Colorado employers that want to make HSA contributions to employees on a pre-tax basis are required to make those contributions on a “comparable” basis. This rule is designed to prevent employers from favoring one group of employees over another. Of course, it gets somewhat complicated. For one thing, the rules allow employers to treat the following categories differently:
- – Part time versus full time
- – Current versus former
- – HSA Eligible versus not eligible
- – Single HDHP coverage versus family HDHP coverage
- – Separate categories within family coverage
- – Union versus non union
- – Employer provided HDHP versus other HDHP
- – Non-highly compensated employees ok to get more than highly compensated employees
A new law congress passed late last year allows employers to give more to non-highly compensated employees than highly compensated employees. IMPORTANT: The rule does not; however, work in reverse. An employer may not give a larger HSA contribution to its highly compensated employees versus its non-highly compensated employees.
The definition for highly compensated employee includes any employee (1) who was a 5% owner at any time during the year or the preceding year, or (2) for the preceding year (A) had compensation from the employer in excess of $100,000 (for 2007) or (B) if elected by the employer, was in the group consisting of the top-20 percent of employees ranked based on compensation. For example, a Colorado business group may make a $1,000 HSA contribution to each non-highly compensated employee without making a contribution for its highly compensated employees.