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Article Date:
January 2015

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Three Rules for Contributing to Your Employees’ Health Savings Accounts and Beating the Dreaded 35 Percent Discrimination Tax

Estimated tax tip savings. The employer in this article could save $3,500 in unnecessary IRS excise taxes by following the three rules governing contributions to the health savings accounts (HSAs) of employees.


HSAs are wonderful; they allow you to contribute to the health care costs of your employees without facing the hurdles of the Affordable Care Act (Obamacare).


Even better: Unlike many other health care options, there are no minimums to pay and no insurance to deal with. You simply make the contributions and get a deduction, and your employees get the income as a tax-free fringe benefit.1


But here’s the kicker: The one thing you need to consider when you make these contributions is the discrimination rules (which are called “comparability” rules in the HSA world). If you violate these rules, the IRS forces you to pay a draconian tax of 35 percent of your total HSA contributions. Ouch!


Fortunately, it’s easy to avoid discrimination—favoring one group of employees over another—when you follow three simple ... Log in to view full article.

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