FAFSA Treatment of Employer-Sponsored HSA vs. Individual HSA

[cptofthehouse]

@BelknapPoint

It’s where the lines are drawn. It’s not fair that contributions made by an employer to qualified plans are not added into income , but your own contributions are. Not fair at all. Here are a lot of things that are not fair in this process as well as with most processes.

You’re missing the point. It’s not about employer contributions to an HSA vs. employee contributions to that same HSA. Employee HSA contributions made through a cafeteria plan (payroll deductions) are not considered, while after tax employee contributions made to the same HSA account and taken as a tax deduction are considered by FAFSA. The federal tax implications are exactly the same either way and the contributed money can be used exactly the same way in either situation. It makes absolutely no sense for FAFSA to make a distinction here for federal student aid purposes.

No, I’m not missing the point. I was giving a whole other example that is not “fair”. It’s just where the lines are drawn and do not always make sense.

We have this very situation with HSAs ourselves as well as with qualified plans. There are a number of things not treated equitably for tax and FAFSA purposes.