Question:
Can a company shareholder with >2% shares in an S Corporation be an HSA-Eligible Individual? IRS Publication 969 appears to not address this specific question on whether a >2% shareholder can contribute to an HSA on a pre or post tax basis.
Answer:
In short, yes, they are eligible to participate in an HSA. A shareholder with >2% in a Subchapter S Corporation, as well as partners in a partnership, sole proprietors, and other self-employed individuals, can establish and contribute to HSAs if they meet other HSA eligibility rules that are listed in IRS Publication 969.
However, keep in mind that if an HSA is offered through a Section 125 cafeteria plan, then those rules must be met and a >2% S Corporation shareholder will be restricted from contributing to the HSA pre-tax under the cafeteria plan.
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