Is non-discrimination testing required?
Note: An HSA is a trust exempt from taxation under Section 223. It is not a fund under Section 419(e) and therefore is not a “welfare benefit” under Section 419. Previously, if an employer made contributions to an HSA, comparable contributions (either the same amount or same percentage) had to be made for all comparable participating employees during the same period. If an employer did not meet the compatibility rule, they were subject to a 35% excise tax on aggregate contributions made to the HSA during that period. Effective January 1, 2007, new rules provide an exception to the comparability rules allowing employers to contribute more to the HSAs of non-highly compensated individuals. For this purpose, the definition of highly compensated employee is based on the same definition used for qualified retirement plans. The comparability rule does not apply to contributions made under a cafeteria plan, or to rollovers from an MSA or another HSA.
