HSA Guide
What Do I Do with Excess Employer Contributions to HSA?
Published June 11, 2024
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Get the appShort answer: To handle excess employer HSA contributions, contact your HSA administrator, ask your employer to stop or adjust contributions, and consider withdrawing excess funds to avoid tax penalties, with applicable tax/penalty rules by age.
Steps for addressing excess HSA contributions
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 itâs crucial to address them quickly. First, inform your HSA administrator about the excess contributions to ensure compliance.