparability rules do not apply 

separately to groups of collectively 

bargained employees. 

Q–6. Is an employer permitted to 

make comparable contributions only to 

the HSAs of comparable participating 

employees who have coverage under the 

employer’s HDHP? 

A–6. (a) Employer-provided HDHP 

coverage. If during a calendar year, an 

employer contributes to the HSA of any 

employee who is an eligible individual 

covered under an HDHP provided by 

the employer, the employer is required 

to make comparable contributions to the 

HSAs of all comparable participating 

employees with coverage under any 

HDHP provided by the employer. An 

employer that contributes only to the 

HSAs of employees who are eligible 

individuals with coverage under the 

employer’s HDHP is not required to 

make comparable contributions to HSAs 

of employees who are eligible 

individuals but are not covered under 

the employer’s HDHP. However, an 

employer that contributes to the HSA of 

any employee who is an eligible 

individual with coverage under any 

HDHP, in addition to the HDHPs 

provided by the employer, must make 

comparable contributions to the HSAs 

of all comparable participating 

employees whether or not covered 

under the employer’s HDHP. 

(b) Examples. The following examples 

illustrate the rules in paragraph (a) of 

this Q & A–6:

Example 1. In a calendar year, Employer C 

offers an HDHP to its full-time employees. 

Most full-time employees are covered under 

Employer C’s HDHP and Employer C makes 

comparable contributions only to these 

employees’ HSAs. Employee W, a full-time 

employee of Employer C and an eligible 

individual, is covered under an HDHP 

provided by W’s spouse’s employer and not 

under Employer C’s HDHP. Employer C is 

not required to make comparable 

contributions to W’s HSA.

Example 2. In a calendar year, Employer D 

does not offer an HDHP. Several full-time 

employees, who are eligible individuals, 

have HSAs. Employer D contributes to these 

employees’ HSAs. Employer D must make 

comparable contributions to the HSAs of all 

full-time employees who are eligible 

individuals.

Example 3. In a calendar year, Employer E 

offers an HDHP to its full-time employees. 

Most full-time employees are covered under 

Employer E’s HDHP and Employer E makes 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50239

comparable contributions to these 

employees’ HSAs and also to the HSAs of 

full-time employees who are eligible 

individuals and who are not covered under 

Employer E’s HDHP. Employee H, a full-time 

employee of Employer E and a comparable 

participating employee, is covered under an 

HDHP provided by H’s spouse’s employer 

and not under Employer E’s HDHP. Employer 

E must make comparable contributions to H’s 

HSA.

Q–7. If an employee and his or her 

spouse are eligible individuals who 

work for the same employer and one 

employee-spouse has family coverage 

for both employees under the 

employer’s HDHP, must the employer 

make comparable contributions to the 

HSAs of both employees? 

A–7. (a) In general. If the employer 

makes contributions only to the HSAs of 

employees who are eligible individuals 

covered under its HDHP, the employer 

is not required to contribute to the HSAs 

of both employee-spouses. The 

employer is required to contribute to the 

HSA of the employee-spouse with 

coverage under the employer’s HDHP, 

but is not required to contribute to the 

HSA of the employee-spouse covered 

under the employer’s HDHP by virtue of 

his or her spouse’s coverage. However, 

if the employer contributes to the HSA 

of any employee who is an eligible 

individual with coverage under any 

HDHP, the employer must make 

comparable contributions to the HSAs 

of both employee-spouses if they are 

both eligible individuals. If an employer 

is required to contribute to the HSAs of 

both employee-spouses, the employer is 

not required to contribute amounts in 

excess of the annual contribution limits 

in section 223(b). 

(b) Examples. The following examples 

illustrate the rules in paragraph (a) of 

this Q & A–7:

Example 1. In a calendar year, Employer F 

offers an HDHP to its full-time employees. 

Most full-time employees are covered under 

Employer F’s HDHP and Employer F makes 

comparable contributions only to these 

employees’ HSAs. Employee H, a full-time 

employee of Employer F and an eligible 

individual has family coverage under 

Employer F’s HDHP for H and H’s spouse, 

Employee W, who is also a full-time 

employee of Employer F and an eligible 

individual. Employer F is required to make 

comparable contributions to H’s HSA, but is 

not required to make comparable 

contributions to W’s HSA.

Example 2. In a calendar year, Employer G 

offers an HDHP to its full-time employees. 

Most full-time employees are covered under 

Employer G’s HDHP and Employer G makes 

comparable contributions to these 

employees’ HSAs and to the HSAs of fulltime employees who are eligible individuals 

but are not covered under Employer G’s 

HDHP. Employee W, a full-time employee of 

Employer G and an eligible individual, has 

family coverage under Employer G’s HDHP 

for W and W’s spouse, Employee H, who is 

also a full-time employee of Employer G and 

an eligible individual. Employer G must 

make comparable contributions to W’s HSA 

and to H’s HSA.

Q–8. Does an employer that makes 

HSA contributions only for nonmanagement employees who are eligible 

individuals, but not for management 

employees who are eligible individuals 

or that makes HSA contributions only 

for management employees who are 

eligible individuals but not for nonmanagement employees who are eligible 

individuals satisfy the requirement that 

the employer make comparable 

contributions? 

A–8. (a) Management v. nonmanagement. No. If management 

employees and non-management 

employees are comparable participating 

employees, the comparability rules are 

not satisfied. However, if nonmanagement employees are comparable 

participating employees and 

management employees are not 

comparable participating employees, the 

comparability rules may be satisfied. 

But see Q & A–1 in § 54.4980G–5 on 

contributions made through a cafeteria 

plan.

(b) Examples. The following examples 

illustrate the rules in paragraph (a) of 

this Q & A–8:

Example 1. In a calendar year, Employer H 

maintains an HDHP covering all management 

and non-management employees. Employer 

H contributes $1,000 for the calendar year to 

the HSA of each non-management employee 

who is an eligible individual covered under 

its HDHP. Employer H does not contribute to 

the HSAs of any of its management 

employees who are eligible individuals 

covered under its HDHP. The comparability 

rules are not satisfied.

Example 2. In a calendar year, Employer J 

maintains an HDHP for non-management 

employees only. Employer J does not 

maintain an HDHP for its management 

employees. Employer J contributes $1,000 for 

the calendar year to the HSA of each nonmanagement employee who is an eligible 

individual with coverage under its HDHP. 

Employer J does not contribute to the HSAs 

of any of its non-management employees not 

covered under its HDHP or to the HSAs of 

any of its management employees. The 

comparability rules are satisfied.

Example 3. In a calendar year, Employer K 

maintains an HDHP for management 

employees only. Employer K does not 

maintain an HDHP for its non-management 

employees. Employer K contributes $1,000 

for the calendar year to the HSA of each 

management employee who is an eligible 

individual with coverage under its HDHP. 

Employer K does not contribute to the HSAs 

of any of its management employees not 

covered under its HDHP or to the HSAs of 

any of its non-management employees. The 

comparability rules are satisfied.

Q–9. If an employer contributes to the 

HSAs of former employees who are 

eligible individuals, do the 

comparability rules apply to these 

contributions? 

A–9. (a) Former employees. Yes. The 

comparability rules apply to 

contributions an employer makes to 

former employees’ HSAs. Therefore, if 

an employer contributes to any former 

employee’s HSA, it must make 

comparable contributions to the HSAs 

of all comparable participating former 

employees (former employees who are 

eligible individuals with the same 

category of HDHP coverage). However, 

an employer is not required to make 

comparable contributions to the HSAs 

of former employees with coverage 

under the employer’s HDHP because of 

an election under a COBRA 

continuation provision (as defined in 

section 9832(d)(1)). See Q & A–5 and

Q & A–11 in this section. The 

comparability rules apply separately to 

former employees because they are a 

separate category of covered employee. 

See Q & A–5 in this section. 

(b) Examples. The following examples 

illustrate the rules in paragraph (a) of 

this Q & A–9:

Example 1. In a calendar year, Employer L 

contributes $1,000 for the calendar year to 

the HSA of each current employee who is an 

eligible individual with coverage under any 

HDHP. Employer L does not contribute to the 

HSA of any former employee who is an 

eligible individual. Employer L’s 

contributions satisfy the comparability rules.

Example 2. In a calendar year, Employer M 

contributes to the HSAs of current employees 

and former employees who are eligible 

individuals covered under any HDHP. 

Employer M contributes $750 to the HSA of 

each current employee with self-only HDHP 

coverage and $1,000 to the HSA of each 

current employee with family HDHP 

coverage. Employer M also contributes $300 

to the HSA of each former employee with 

self-only HDHP coverage and $400 to the 

HSA of each former employee with family 

HDHP coverage. Employer M’s contributions 

satisfy the comparability rules.

Q–10. Is an employer permitted to 

make comparable contributions only to 

the HSAs of comparable participating 

former employees who have coverage 

under the employer’s HDHP? 

A–10. If during a calendar year, an 

employer contributes to the HSA of any 

former employee who is an eligible 

individual covered under an HDHP 

provided by the employer, the employer 

is required to make comparable 

contributions to the HSAs of all former 

employees who are comparable 

participating former employees with 

coverage under any HDHP provided by 

the employer. An employer that 

contributes only to the HSAs of former 

50240 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

employees who are eligible individuals 

with coverage under the employer’s 

HDHP is not required to make 

comparable contributions to the HSAs 

of former employees who are eligible 

individuals and who are not covered 

under the employer’s HDHP. However, 

an employer that contributes to the HSA 

of any former employee who is an 

eligible individual with coverage under 

any HDHP, even if that coverage is not 

the employer’s HDHP, must make 

comparable contributions to the HSAs 

of all former employees who are eligible 

individuals whether or not covered 

under an HDHP of the employer. 

Q–11. If an employer contributes only 

to the HSAs of former employees who 

are eligible individuals with coverage 

under the employer’s HDHP, must the 

employer make comparable 

contributions to the HSAs of former 

employees who are eligible individuals 

with coverage under the employer’s 

HDHP because of an election under a 

COBRA continuation provision (as 

defined in section 9832(d)(1))? 

A–11. No. An employer that 

contributes only to the HSAs of former 

employees who are eligible individuals 

with coverage under the employer’s 

HDHP is not required to make 

comparable contributions to the HSAs 

of former employees who are eligible 

individuals with coverage under the 

employer’s HDHP because of an election 

under a COBRA continuation provision 

(as defined in section 9832(d)(1)).

Q–12. How do the comparability rules 

apply if some employees have HSAs 

and other employees have Archer 

MSAs? 

A–12. (a) HSAs and Archer MSAs.

The comparability rules apply 

separately to employees who have HSAs 

and employees who have Archer MSAs. 

However, if an employee has both an 

HSA and an Archer MSA, the employer 

may contribute to either the HSA or the 

Archer MSA, but not to both. 

(b) Examples. The following examples 

illustrate the rules in paragraph (a) of 

this Q & A–12:

Example 1. In a calendar year, Employer N 

contributes $600 to the Archer MSA of each 

employee who is an eligible individual and 

who has an Archer MSA. Employer N 

contributes $500 for the calendar year to the 

HSA of each employee who is an eligible 

individual and who has an HSA. If an 

employee has both an Archer MSA and an 

HSA, Employer N contributes to the 

employee’s Archer MSA and not to the 

employee’s HSA. Employee X has an Archer 

MSA and an HSA. Employer N contributes 

$600 for the calendar year to X’s Archer MSA 

but does not contribute to X’s HSA. Employer 

N’s contributions satisfy the comparability 

rules.

Example 2. Same facts as Example 1,

except that if an employee has both an 

Archer MSA and an HSA, Employer N 

contributes to the employee’s HSA and not 

to the employee’s Archer MSA. Employer N 

contributes $500 for the calendar year to X’s 

HSA but does not contribute to X’s Archer 

MSA. Employer N’s contributions satisfy the 

comparability rules.

§ 54.4980G–4 Calculating comparable 

contributions. 

Q–1. What are comparable 

contributions? 

A–1. (a) Definition. Contributions are 

comparable if they are either the same 

amount or the same percentage of the 

deductible under the HDHP for 

employees who are eligible individuals 

with the same category of coverage. 

Employees with self-only HDHP 

coverage are tested separately from 

employees with family HDHP coverage. 

See Q & A–1 and Q & A–2 in 

§ 54.4980G–1. An employer is not 

required to contribute the same amount 

or the same percentage of the deductible 

for employees who are eligible 

individuals with self-only HDHP 

coverage that it contributes for 

employees who are eligible individuals 

with family HDHP coverage. An 

employer that satisfies the 

comparability rules by contributing the 

same amount to the HSAs of all 

employees who are eligible individuals 

with self-only HDHP coverage is not 

required to contribute any amount to the 

HSAs of employees who are eligible 

individuals with family HDHP coverage, 

or to contribute the same percentage of 

the family HDHP deductible as the 

amount contributed with respect to selfonly HDHP coverage. Similarly, an 

employer that satisfies the 

comparability rules by contributing the 

same amount to the HSAs of all 

employees who are eligible individuals 

with family HDHP coverage is not 

required to contribute any amount to the 

HSAs of employees who are eligible 

individuals with self-only HDHP 

coverage, or to contribute the same 

percentage of the self-only HDHP 

deductible as the amount contributed 

with respect to family HDHP coverage. 

(b) Examples. Assume that the HDHPs 

in Example 1 through Example 7 satisfy 

the definition of an HDHP for the 2007 

calendar year. The following examples 

illustrate the rules in paragraph (a) of 

this Q & A–1:

Example 1. In the 2007 calendar year, 

Employer A offers its full-time employees 

three health plans, including an HDHP with 

self-only coverage and a $2,000 deductible. 

Employer A contributes $1,000 for the 

calendar year to the HSA of each employee 

who is an eligible individual electing the 

self-only HDHP coverage. Employer A makes 

no HSA contributions for employees with 

family HDHP coverage or for employees who 

do not elect the employer’s self-only HDHP. 

Employer A’s HSA contributions satisfy the 

comparability rules.

Example 2. In the 2007 calendar year, 

Employer B offers its employees an HDHP 

with a $3,000 deductible for self-only 

coverage and a $4,000 deductible for family 

coverage. Employer B contributes $1,000 for 

the calendar year to the HSA of each 

employee who is an eligible individual 

electing the self-only HDHP coverage. 

Employer B contributes $2,000 for the 

calendar year to the HSA of each employee 

who is an eligible individual electing the 

family HDHP coverage. Employer B’s HSA 

contributions satisfy the comparability rules.

Example 3. In the 2007 calendar year, 

Employer C offers its employees an HDHP 

with a $1,500 deductible for self-only 

coverage and a $3,000 deductible for family 

coverage. Employer C contributes $1,000 for 

the calendar year to the HSA of each 

employee who is an eligible individual 

electing the self-only HDHP coverage. 

Employer C contributes $1,000 for the 

calendar year to the HSA of each employee 

who is an eligible individual electing the 

family HDHP coverage. Employer C’s HSA 

contributions satisfy the comparability rules.

Example 4. In the 2007 calendar year, 

Employer D offers its employees an HDHP 

with a $1,500 deductible for self-only 

coverage and a $3,000 deductible for family 

coverage. Employer D contributes $1,500 for 

the calendar year to the HSA of each 

employee who is an eligible individual 

electing the self-only HDHP coverage. 

Employer D contributes $1,000 for the 

calendar year to the HSA of each employee 

who is an eligible individual electing the 

family HDHP coverage. Employer D’s HSA 

contributions satisfy the comparability rules.

Example 5. (i) In the 2007 calendar year, 

Employer E maintains two HDHPs. Plan A 

has a $2,000 deductible for self-only coverage 

and a $4,000 deductible for family coverage. 

Plan B has a $2,500 deductible for self-only 

coverage and a $4,500 deductible for family 

coverage. For the calendar year, Employer E 

makes contributions to the HSA of each fulltime employee who is an eligible individual 

covered under Plan A of $600 for self-only 

coverage and $1,000 for family coverage. 

Employer E satisfies the comparability rules, 

if it makes either of the following 

contributions for the 2007 calendar year to 

the HSA of each full-time employee who is 

an eligible individual covered under Plan 

B—

(A) $600 for each full-time employee with 

self-only coverage and $1,000 for each fulltime employee with family coverage; or 

(B) $750 for each employee with self-only 

coverage and $1,125 for each employee with 

family coverage (the same percentage of the 

deductible Employer E contributes for fulltime employees covered under Plan A, 30% 

of the deductible for self-only coverage and 

25% of the deductible for family coverage). 

(ii) Employer E also makes contributions to 

the HSA of each part-time employee who is 

an eligible individual covered under Plan A 

of $300 for self-only coverage and $500 for 

family coverage. Employer E satisfies the 

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50241

comparability rules, if it makes either of the 

following contributions for the 2007 calendar 

year to the HSA of each part-time employee 

who is an eligible individual covered under 

Plan B—

(A) $300 for each part-time employee with 

self-only coverage and $500 for each parttime employee with family coverage; or 

(B) $375 for each part-time employee with 

self-only coverage and $563 for each parttime employee with family coverage (the 

same percentage of the deductible Employer 

E contributes for part-time employees 

covered under Plan A, 15% of the deductible 

for self-only coverage and 12.5% of the 

deductible for family coverage).

Example 6. (i) In the 2007 calendar year, 

Employer F maintains an HDHP. The HDHP 

has a $2,500 deductible for self-only 

coverage, and the following family coverage 

options—

(A) A $3,500 deductible for self plus one 

dependent; 

(B) A $3,500 deductible for self plus 

spouse; 

(C) A $3,500 deductible for self plus two 

or more dependents; 

(D) A $3,500 deductible for self plus 

spouse and one dependent; and 

(E) A $3,500 deductible for self plus spouse 

and two or more dependents. 

(ii) Employer F makes the following 

contributions for the calendar year to the 

HSA of each full-time employee who is an 

eligible individual covered under the 

HDHP—

(A) $750 for self-only coverage; 

(B) $1,000 for self plus one dependent; 

(C) $1,000 for self plus spouse; 

(D) $1,000 for self plus two or more 

dependents; 

(E) $1,000 for self plus spouse and one 

dependent; and 

(F) $1,000 for self plus spouse and two or 

more dependents. 

(iii) Employer F’s HSA contributions 

satisfy the comparability rules.

Example 7. (i) In the 2007 calendar year, 

Employer G maintains an HDHP. The HDHP 

has a $1,800 deductible for self-only coverage 

and the following family coverage options—

(A) A $3,500 deductible for self plus one 

dependent; 

(B) A $3,800 deductible for self plus 

spouse; 

(C) A $4,000 deductible for self plus two 

or more dependents; 

(D) A $4,500 deductible for self plus 

spouse and one dependent; and 

(E) A $5,000 deductible for self plus spouse 

and two or more dependents. 

(ii) Employer G makes the following 

contributions for the calendar year to the 

HSA of each full-time employee who is an 

eligible individual covered under the 

HDHP—

(A) $360 for self-only coverage; 

(B) $875 for self plus one dependent; 

(C) $950 for self plus spouse; 

(D) $1,000 for self plus two or more 

dependents; 

(E) $1,125 for self plus spouse and one 

dependent; and 

(F) $1,250 for self plus spouse and two or 

more dependents. 

(iii) Employer G’s HSA contributions 

satisfy the comparability rules because 

Employer G has made contributions that are 

the same percentage of the deductible for 

eligible employees with the same category of 

coverage (20% of the deductible for eligible 

employees with self-only coverage and 25% 

of the deductible for eligible employees with 

family coverage). Employer G could also 

satisfy the comparability rules by 

contributing the same dollar amount for each 

category of coverage.

Example 8. In a calendar year, Employer H 

offers its employees an HDHP and a health 

flexible spending arrangement (health FSA). 

The health FSA reimburses employees for 

medical expenses as defined in section 

213(d). Some of Employer H’s employees 

have coverage under the HDHP and the 

health FSA. For the calendar year, Employer 

H contributes $500 to the HSA of each of 

employee who is an eligible individual, but 

does not contribute to the HSAs of employees 

who have coverage under the health FSA or 

under a spouse’s health FSA. In addition, 

some of Employer H’s employees have 

coverage under the HDHP and are enrolled in 

Medicare. Employer H does not contribute to 

the HSAs of employees who are enrolled in 

Medicare. The employees who have coverage 

under the health FSA or under a spouse’s 

health FSA are not comparable participating 

employees because they are not eligible 

individuals under section 223(c)(1). 

Similarly, the employees who are enrolled in 

Medicare are not comparable participating 

employees because they are not eligible 

individuals under section 223(b)(7) and 

(c)(1). Therefore, employees who have 

coverage under the health FSA or under a 

spouse’s health FSA and employees who are 

enrolled in Medicare are excluded from 

comparability testing. See sections 4980G(b) 

and 4980E. Employer H’s contributions 

satisfy the comparability rules.

Q–2. How do the comparability rules 

apply to employer contributions to 

employees’ HSAs if some employees 

work full-time during the entire 

calendar year, and other employees 

work full-time for less than the entire 

calendar year? 

A–2. Employer contributions to the 

HSAs of employees who work full-time 

for less than twelve months satisfy the 

comparability rules if the contribution 

amount is comparable when determined 

on a month-to-month basis. For 

example, if the employer contributes 

$240 to the HSA of each full-time 

employee who works the entire calendar 

year, the employer must contribute $60 

to the HSA of a full-time employee who 

works three months of the calendar 

year. The rules set forth this Q & A–2 

apply to employer contributions made 

on a pay-as-you-go basis or on a lookback-basis as described in Q & A–3 in 

this section. See sections 4980G(b) and 

4980E(d)(2)(B). 

Q–3. How does an employer comply 

with the comparability rules when some 

employees who are eligible individuals 

do not work for the employer during the 

entire calendar year? 

A–3. (a) In general. In determining 

whether the comparability rules are 

satisfied, an employer must take into 

account all full-time and part-time 

employees who were employees and 

eligible individuals for any month 

during the calendar year. (Full-time and 

part-time employees are tested 

separately. See Q & A–5 in § 54.4980G–

3.) There are two methods to comply 

with the comparability rules when some 

employees who are eligible individuals 

do not work for the employer during the 

entire calendar year; contributions may 

be made on a pay-as-you-go basis or on 

a look-back basis. See Q & A–9 through 

Q & A–11 in § 54.4980G–3 for the rules 

regarding comparable contributions to 

the HSAs of former employees.

(b) Contributions on a pay-as-you-go 

basis. An employer may comply with 

the comparability rules by contributing 

amounts at one or more times for the 

calendar year to the HSAs of employees 

who are eligible individuals, if 

contributions are the same amount or 

the same percentage of the HDHP 

deductible for employees who are 

eligible individuals as of the first day of 

the month with the same category of 

coverage and are made at the same time. 

Contributions made at the employer’s 

usual payroll interval for different 

groups of employees are considered to 

be made at the same time. For example, 

if salaried employees are paid monthly 

and hourly employees are paid biweekly, an employer may contribute to 

the HSAs of hourly employees on a biweekly basis and to the HSAs of salaried 

employees on a monthly basis. An 

employer may change the amount that 

it contributes to the HSAs of employees 

at any point. However, the changed 

contribution amounts must satisfy the 

comparability rules. 

(c) Examples. The following examples 

illustrate the rules in paragraph (b) of 

this Q & A–3:

Example 1. (i) Beginning on January 1st, 

Employer J contributes $50 per month on the 

first day of each month to the HSA of each 

employee who is an eligible individual. 

Employer J does not contribute to the HSAs 

of former employees. In mid-March of the 

same year, Employee X, an eligible 

individual, terminates employment after 

Employer J has contributed $150 to X’s HSA. 

After X terminates employment, Employer J 

does not contribute additional amounts to X’s 

HSA. In mid-April of the same year, 

Employer J hires Employee Y, an eligible 

individual, and contributes $50 to Y’s HSA 

in May and $50 in June. Effective in July of 

the same year, Employer J stops contributing 

to the HSAs of all employees and makes no 

contributions to the HSA of any employee for 

the months of July through December. In 

August, Employer J hires Employee Z, an 

eligible individual. Employer J does not 

50242 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

contribute to Z’s HSA. After Z is hired, 

Employer J does not hire additional 

employees. As of the end of the calendar 

year, Employer J has made the following HSA 

contributions to its employees’ HSAs—

(A) Employer J contributed $150 to X’s 

HSA; 

(B) Employer J contributed $100 to Y’s 

HSA; 

(C) Employer J did not contribute to Z’s 

HSA; and 

(D) Employer J contributed $300 to the 

HSA of each employee who was an eligible 

individual and employed by Employer from 

January through June. 

(ii) Employer J’s contributions satisfy the 

comparability rules.

Example 2. In a calendar year, Employer K 

offers its employees an HDHP and 

contributes on a monthly pay-as-you go-basis 

to the HSAs of employees who are eligible 

individuals with coverage under Employer 

K’s HDHP. In the calendar year, Employer K 

contributes $50 per month to the HSA of 

each of employee with self-only HDHP 

coverage and $100 per month to the HSA of 

each employee with family HDHP coverage. 

From January 1st through March 30th of the 

calendar year, Employee X is an eligible 

individual with self-only HDHP coverage. 

From April 1st through December 30th of the 

calendar year, X is an eligible individual 

with family HDHP coverage. For the months 

of January, February and March of the 

calendar year, Employer K contributes $50 

per month to X’s HSA. For the remaining 

months of the calendar year, Employer K 

contributes $100 per month to X’s HSA. 

Employer K’s contributions to X’s HSA 

satisfy the comparability rules.

(d) Contributions on a look-back 

basis. An employer may also satisfy the 

comparability rules by determining 

comparable contributions for the 

calendar year at the end of the calendar 

year, taking into account all employees 

who were eligible individuals for any 

month during the calendar year and 

contributing the correct amount (a 

percentage of the HDHP deductible or a 

specified dollar amount for the same 

categories of coverage) to the employees’

HSAs.

(e) Example. The following example 

illustrates the rules in paragraph (d) of 

this Q & A–3:

Example. In a calendar year, Employer L 

offers its employees an HDHP and 

contributes on a look-back-basis to the HSAs 

of employees who are eligible individuals 

with coverage under Employer L’s HDHP. 

Employer L contributes $600 (i.e. $50 per 

month) for the calendar year to the HSA of 

each of employee with self-only HDHP 

coverage and $1,200 (i.e., $100 per month) 

for the calendar year to the HSA of each 

employee with family HDHP coverage. From 

January 1st through June 30th of the calendar 

year, Employee Y is an eligible individual 

with family HDHP coverage. From July 1st 

through December 31, Y is an eligible 

individual with self-only HDHP coverage. 

Employer L contributes $900 on a look-backbasis for the calendar year to Y’s HSA ($100 

per month for the months of January through 

June and $50 per month for the months of 

July through December). Employer L’s 

contributions to Y’s HSA satisfy the 

comparability rules.

Q–4. May an employer make all of its 

contributions to the HSAs of its 

employees who are eligible individuals 

at the beginning of the calendar year 

(i.e., on a pre-funded basis) instead of 

contributing on a pay-as-you-go or on a 

look-back basis? 

A–4. (a) Contributions on a prefunded basis. Yes. An employer may 

make all of its contributions to the HSAs 

of its employees who are eligible 

individuals at the beginning of the 

calendar year. An employer that prefunds the HSAs of its employees will 

not fail to satisfy the comparability rules 

because an employee who terminates 

employment prior to the end of the 

calendar year has received more 

contributions on a monthly basis than 

employees who have worked the entire 

calendar year. See Q & A–12 in this 

section. Under section 223(d)(1)(E), an 

account beneficiary’s interest in an HSA 

is nonforfeitable. An employer must 

make comparable contributions for all 

employees who are comparable 

participating employees for any month 

during the calendar year, including 

employees who are eligible individuals 

hired after the date of initial funding. 

An employer that makes HSA 

contributions on a pre-funded basis may 

also contribute on a pre-funded-basis to 

the HSAs of employees who are eligible 

individuals hired after the date of initial 

funding. Alternatively, an employer that 

has pre-funded the HSAs of comparable 

participating employees may contribute 

to the HSAs of employees who are 

eligible individuals hired after the date 

of initial funding on a pay-as-you-go 

basis or on a look-back basis. An 

employer that makes HSA contributions 

on a pre-funded basis must use the same 

contribution method for all employees 

who are eligible individuals hired after 

the date of initial funding. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–4:

Example. (i) On January 1, Employer M 

contributes $1,200 for the calendar year on a 

pre-funded basis to the HSA of each of 

employee who is an eligible individual. In 

mid-May, Employer M hires Employee B, an 

eligible individual. Therefore, Employer M is 

required to make comparable contributions to 

B’s HSA beginning in June. Employer M 

satisfies the comparability rules with respect 

to contributions to B’s HSA if it makes HSA 

contributions in any one of the following 

ways—

(A) Pre-funding B’s HSA by contributing 

$700 to B’s HSA; 

(B) Contributing $100 per month on a payas-you-go basis to B’s HSA; or 

(C) Contributing to B’s HSA at the end of 

the calendar year taking into account each 

month that B was an eligible individual and 

employed by Employer M. 

(ii) If Employer M hires additional 

employees who are eligible individuals after 

initial funding, it must use the same 

contribution method for these employees that 

it used to contribute to B’s HSA.

Q–5. Must an employer use the same 

contribution method as described in Q 

& A–3 and Q & A–4 of this section for 

all employees who were comparable 

participating employees for any month 

during the calendar year? 

A–5. Yes. If an employer makes 

comparable HSA contributions on a 

pay-as-you-go basis, it must do so for 

each employee who is a comparable 

participating employee during the pay 

period. If an employer makes 

comparable contributions on a lookback basis, it must do so for each 

employee who was a comparable 

participating employee for any month 

during the calendar year. If an employer 

makes HSA contributions on a prefunded basis, it must do so for all 

employees who are comparable 

participating employees at the 

beginning of the calendar year. An 

employer that contributes on a prefunded basis must make comparable 

HSA contributions for all employees 

who are comparable participating 

employees for any month during the 

calendar year, including employees who 

are eligible individuals hired after the 

date of initial funding. See Q & A–4 in 

this section for rules regarding 

contributions for employees hired after 

initial funding. 

Q–6. How does an employer comply 

with the comparability rules if an 

employee has not established an HSA at 

the time the employer contributes to its 

employees’ HSAs? 

A–6. (a) Employee has not established 

an HSA. If an employee has not 

established an HSA at the time the 

employer funds its employees’ HSAs, 

the employer complies with the 

comparability rules by contributing 

comparable amounts to the employee’s 

HSA when the employee establishes the 

HSA, taking into account each month 

that the employee was a comparable 

participating employee. However, an 

employer is not required to make 

comparable contributions for a calendar 

year to an employee’s HSA if the 

employee has not established an HSA 

by December 31st of the calendar year. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–6:

Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 50243

Example. Beginning on January 1st, 

Employer N contributes $500 per calendar 

year on a pay-as-you-go basis to the HSA of 

each employee who is an eligible individual. 

Employee C is an eligible individual during 

the entire calendar year but does not 

establish an HSA until March. 

Notwithstanding C’s delay in establishing an 

HSA, Employer N must make up the missed 

HSA contributions for January and February 

by April 15th of the following calendar year.

Q–7. If an employer bases its 

contributions on a percentage of the 

HDHP deductible, how is the correct 

percentage or dollar amount computed? 

A–7. (a) Computing HSA 

contributions. The correct percentage is 

determined by rounding to nearest

1/100th of a percentage point and the 

dollar amount is determined by 

rounding to the nearest whole dollar. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–7:

Example. In this Example, assume that the 

HDHP provided by Employer P satisfies the 

definition of an HDHP for the 2007 calendar 

year. In the 2007 calendar year, Employer P 

maintains two HDHPs. Plan A has a 

deductible of $3,000 for self-only coverage. 

Employer P contributes $1,000 for the 

calendar year to the HSA of each employee 

covered under Plan A. Plan B has a 

deductible of $3,500 for self-only coverage. 

Employer P satisfies the comparability rules 

if it makes either of the following 

contributions for the 2007 calendar year to 

the HSA of each employee who is an eligible 

individual with self-only coverage under 

Plan B—

(i) $1,000; or 

(ii) $1,167 (33.33% of the deductible 

rounded to the nearest whole dollar amount).

Q–8. Does an employer that 

contributes to the HSA of each 

comparable participating employee in 

an amount equal to the employee’s HSA 

contribution or a percentage of the 

employee’s HSA contribution (matching 

contributions) satisfy the rule that all 

comparable participating employees 

receive comparable contributions? 

A–8. No. If all comparable 

participating employees do not 

contribute the same amount to their 

HSAs and, consequently, do not receive 

comparable contributions to their HSAs, 

the comparability rules are not satisfied, 

notwithstanding that the employer 

offers to make available the same 

contribution amount to each comparable 

participating employee. But see Q & A–

1 in § 54.4980G–5 on contributions to 

HSAs made through a cafeteria plan. 

Q–9. If an employer conditions 

contributions by the employer to an 

employee’s HSA on an employee’s 

participation in health assessments, 

disease management programs or 

wellness programs and makes the same 

contributions available to all employees 

who participate in the programs, do the 

contributions satisfy the comparability 

rules? 

A–9. No. If all comparable 

participating employees do not elect to 

participate in all the programs and 

consequently, all comparable 

participating employees do not receive 

comparable contributions to their HSAs, 

the employer contributions fail to satisfy 

the comparability rules. But see Q & A–

1 in § 54.4980G–5 on contributions 

made to HSAs through a cafeteria plan. 

Q–10. If an employer makes 

additional contributions to the HSAs of 

all comparable participating employees 

who have attained a specified age or 

who have worked for the employer for 

a specified number of years, do the 

contributions satisfy the comparability 

rules? 

A–10. No. If all comparable 

participating employees do not meet the 

age or length of service requirement, all 

comparable participating employees do 

not receive comparable contributions to 

their HSAs and the employer 

contributions fail to satisfy the 

comparability rules. 

Q–11. If an employer makes 

additional contributions to the HSAs of 

all comparable participating employees 

who qualify for the additional 

contributions (HSA catch-up 

contributions) under section 223(b)(3), 

do the contributions satisfy the 

comparability rules? 

A–11. No. If all comparable 

participating employees do not qualify 

for the additional HSA contributions 

under section 223(b)(3), all comparable 

participating employees do not receive 

comparable contributions to their HSAs, 

and the employer contributions fail to 

satisfy the comparability rules. 

Q–12. If an employer’s contributions 

to an employee’s HSA result in noncomparable contributions, may the 

employer recoup the excess amount 

from the employee’s HSA? 

A–12. No. An employer may not 

recoup from an employee’s HSA any 

portion of the employer’s contribution 

to the employee’s HSA. Under section 

223(d)(1)(E), an account beneficiary’s 

interest in an HSA is nonforfeitable. 

However, an employer may make 

additional HSA contributions to satisfy 

the comparability rules. An employer 

may contribute up until April 15th 

following the calendar year in which the 

non-comparable contributions were 

made. An employer that makes 

additional HSA contributions to correct 

non-comparable contributions must also 

contribute reasonable interest. However, 

an employer is not required to 

contribute amounts in excess of the 

annual contribution limits in section 

223(b).

§ 54.4980G–5 HSA comparability rules and 

cafeteria plans and waiver of excise tax. 

Q–1. If an employer makes 

contributions through a section 125 

cafeteria plan to the HSA of each 

employee who is an eligible individual 

are the contributions subject to the 

comparability rules? 

A–1. No. The comparability rules do 

not apply to HSA contributions that an 

employer makes through a section 125 

cafeteria plan. However, contributions 

to an HSA made under a cafeteria plan 

are subject to the section 125 

nondiscrimination rules (eligibility 

rules, contributions and benefits tests 

and key employee concentration tests). 

See section 125(b), (c) and (g) and Prop. 

Treas. Reg. § 1.125–1, Q & A–19, (49 FR 

19321). 

Q–2. If an employer makes 

contributions through a cafeteria plan to 

the HSA of each employee who is an 

eligible individual in an amount equal 

to the amount of the employee’s HSA 

contribution or a percentage of the 

amount of the employee’s HSA 

contribution (i.e., matching 

contributions), are the contributions 

subject to the section 4980G 

comparability rules? 

A–2. No. The comparability rules do 

not apply to HSA contributions that an 

employer makes through a section 125 

cafeteria plan. Thus, where matching 

contributions are made by an employer 

through a cafeteria plan, the 

contributions are not subject to the 

comparability rules of section 4980G. 

However, contributions, including 

matching contributions, to an HSA 

made under a cafeteria plan are subject 

to the section 125 nondiscrimination 

rules (eligibility rules, contributions and 

benefits tests and key employee 

concentration tests). See Q & A–1 in this 

section. 

Q–3. If an employer provides HDHP 

coverage through a cafeteria plan, but 

the employer’s HSA contributions are 

not provided through the cafeteria plan, 

do the cafeteria plan nondiscrimination 

rules or the comparability rules apply to 

the HSA contributions? 

A–3. (a) HDHP provided through 

cafeteria plan. The comparability rules 

in section 4980G apply to the HSA 

contributions. The cafeteria plan 

nondiscrimination rules apply only to 

HSA contributions made through a 

cafeteria plan irrespective of whether 

the HDHP is provided through a 

cafeteria plan. 

(b) Example. The following example 

illustrates the rules in paragraph (a) of 

this Q & A–3:

50244 Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / Proposed Rules 

Example. Employer A provides HDHP 

coverage through its cafeteria plan. Employer 

A automatically contributes to the HSA of 

each employee who is an eligible individual 

with HDHP coverage through the cafeteria 

plan. Employees make no election with 

respect to Employer A’s HSA contributions 

and have no right to receive cash or other 

taxable benefits in lieu of the HSA 

contributions. Employer A contributes only 

to the HSAs of employees who have elected 

HDHP coverage through the cafeteria plan. 

The comparability rules apply to Employer 

A’s HSA contributions because the HSA 

contributions are not made through the 

cafeteria plan.

Q–4. If under the employer’s cafeteria 

plan, employees who are eligible 

individuals and who participate in 

health assessments, disease 

management programs or wellness 

programs receive an employer 

contribution to an HSA, unless the 

employees elect cash, are the 

contributions subject to the 

comparability rules? 

A–4. No. The comparability rules do 

not apply to employer contributions to 

an HSA made through a cafeteria plan. 

See Q & A–1 in this section. 

Q–5. May all or part of the excise tax 

imposed under section 4980G be 

waived? 

A–5. In the case of a failure which is 

due to reasonable cause and not to 

willful neglect, all or a portion of the 

excise tax imposed under section 4980G 

may be waived to the extent that the 

payment of the tax would be excessive 

relative to the failure involved. See 

sections 4980G(b) and 4980E(c).

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement.

[FR Doc. 05–16941 Filed 8–25–05; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation 

and Enforcement 

30 CFR Part 948 

[WV–106–FOR] 

West Virginia Regulatory Program

AGENCY: Office of Surface Mining 

Reclamation and Enforcement (OSM), 

Interior.

ACTION: Proposed rule; public comment 

period and opportunity for public 

hearing on proposed amendment. 

SUMMARY: We are announcing receipt of 

a proposed amendment to the West 

Virginia regulatory program (the West 

Virginia program) under the Surface 

Mining Control and Reclamation Act of 

1977 (SMCRA or the Act). West Virginia 

proposes revisions to the Code of West 

Virginia (W. Va. Code) and the Code of 

State Regulations (CSR) as authorized by 

several bills passed during the State’s 

2005 Legislative Session. West Virginia 

is also proposing an amendment that 

affects the State’s regulations 

concerning erosion protection zones 

(EPZ) associated with durable rock fills. 

The State is revising its program to be 

consistent with certain corresponding 

Federal requirements, and to include 

other amendments at its own initiative. 

The amendments include, among other 

things, changes to the State’s surface 

mining and blasting regulations as 

authorized by Committee Substitute for 

House Bill 2723; various statutory 

changes to the State’s approved program 

as a result of the passage of Committee 

Substitute for House Bill 3033 and 

House Bills 2333 and 3236; the 

submission of a draft policy regarding 

the State’s EPZ requirement and 

requesting that the Office of Surface 

Mining (OSM) reconsider its previous 

decision concerning EPZ; State water 

rights and replacement policy 

identifying the timing of water supply 

replacement; the revised Permittee’s 

Request For Release form; and the 

submission of a Memorandum of 

Agreement (MOA) between the West 

Virginia Department of Environmental 

Protection (WVDEP), Division of Mining 

and Reclamation, and the West Virginia 

Division of Natural Resources, Wildlife 

Resources Section that is intended to 

partially resolve a required program 

amendment relating to planting 

arrangements for Homestead postmining land use.

DATES: We will accept written 

comments on this amendment until 4 

p.m. (local time), on September 26, 

2005. If requested, we will hold a public 

hearing on the amendment on 

September 20, 2005. We will accept 

requests to speak at a hearing until 4 

p.m. (local time), on September 12, 

2005.

ADDRESSES: You may submit comments, 

identified by WV–106–FOR, by any of 

the following methods: 

• E-mail: chfo@osmre.gov. Include 

WV–106–FOR in the subject line of the 

message; 

• Mail/Hand Delivery: Mr. Roger W. 

Calhoun, Director, Charleston Field 

Office, Office of Surface Mining 

Reclamation and Enforcement, 1027 

Virginia Street, East, Charleston, West 

Virginia 25301; or 

• Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

Instructions: All submissions received 

must include the agency docket number 

for this rulemaking. For detailed 

instructions on submitting comments 

and additional information on the 

rulemaking process, see the ‘‘Public 

Comment Procedures’’ heading in the 

SUPPLEMENTARY INFORMATION section of 

this document. You may also request to 

speak at a public hearing by any of the 

methods listed above or by contacting 

the individual listed under FOR FURTHER

INFORMATION CONTACT.

Docket: You may review copies of the 

West Virginia program, this amendment, 

a listing of any scheduled public 

hearings, and all written comments 

received in response to this document at 

the addresses listed below during 

normal business hours, Monday through 

Friday, excluding holidays. You may 

also receive one free copy of this 

amendment by contacting OSM’s 

Charleston Field Office listed below. 

Mr. Roger W. Calhoun, Director, 

Charleston Field Office, Office of 

Surface Mining Reclamation and 

Enforcement, 1027 Virginia Street, East, 

Charleston, West Virginia 25301, 

Telephone: (304) 347–7158. E-mail: 

chfo@osmre.gov.

West Virginia Department of 

Environmental Protection, 601 57th 

Street, SE, Charleston, West Virginia 

25304, Telephone: (304) 926–0490. 

In addition, you may review a copy of 

the amendment during regular business 

hours at the following locations: 

Office of Surface Mining Reclamation 

and Enforcement, Morgantown Area 

Office, 75 High Street, Room 229, P.O. 

Box 886, Morgantown, West Virginia 

26507, Telephone: (304) 291–4004. (By 

Appointment Only) 

Office of Surface Mining Reclamation 

and Enforcement, Beckley Area Office, 

323 Harper Park Drive, Suite 3, Beckley, 

West Virginia 25801, Telephone: (304) 

255–5265.

FOR FURTHER INFORMATION CONTACT: Mr. 

Roger W. Calhoun, Director, Charleston 

Field Office, Telephone: (304) 347–

7158. Internet: chfo@osmre.gov.

SUPPLEMENTARY INFORMATION:

I. Background on the West Virginia Program 

II. Description of the Proposed Amendment 

III. Public Comment Procedures 

IV. Procedural Determinations

I. Background on the West Virginia 

Program 

Section 503(a) of the Act permits a 

State to assume primacy for the 

regulation of surface coal mining and 

reclamation operations on non-Federal 

and non-Indian lands within its borders 

by demonstrating that its program 

includes, among other things, ‘‘* * * a