IRS Expands Rules for Returning Mistaken HSA Contributions


In Notice 2008-59, the IRS provided certain limited exceptions to its previously stated general position that employers may not recoup any portion of the employer’s contribution to an HSA. Specifically, Notice 2008-59 provided that an employer may recover amounts that it contributes to an HSA account if: (i) the employee for whom the contribution was made was never eligible for an HSA contribution, provided the contribution is returned by the end of the tax year for which it was contributed, or (ii) the employer contributed an amount to the employee’s HSA in excess of the maximum amount permitted under the Internal Revenue Code due to an error. The IRS has stated that employers generally cannot recover amounts from an HSA other than for the two reasons described in Notice 2008-59.

In response to a request for additional guidance relating to the ability of employer’s to recover mistaken contributions to HSAs, the IRS recently released Information Letter 2018-0033.[1] The Information Letter clarifies that Notice 2008-59 was not meant to provide an exhaustive list of situations in which employers could recover contributions to an HSA that were made as a result of the employer’s (or its provider’s) administrative errors. Rather, if there is “clear documentary evidence” that demonstrates an administrative error, the employer may request a return of contributions under other circumstances to the extent necessary to correct the error.

In the Information Letter, the IRS provided the following examples of errors that may be corrected under this standard:

[1]              An “information letter” is used by the IRS to provide a general statement of well-defined law without applying it to a specific set of facts and is given in response to requests for general information by taxpayers or by Congress.


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National Law Review, Volumess IX, Number 57