I have an HSA at First Am Bank. As part of my cafeteria plan at work, my employer withholds my HSA contribution each pay period and direct deposits it into my HSA. First Am Bank recently switched service providers and provided me with a new Account and Routing # for my HSA.
There was a mixup by my employer and they accidentally set it up so my entire paycheck was deposited to my HSA. I did not realize this until about 3 weeks after it happened.
My employer talked to Paychex (our payroll provider) and they can no longer reverse the deposit. I talked to the new service provider for the HSA and they are telling me that the deposit will be considered a contribution and I will have excess contributions (even though this is after-tax money that went into the account). They also told me that if I take a distribution it will be reported as a taxable distribution. They told me there is no way to correct the error on their end. They recommended I have my accountant make sure everything is explained to the IRS when I file my tax return.
There has to be some type of remedy for a mistake of fact. I cannot be the first and only person to have a deposit made in error. This was not a contribution to my HSA. This was an error that needs to be corrected.
Do you have any recommendations?
Thank you for your time.