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Employer Terminated Contributions to HSA Without Notice

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  • Employer Terminated Contributions to HSA Without Notice

    Hello all and thank you for any help.

    Background information: I have been a salaried employee for the same company in California for over 7.5 years. As part of my employee agreement, I was provided the option of choosing a regular PPO health plan or a high deductible plan and health savings account combination in which my employer would pay 80% of the $2,400 allowable contribution (or $1920) into a HSA account for me. I'm young, healthy, and don't go to the doctor too often so I chose the HSA option. For me it was an added bonus of an extra $1920 into an account I could actually use for my typical yearly medical expenses and pay nothing out of pocket. Others chose the HSA too, while some chose to go the standard PPO route. The monthly cost to my employer was roughly the same either way, ~$350-400 per month for like employees.

    Problem: recently another employee checked his HSA account and noticed that our employer has not contributed the agreed upon monthly amount for this year (Jan. to now). When he questioned our HR lady, she said that our boss had told her in the beginning of the year to not fund our HSAs. We were never given notice and our boss has refused to give us the contributions retroactive. Business has been slow, and he saw the HSAs some of his employees are on as a way to cut costs and save some money by not cutting a check to our accounts. On top of this, the other employees who chose regular PPOs were not affected, their PPO plans and premiums remained the same. So he was effectively paying less for our health care option (the HSAers) than these other employees (PPOers).

    Is this legal? I understand that health benefits are optional in CA, but what are the standards for once they are offered and how does this relate to HSAs to which an employer has agreed to contribute to as part of an employee agreement and benefit package?

    First and foremost regardless of legality, I believe my boss' actions in regards to this situation are unethical and shady, but I also want to see if I have any legal grounds to stand on if I fight this further.

    Thanks for any help.

  • #2
    NOT my area of expertise, but I would assume that this is a federal issue. Likely DOL EBSA.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)


    • #3
      Do you have any open enrollment materials from January that state it was going to happen for 2012? Or did everyone assume it was continuing and he didn't make a big point that it was not? If it wasn't in the OE materials, did anyone question why? If you can prove it was a promised benefit in the OE materials for 2012, you might either have a wage claim with your state OR a benefits claim with the DOL.

      He does have every right to cut back, but generally should have let the employees know prospectively not retro. However, it is strange that no one noticed for 11 months that the contributions were not being made. And it is legal for the employer to pay less for those that chose an HRA than they would for a PPO. Because consider those who don't need health insurance at all. In that case the employer is paying $0 for them but hundreds for the employees who do choose to be covered.


      • #4
        Open enrollment meaning enrollment into the HSA? Not sure what you mean by that. The yearly contributions were part of my employment agreement and has happened for the last 6.5 years, so yes, I was assuming that it was continuing as no notice was made that the contributions were going to be terminated for 2012. I assume fault that I didn't religiously check to make sure my employer was making the contributions. But to be honest, it's an HSA that I use a couple times a year to pay for a prescription or doctor's visit and other than that I don't pay attention to it. That doesn't mean that it's ok for my employer to not notify me of the contribution termination, ethically that is. Now I'm just trying to figure out the legality of it.

        In regards to differences in benefits pay for employees, I was simply stating that I chose the HSA because he was making the contributions. I would have chose a regular PPO if he did not offer the HSA contributions because I would be paying less out of pocket than an HSA with no employer contributions. Instead what happened was that I go pigeon holed into the HSA with no employer contributions for 2012 because he did not notify me of the change until it was too late to enroll in a different plan. Note, the other employees who are on a PPO were not affected in any way. Our boss continued to pay their full premium.


        • #5
          Every year your employer should have what is called an Open Enrollment period. During this time, you are allowed to make changes to your coverage without a qualifying reason. It is also during this time, that changes to various plans are communicated.

          If you are not sure when your OE might be check with your HR Department. Forgive us but some of us here do this for a living and have had a few too many cases where the information was sent out, but not read or acted upon by an employee who later claims they had no idea. Occupational hazard not to assume that just beacuse someone doesn't recall receiving the information, that it was never sent. If indeed the company didn't communicate this information, then you have potential recourse.
          I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.


          • #6
            It sounds like you had an expectation that the HSA contribution would continue indefinitely and he didn't. That expectation came from what you call the employment agreement. You'd have to take your employment agreement to a local attorney to see if it consists of a contract. If it does, that is different than if it is just an offer letter or summary of benefits your first year.

            However, it might not state remedies if the employer breaks any part of it. Either way, I suspect the language of that agreement will make all the difference. In the end, do you want to sue your current employer? Usually that is a career limiting move. You might win the battle but lose the war.

            In normal benefits work, HSA contributions are "announced" during your Open Enrollment period where you have the chance to change between plans (from HSA health plan to PPO). That would be where the change notification was if there was one. That's why I asked about 2012 Open Enrollment materials. Usually OE happens at the end of the calendar year if your benefits are calendar year based. We just got done doing my husbands last Friday and I just sent our OE packets to my employees this morning.....usually end of Oct through Dec sometime.

            I don't know any company (generally) that puts a specific health plan/HSA amount into an employment agreement without language stating that changes can be made in the future or that it is for the current year only. But there are probably always some out there! So I would suggest running it by a lawyer who is familiar with benefits and employment law.
            Last edited by hr for me; 11-08-2012, 09:01 AM.


            • #7
              Thanks all. Out HR lady does ask us every year if we want to stay on our selected plan and at no time during the last 7.5 years has a change in the employer contribution been announced, I'm 100% sure of that.

              Below is the language from my benefits agreement summary:

               Firm pays 100% of employee premiums
               Dependent premiums are paid by employee
               Options: Blue Cross (Employee Elect Plus-All Plans) including
               Health Savings Acct. High-Deductible Plan $2,400 (Employer Pays 80% of Deductible)
               Eligible on first day of employment

              My end goal is not to sue my employer, but to provide him with such information to resolve the situation before it goes that far.


              • #8
                Originally posted by mtowers View Post
                 Health Savings Acct. High-Deductible Plan $2,400 (Employer Pays 80% of Deductible)
                I would expect it to say "employer pays 80% of the deductible each year into your HSA" for him to be liable. But that is not what it states. Just that he will pay 80% of your deductible. It doesn't state when or how. It could be argued that you have no deductible until you actually use it. How much of your deductible have you met this year? I would think he would be liable for 80% of whatever that is.

                But I do agree it is vague and you do have an argument that precedent was set in prior years.


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