What Do I Do with Excess Employer Contributions to HSA?

Having excess employer contributions to your HSA can be a good problem to have, but it's important to know how to handle them properly. If you find yourself in this situation, here are a few steps you can take:

• Contact your HSA administrator to notify them of the excess contributions.
• Ask your employer to stop making contributions or adjust the amounts to prevent future overfunding.
• Consider withdrawing the excess contributions to avoid tax penalties. This can be done by contacting your HSA provider and requesting a distribution of the excess funds.
• If you are under 65 years old, you will need to pay taxes on the excess contributions as well as a 20% penalty. However, if you are 65 or older, you will only owe taxes on the excess amount.
• Be sure to keep accurate records of any withdrawals or adjustments made to your HSA to stay compliant with IRS regulations.

Excess employer contributions to your HSA can be a pleasant surprise, but it’s crucial to address them quickly. First, inform your HSA administrator about the excess contributions to ensure compliance.