Are HSA program monetary rewards considered contributions?

[Kilikikero]

Hello all. I had a question about HSA monetary rewards and if they count as contributions or not.

I was going through TurboTax and had reached a screen asking about my HSA contributions.

I do have an HSA account with my company through United Health Care. UHC has a fitness watch program that rewards you with money in your HSA account up to $3/day if you're able to reach a certain number of steps (it's a little more complicated than that, but that's the gist of it).

The thing is, I'm not sure if the $300 they've rewarded me through this program into my HSA account in 2020 would count as "contributions", since I didn't technically deposit the money, I was awarded it through their step program.

Any thoughts? Thanks very much.

 

[Redemptionman1]

Those are awards rewards not contributions so while it goes into your account and can be used for medical costs, they are not reducing your tax liability.

 

[Kilikikero]

Thanks for the explanation, @Redemptionman1, it's much appreciated.

 

[Taxing Matters]

Those are awards rewards not contributions so while it goes into your account and can be used for medical costs, they are not reducing your tax liability.

I disagree. The additions to the HSA in this case were not made by the employer. They were made by a health plan that maintains the HSA. IRS publication 969, which covers HSA, notes that family members "or any other person" may make contributions on behalf of the individual. Moreover, the publication also states on page 8 that "Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income." So, as this is not a contribution made by the employer, it is treated the same as though the OP made the contribution himself/herself.

This is also reflected in the Form 8889 and the related instructions. That form is the one in which you figure your HSA deduction. Line 2 is the line on which you put "HSA contributions you made for 2020 (or those made on your behalf), including those made from January 1, 2021, through April 15, 2021, that were for 2020. Do not include employer contributions, contributions through a cafeteria plan, or rollovers. See instructions." So you are including all the contributions made to your HSA by yourself or others except those contributions by the employer, a cafeteria plan, or rollover.

The Form 8889 instructions explain a bit further on page 3:

Include on line 2 only those amounts you, or others on your behalf, contributed to your HSA in 2020. Also, include those contributions made from January 1, 2021, through April 15, 2021, that were for 2020. Do not include employer contributions (see line 9) or amounts rolled over from another HSA or Archer MSA. See Rollovers, earlier. Also, do not include any qualified HSA funding distributions (see line 10). Contributions to an employee's account through a cafeteria plan are treated as employer contributions and are not included on line 2.​

​

In short, it appears that this contribution to the HCA by the health care plan would be counted just like any contribution made directly by the HSA account holder.

 

[Redemptionman1]

I disagree. The additions to the HSA in this case were not made by the employer. They were made by a health plan that maintains the HSA. IRS publication 969, which covers HSA, notes that family members "or any other person" may make contributions on behalf of the individual. Moreover, the publication also states on page 8 that "Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income." So, as this is not a contribution made by the employer, it is treated the same as though the OP made the contribution himself/herself.

This is also reflected in the Form 8889 and the related instructions. That form is the one in which you figure your HSA deduction. Line 2 is the line on which you put "HSA contributions you made for 2020 (or those made on your behalf), including those made from January 1, 2021, through April 15, 2021, that were for 2020. Do not include employer contributions, contributions through a cafeteria plan, or rollovers. See instructions." So you are including all the contributions made to your HSA by yourself or others except those contributions by the employer, a cafeteria plan, or rollover.

The Form 8889 instructions explain a bit further on page 3:

Include on line 2 only those amounts you, or others on your behalf, contributed to your HSA in 2020. Also, include those contributions made from January 1, 2021, through April 15, 2021, that were for 2020. Do not include employer contributions (see line 9) or amounts rolled over from another HSA or Archer MSA. See Rollovers, earlier. Also, do not include any qualified HSA funding distributions (see line 10). Contributions to an employee's account through a cafeteria plan are treated as employer contributions and are not included on line 2.​

​

In short, it appears that this contribution to the HCA by the health care plan would be counted just like any contribution made directly by the HSA account holder.

Wow, okay. Rally Health and Wellness rewards (which is what I assume the OP is getting) are awards/ rewards for reaching goals. They may reflect in the total contribution balance but you are not putting that money in there from payroll and it remains separate. So, you can use it for Health Care costs but has no bearing on any payroll at all nor tax implications from it. Unless of course you use the money for something other than Healthcare, eye care or dental.

 

[Zigner]

Wow, okay. Rally Health and Wellness rewards (which is what I assume the OP is getting) are awards/ rewards for reaching goals. They may reflect in the total contribution balance but you are not putting that money in there from payroll and it remains separate. So, you can use it for Health Care costs but has no bearing on any payroll at all nor tax implications from it. Unless of course you use the money for something other than Healthcare, eye care or dental.

Saying it again doesn't change what TM explained...the contributions don't have to be from "payroll".

 

[Redemptionman1]

Okay the actual explanation is located under the rewards program particulars for your program within myuhc.

 

[Just Blue]

Thanks for the explanation, @Redemptionman1, it's much appreciated.

FYI: Taxing Matters is a site vetted Tax Attorney.

 

[Just Blue]

Why was my post letting the OP know that TM is a site vetted tax attorney reported?

 

[Redemptionman1]

No commercial links and spam posting per T&Cs.

thank you

 

[Just Blue]

No commercial links and spam posting per T&Cs.

thank you

I had no commercial links or spam in my post. My post read "FYI: Taxing Matters is a site vetted tax attorney."