On December 28, 2018, the IRS released IRS Information Letter 2018-0033 to provide further clarification on the scenarios which would allow an employer to correct mistaken HSA contributions resulting from administrative or processing errors.

Prior to IRS Information Letter 2018-0033, employers did not have a recovery method available to recoup erroneous contributions except those set forth in IRS Notice 2008-59, which allowed for recovery in limited situations where an employee was never eligible to contribute in the first place or when the employer mistakenly contributed more than the maximum contribution allowed to an employee’s HSA. Once a contribution was made for any other reason, it could not be taken back. The only recourse an employer had was to adjust a future contribution or stop the contributions.

Information Letter 2018-0033 offered expanded guidance to include the following situations where an employer could recoup a mistaken contribution:

• When an amount withheld from an employee’s pay and deposited into her HSA is greater than the employee’s HSA election
• When an unintended contribution is made to an employee’s HSA because her name is similar to another employee for whom the contribution was intended
• Amounts are withheld and contributed due to a data entry error on the part of the payroll administrator
• Duplicate payroll processing for a pay period results in a duplicate contribution
• A different deduction amount is taken because an employee’s HSA election change was not processed timely
• An erroneous contribution is made due to mathematical errors or decimal positioning

This list is not exclusive; other processing or administrative errors resulting in mistaken contributions may qualify. If an employer must recapture an HSA contribution, documentation pertaining to the adjustment should be maintained. And remember, ultimately the HSA custodian bank or trustee must approve the adjustment.