Source: https://www.federalregister.gov/articles/2008/07/16/E8-16175/employer-comparable-contributions-to-health-savings-accounts-under-section-4980g-and-requirement-of
Timestamp: 2015-07-29 04:54:49
Document Index: 143732799

Matched Legal Cases: ['§ 601', 'art 54', '§ 54', '§ 601', 'art 54', '§ 54', '§ 54', '§ 54', '§ 54', '§ 54', '§ 54', '§ 54']

Federal Register | Employer Comparable Contributions to Health Savings Accounts Under Section 4980G, and Requirement of Return for Filing of the Excise Tax Under Section 4980B, 4980D, 4980E or 4980G
Comments Close: 10/14/2008
73 FR 40793
-40799 (7 pages)
REG-120476-07
Document Number: E8-16175
Shorter URL: https://federalregister.gov/a/E8-16175 Related Topics
This document contains proposed regulations providing guidance on employer comparable contributions to Health Savings Accounts (HSAs) under section 4980G of the Internal Revenue Code (Code) as amended by sections 302, 305 and 306 of the Tax Relief and Health Care Act of 2006 (the Act). The proposed regulations also provide guidance relating to the requirement of a return to accompany payment of the excise tax under section 4980B, 4980D, 4980E, or 4980G of the Code and the time for filing that return. These proposed regulations would affect employers that contribute to employees' HSAs and Archer MSAs, employers or employee organizations that sponsor a group health plan, and certain third parties such as insurance companies or HMOs or third-party administrators who are responsible for providing benefits under the plan. This document also provides notice of a public hearing on these proposed regulations.
Employer Comparable Contributions to Health Savings Accounts Under Section 4980G 4 actions from July 16th, 2008 to June 2009
73 FR 63914
Special Rule for Contributions to Nonhighly Compensated Employees
Written or electronic comments must be received by October 14, 2008. Outlines of topics to be discussed at the public hearing scheduled for October 30, 2008, at 10 a.m., must be received by October 13, 2008.
Send submissions to: CC:PA:LPD:PR (REG-120476-07), Internal Revenue Service, room 5203, 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-120476-07), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-120476-07). The public hearing will be held in room 2116, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
Concerning the proposed regulations as they relate to section 4980E or 4980G, Mireille Khoury at (202) 622-6080; concerning the proposed regulations as they relate to section 4980B or 4980D, Russ Weinheimer at (202) 622-6080; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard Hurst at (202) 622-7180 (not toll-free numbers).
Section 1201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Modernization 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 Modernization 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 an 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 the 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 IRB 269), Q A-32. On July 31, 2006, final regulations on comparability were published in the Federal Register, 72 FR 30501 (2007-26 IRB 1495), TD 9277. In addition, on April 17, 2008, final regulations were published in the Federal Register, 73 FR 20794 (2008-20 IRB 975), providing guidance on employer comparable contributions to HSAs in instances where an employee has not established an HSA by December 31st and in instances where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses. See § 601.601(d)(2).
This document also contains proposed Pension Excise Tax Regulations (26 CFR part 54) under sections 4980B and 4980D of the Code. Under section 4980B of the Code, group health plans maintained by an employer with 20 or more employees must comply with continuation coverage requirements. If a plan does not satisfy these requirements, an excise tax is imposed of $100 per day per affected beneficiary. Final regulations under section 4980B have been published, including provisions concerning the excise tax, but no return filing requirement has previously been imposed. See § 54.4980B-2, Q A-9 and Q A-10. Moreover, under chapter 100 of the Code, group health plans must comply with various requirements, including limitations on preexisting condition exclusions, certification of creditable coverage, special enrollments, prohibitions against discrimination based on a health factor, parity in the annual and lifetime dollar limits placed on mental health benefits with those placed on medical/surgical benefits, and minimum hospital lengths of stay in connection with childbirth. If a plan does not satisfy any of these requirements under chapter 100, section 4980D imposes an excise tax of $100 per day per affected individual. Regulations interpreting the substantive requirements of chapter 100 have previously been published, but no regulations have been published concerning the excise tax under section 4980D. Explanation of Provisions Back to Top
Section 302(a) of the Act provides for qualified HSA distributions. See section 106(e) and Notice 2007-22 (2007-10 IRB 670). See § 601.601(d)(2). A qualified HSA distribution is a direct distribution of an amount from a health flexible spending arrangement (health FSA) or a health reimbursement arrangement (HRA) to an HSA. The distribution must not exceed the lesser of the balance in the health FSA or HRA on September 21, 2006, or as of the date of the distribution. Section 54.4980G-7 of the proposed regulations would provide that if an employer offers qualified HSA distributions to any employee who is an eligible individual covered under any HDHP, the employer must offer qualified HSA distributions to all employees who are eligible individuals covered under any HDHP. However, an employer that offers qualified HSA distributions only to employees who are eligible individuals covered under the employer's HDHP is not required to offer qualified HSA distributions to employees who are eligible individuals but are not covered under the employer's HDHP.
The regulations provide that persons who are liable for the excise tax under section 4980B, 4980D, 4980E, or 4980G are required to file a return on Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code.” The excise tax under section 4980B, 4980D, 4980E or 4980G must be paid at the time prescribed for filing of the excise tax return (without extensions). With respect to the excise tax under section 4980B or 4980D for employers and third parties such as insurers or third party administrators, the return is due on or before the due date for filing the person's federal income tax return. An extension to file the person's income tax return does not extend the date for filing Form 8928. With respect to the excise tax under section 4980B or 4980D for multiemployer or specified multiple employer health plans, the return is due on or before the last day of the seventh month after the end of the plan year. Finally, with respect to the excise tax under section 4980E or 4980G for noncomparable contributions, the return is due on or before the 15th day of the fourth month following the calendar year in which the noncomparable contributions were made. Proposed Effective/Applicability Date Back to Top
The sections of these regulations that provide guidance on employer comparable contributions to HSAs under section 4980G are proposed to apply to employer contributions made on or after the first day of the first calendar year after the final regulations are published in the Federal Register. However, taxpayers may rely on these regulations for guidance with respect to employer contributions made on or after January 1, 2007, and before the effective date of final regulations.
The sections of these regulations that provide guidance relating to the excise tax under section 4980B, 4980D, 4980E and 4980G are proposed to be effective for calendar years (or plan years, where applicable) beginning after the date the final regulations are published in the Federal Register.
The public hearing has been scheduled for October 30, 2008, beginning at 10 a.m. in room 2116, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.
Paragraph 1. The authority citation for part 54 is amended by adding entries to the table to read in part as follows:
Par. 2. Section 54.4980B-0 is amended by adding a new Q-11 to § 54.4980B-2 in the list of questions to read as follows:
§ 54.4980B-0 Table of contents.
List of Questions Back to Top
Par. 3. Section 54.4980B-2 is amended by adding a new Q A-11 to read as follows:
A-11: (a) In general. Any person who is liable for the excise tax under section 4980B must report this tax by filing Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code”, and the tax must be paid at the time prescribed for filing such return (without extensions). The return must include the information required by Form 8928 and the instructions issued with respect to it.
(b) Due date for filing of return by employers or other persons responsible for benefits under a group health plan. If the person liable for the excise tax is an employer or other person responsible for providing or administering benefits under a group health plan (such as an insurer or a third party administrator), the return must be filed on or before the due date for filing the person's income tax return and must reflect the portion of the noncompliance period for each failure under section 4980B that falls during the person's taxable year. An extension to file the person's income tax return does not extend the date for filing Form 8928.
(c) Due date for filing of return by multiemployer plans. If the person liable for the excise tax is a multiemployer plan, the return must be filed on or before the last day of the seventh month following the end of the plan's plan year. The filing of Form 8928 by a plan must reflect the portion of the noncompliance period for each failure under section 4980B that falls during the plan's plan year. (d) Effective/applicability date. In the case of an employer or other person mentioned in paragraph (b) of this Q A-11, the rules in this Q A-11 are effective for taxable years beginning after the date the final regulations are published in the Federal Register. In the case of a plan mentioned in paragraph (c) of this Q A-11, the rules in this Q A-11 are effective for plan years beginning after the date the final regulations are published in the Federal Register.
Par. 4. Section 54.4980D-1 is added to read as follows:
A-1: (a) In general. Any person who is liable for the excise tax under section 4980D must report this tax by filing Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code”, and the tax must be paid at the time prescribed for filing such return (without extensions). The return must include the information required by Form 8928 and the instructions issued with respect to it.
(b) Due date for filing of return by employers. If the person liable for the excise tax is an employer, the return must be filed on or before the due date for filing the employer's income tax return and must reflect the portion of the noncompliance period for each failure under chapter 100 that falls during the employer's taxable year. An extension to file the employer's income tax return does not extend the date for filing Form 8928.
(c) Due date for filing of return by multiemployer plans or multiple employer health plans. If the person liable for the excise tax is a multiemployer plan or a specified multiple employer health plan, the return must be filed on or before the last day of the seventh month following the end of the plan's plan year. The filing of Form 8928 by a plan must reflect the portion of the noncompliance period for each failure under chapter 100 that falls during the plan's plan year.
(d) Effective/applicability date. In the case of an employer or other person mentioned in paragraph (b) of this Q A-1, the rules in this Q A-1 are effective for taxable years beginning after the date the final regulations are published in the Federal Register. In the case of a plan mentioned in paragraph (c) of this Q A-1, the rules in this Q A-1 are effective for plan years beginning after the date the final regulations are published in the Federal Register.
Par. 5. Section 54.4980E-1 is added to read as follows:
A-1: (a) In general. Any employer who is liable for the excise tax under section 4980E must report this tax by filing Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code”, on or before the 15th day of the fourth month following the calendar year in which the noncomparable contributions were made. The tax must be paid at the time prescribed for filing such return (without extensions), and the return must include the information required by Form 8928 and the instructions issued with respect to it.
(b) Effective/applicability date. The rules in this Q A-1 are effective for plan years beginning after the date the final regulations are published in the Federal Register.
Par. 6. Section 54.4980G-1 is amended by:
A-5: (a) In general. Any employer who is liable for the excise tax under section 4980E must report this tax by filing Form 8928, “Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code”, on or before the 15th day of the fourth month following the calendar year in which the noncomparable contributions were made. The tax must be paid at the time prescribed for filing such return (without extensions), and the return must include the information required by Form 8928 and the instructions issued with respect to it. See Q A-4 of § 54.4980G-1 for the rules on computation of the excise tax under section 4980G.
(b) Effective/applicability date. The rules in this Q A-5 are effective for plan years beginning after the date the final regulations are published in the Federal Register.
Par. 7. Section 54.4980G-3 is amended by:
A-5: (a) Categories. The categories of employees for comparability testing are as follows (but see Q A-6 of this section for the treatment of collectively bargained employees and Q A-1 of § 54.4980G-6 for a special rule for contributions made to the HSAs of nonhighly compensated employees)—
Par. 8. Section 54.4980G-4 is amended by:
(h) Maximum contribution permitted for all employees who are eligible individuals during the last month of the taxable year. An employer may contribute up to the maximum annual contribution amount for the calendar year (based on the employees' HDHP coverage) to the HSAs of all employees who are eligible individuals during the last month of the taxable year, including employees who worked for the employer for less than the entire calendar year and employees who became eligible individuals after January 1st of the calendar year. For example, such contribution may be made on behalf of an eligible individual who is hired after January 1st or an employee who becomes an eligible individual after January 1st. Employers are not required to provide more than a pro-rata contribution based on the number of months that an individual was an eligible individual and employed by the employer during the year. However, if an employer contributes more than a pro-rata amount for the calendar year to the HSA of any eligible individual who is hired after January 1st of the calendar year or any employee who becomes an eligible individual any time after January 1st of the calendar year, the employer must contribute that same amount on an equal and uniform basis to the HSAs of all comparable participating employees (as defined in Q A-1 in § 54.4980G-1) who are hired or become eligible individuals after January 1st of the calendar year. Likewise, if an employer contributes the maximum annual contribution amount for the calendar year to the HSA of any eligible individual who is hired after January 1st of the calendar year or any employee who becomes an eligible individual any time after January 1st of the calendar year, the employer must contribute the maximum annual contribution amount on an equal and uniform basis to the HSAs of all comparable participating employees (as defined in Q A-1 in § 54.4980G-1) who are hired or become eligible individuals after January 1st of the calendar year. An employer who makes the maximum calendar year contribution or more than a pro-rata contribution to the HSAs of employees who become eligible individuals after the first day of the calendar year or eligible individuals who are hired after the first day of the calendar year will not fail to satisfy comparability merely because some employees will have received more contributions on a monthly basis than employees who worked the entire calendar year.
(i) Examples. The following examples illustrate the rules in paragraph (h) in this Q A-2. In the following examples, no contributions are made through a section 125 cafeteria plan and none of the employees are covered by a collective bargaining agreement.
Par. 9. Section 54.4980G-6 is added to read as follows:
A-2: (a) In general. No. Employer contributions to HSAs for highly compensated employees who are comparable participating employees may not be larger than employer HSA contributions for nonhighly compensated employees who are comparable participating employees. The comparability rules continue to apply with respect to contributions to the HSAs of all highly compensated employees. Employers must make comparable contributions for the calendar year to the HSA of each highly compensated comparable participating employee. See Q A-1 in § 54.4980G-1 for the definition of comparable participating employee.
(b) Examples. The following examples illustrate the rules in Q A-1 and Q A-2 of this section. No contributions are made through a section 125 cafeteria plan and none of the employees in the following examples are covered by a collective bargaining agreement. All of the employees in the following examples have the same HDHP deductible for the same category of coverage.
(b) Example. The following example illustrates the rules in paragraph (a) of this Q A-3. In the following examples, no contributions are made through a section 125 cafeteria plan and none of the employees are covered by a collective bargaining agreement.
Par. 10. Section 54.4980G-7 is added to read as follows:
[FR Doc. E8-16175 Filed 7-15-08; 8:45 am]