Question

Do employer contributions affect hsa limit:

A. exist on a use-it-or-lose-it basis.
B. reduce the total amount an employee can contribute to their hsa.
C. may include amounts over and above the employee's wages.
D. are not subject to the same limits as the individual for whom they are made.

Answer 1

Employer contributions reduce the total amount an individual can contribute to their HSA, as both employer and employee contributions count towards the annual IRS-set limit. The correct answer is option B.

Step-by-step explanation:

The query about whether employer contributions affect HSA limits pertains to Health Savings Accounts (HSAs) and the rules governing contributions. The correct answer is B, meaning that employer contributions reduce the total amount an individual can contribute to their HSA. The IRS sets a yearly limit on the amount that can be contributed to an HSA, and this limit includes both employer and employee contributions. Therefore, if an employer contributes to an employee's HSA, this amount is counted towards the employee's annual contribution limit. On the other hand, employer contributions do not exist on a use-it-or-lose-it basis (A), they can only be made from amounts designated for this purpose in the employee's compensation package and may not necessarily be over and above the employee's wages (C), and they are subject to the same limits as the individual (D).