HSA is not an option
My employer recently dropped our FSA/HRA benefits and replaced it with a HSA Account. I am the only employee in our organization who is on Medicare so I cannot participate in the HSA. The benefit to the employees is the ornganization is depositing $3400 into each employees HSA account. Since I cannot hold an HSA account they offered to raise my salary and gross it up from the $3400 to cover my taxes. My question is….rather than grossing up my income could they just deposit the $3400 into the ROTH portion of my 401k with the organization?
Permalink Submitted by Alan - IRA critic on Sat, 2025-06-07 13:17
No. Matching contributions are limited to matching what you have contributed to the 401k. Secure 2.0 included a new provision that allowed amounts repaid on student loans to be treated as if these were payments were contributions to the 401k that could then be matched. This required special legislation because the plan cannot make matching contributions based on other factors than what was contributed to the plan. There is no other provision that allows the plan to make matching (or other contributions) for miscellaneous reasons.
It is nice that they offered the grossed up direct payment option, which should result in your retaining after taxes about 3400. Not as good as a Roth contribution, but still beneficial.
Permalink Submitted by Mike Caldwell on Sat, 2025-06-07 14:19
Thanks for your comments. My employer currrently provides a 1:1 match up to 6% which is great. However, I currenly contribute quite a bit more over the 6%. My total contribution is about 20%. Would they be able to base an additional contribution on the what I invest over and above the 6%? It is nice they have agreed to gross up my pay but the downside is it gets me really close to IRMMA limits. I’m guessing the answer is still “no” but thought I would ask just to make sure.
Permalink Submitted by Alan - IRA critic on Sun, 2025-06-08 23:00
They can’t do it, and even if they could, any employer contribution that can now be made to a Roth 401k would be included in income on a 1099R, so that would not help your IRMAA situation.
Matching contributions are based on what the participant contributes to the plan. Recently Secure 2.0 included a provision that allows matching contributions for student loan payments, but that’s based on the legislation stating that the loan payments are treated as a contribution to the plan, so even that is based on what is treated as a contribution to the plan.
Permalink Submitted by Mike Caldwell on Mon, 2025-06-09 09:46
Thanks, Alan.