Question:
If an employer contributes to the account of an employee who was never an eligible individual, can the employer recoup the amounts?
Answer:
If the employee was never an eligible individual under § 223(c), then no HSA ever existed and the employer may correct the error. At the employer’s option, the employer may request that the financial institution return the amounts to the employer. However, if the employer does not recover the amounts by the end of the taxable year, then the amounts must be included as gross income and wages on the employee’s Form W-2 for the year during which the employer made the contributions (Notice 2008-59, Q&A-23).