Employer Participation

This section contains the rules that employers must follow if they decide to make MSAs available to their employees. Unlike the previous discussions, "you" refers to the employer, and not to the employee.

Health plan. If you want your employees to be able to have an MSA, you must make available to them a high deductible health plan. You can provide no additional coverage other than those exceptions listed previously. See High Deductible Health Plan, earlier.

Contributions. You can make contributions to your employees' MSAs. You deduct the contributions on the "Employee benefit programs" line of your business income tax return for the year you make these contributions.

Comparable contributions. If you decide to make contributions, you must make comparable contributions to all comparable participating employees' MSAs. Your contributions are comparable if they are either:

• The same amount, or
• The same percentage of the annual deductible limit under the high deductible health plan covering the employee.

Comparable participating employees. Comparable participating employees:

• Are covered by your high deductible health plan and are eligible to establish an MSA,
• Have the same category of coverage (either self-only or family coverage), and
• Have the same category of employment (either part-time or full-time).

Additional tax. If you made contributions to your employees' MSAs that were not comparable, you must pay an additional tax of 35% of the amount you contributed. See Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, to report and pay this tax.

Employment taxes. Amounts you contribute to your employees' MSAs are generally not subject to employment taxes. You must report the contributions in box 13 of the Form W-2, Wage and Tax Statement, you file for each employee during the calendar year. Enter Code "R" in box 13.

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