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By the way -- did you know that if you fund your HSA with payroll deductions -- making it a Section 125 cafeteria plan -- the HSA contributions are not only pre-federal income tax but also not subject to Social Security and Medicare taxes? On the other hand, 401K contributions are subject to SS and Medicare taxes. So putting a dollar into an HSA instead of a 401K can actually save you 7.65 cents in payroll taxes.

Greetings, ziggy29, to further clarify on this, do you know of any reason why it would be more advantageous to accept payroll deduction for HSA funding rather than have the employer make an outright payment as an employer contribution? Looking over IRS Form 8889, it seems like either action is an option for receiving HSA proceeds so long as the employer is funding the HSA.

Assuming (which is a risk, I know) that one's salary would have to be grossed up if deductions were made from payroll to equate to a direct employer contribution, it seems to me that I would put ceilings at risk that are tied to AGI (or MAGI) and that I could be in danger again of crossing over into Highly Compensated Employee territory. I will also cross-post this on the Tax Strategies and Health Savings Accounts boards in hopes of any responses. Thanks in advance!

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