§4980E Failure of employer to make comparable Archer MSA contributions

Summary

If an employer puts money into employees’ Archer MSAs but does not give the same kind of contribution to all similar employees for the year, the employer must pay a tax. The tax is 35 percent of the total amount the employer put into employees’ Archer MSAs for the taxable years that end in that calendar year. If the failure happened because of a reasonable cause and not because the employer willfully ignored the rule, the Secretary can cancel some or all of the tax if paying it would be too harsh compared with the mistake. To avoid the tax, the employer must offer comparable contributions to all “comparable participating employees” for each coverage period. Comparable contributions means either the same dollar amount or the same percentage of the plan’s annual deductible. If an employee worked only part of the year, the contribution can be prorated for that person. Comparable participating employees are those eligible under the employer’s high deductible health plans with the same category of coverage. Part-time employees (those working under 30 hours per week) are treated separately from other employees. All persons treated as a single employer under section 414(b), (c), (m), or (o) count as one employer, and words used here that also appear in section 220 have the meanings given in section 220.