HSA Comparability Categories: Self-Only And Family Coverage
The comparability test is run one coverage category at a time. This guide shows how employers sort employees into those categories and how large the gap between them can be.
Sorting Employees By Coverage.
General information, not legal or tax advice. Statutes and rules change, so read the current text before you act.
The Full Comparability Framework
The overview page shows how coverage categories sit alongside the other four comparability topics.
The Basic Comparability Test
Within each category, contributions must match in dollars or as a share of the deductible, month by month.
Employee Categories Beyond Coverage
Coverage tier is one filter. Full-time, part-time and former-employee status is the other, and the two combine.
One Category At A Time.
The regulation sets two main categories: self-only and family. Family means anything other than self-only. An employer can test family coverage as a single category or divide it into self plus one, self plus two and self plus three or more. Categories covering the same number of people merge, so employee-plus-spouse and employee-plus-child are both self plus one.
Within a category, the contribution must be identical in dollars or identical as a percentage of the plan deductible. Between categories, nothing needs to match. An employer might deposit a smaller amount for self-only coverage and a larger one for family coverage and pass the test, because the test never compares one category against another.
Tiers carry one structural limit: the amounts cannot fall as the tier gets larger. A self-plus-two deposit cannot be lower than the self-plus-one deposit, and a self-plus-three-or-more deposit cannot be lower than the self-plus-two deposit.
Choosing A Design.
A single flat deposit per category is the easiest design to administer and to defend. A percentage of the deductible is useful when the employer offers several plans, since the dollar value moves with each plan’s deductible while the percentage stays fixed. When percentages are used, the regulation rounds to the nearest one-hundredth of a percentage point, and dollar amounts round to the nearest whole dollar.
Employers also have no duty to contribute more than the annual limit set by section 223(b). A family deposit that would push an employee past that limit can be capped without breaking comparability.
Building The Tier Table.
Write down each high deductible plan, each coverage tier and the deposit that applies. Check that no larger tier receives less than a smaller one. Then map each enrolled, eligible employee to a tier at the start of every month, since coverage can change mid-year through a qualifying life event and the test follows the month.
Mistakes To Avoid.
Do not create extra categories the regulation does not recognize, such as one for management or one for tenure. Do not let two spouses who both work for you fall through the cracks: if you contribute for employees on your plan only, you need not contribute for a spouse who is covered solely under the other spouse’s family coverage, but if you contribute for anyone on outside coverage, both spouses are in the test.
Related Topics For Plan Sponsors.
HDHP And HSA Contribution Limits
The dollar ceilings that cap every contribution discussed here.
What Is An HSA
The account itself: who qualifies, what goes in and what comes out.
HRA Vs HSA Vs FSA
Choosing among the tax-advantaged accounts an employer can offer.
Laws And Sources Referenced
The statements above rely on the following primary sources.
Internal Revenue Code section 4980G — Tax on employers that fail comparability for HSA contributions.
Treas. Reg. 54.4980G-1 — The comparability requirement, coverage categories, testing year and the 35 percent tax.
Treas. Reg. 54.4980G-3 — Employee categories, part-time definition, former employees and collectively bargained employees.
Treas. Reg. 54.4980G-4 — Calculating comparable contributions, funding methods, correction and the notice safe harbor.
IRS Publication 969 — IRS guidance on HSAs, including employer comparability and the 35 percent tax.
Quick Answers.
Short replies to common questions about coverage tiers.
Can family coverage get a larger deposit than self-only?
Yes. Self-only and family coverage are tested separately, so the dollar amount or the percentage of the deductible for family coverage can differ from the amount for self-only coverage. What matters is that everyone within a category receives the same treatment.
Do employee-plus-spouse and employee-plus-child tiers need the same deposit?
Yes, if you split family coverage into tiers. Categories that cover the same number of people are combined, so both fall under self plus one and must be treated alike.
What if we offer two high deductible plans with different deductibles?
Each category is tested against the dollar amount or the percentage of the deductible. A fixed dollar amount can be paid on both plans, or a percentage can be applied to each plan’s own deductible, so long as the method is applied consistently.
More Guides In This Series.
What Comparability Means For Employer HSA Contributions
The core rule, what it measures and what sits outside it.
HSA Comparability For Full-Time, Part-Time And Former Employees
Employee categories, the 30-hour line and former employees.
The 35 Percent Excise Tax On Non-Comparable HSA Contributions
How the tax is computed and how to correct a miss.
Using A Cafeteria Plan Instead Of HSA Comparability
The cafeteria plan route and the testing it brings.
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