Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

DOL: HEALTH SAVINGS ACCOUNTS ARE NOT ERISA PLANS

April 08, 2004

The Department of Labor yesterday announced that Health Savings Accounts will generally not be treated as "ERISA" plans (Field Assistance Bulletin 2004-1; pdf format). ERISA plans have many additional compliance burdens; by making clear that ERISA doesn't apply, the DOL makes it much more likely for employers to sponsor HSAs.

The DOL arrived at this conclusion even though, as Henry Aaron of the Brookings Institute has noted, HSAs can be viewed as defined contribution plans in drag with a health-expense kicker.

The key language of the DOL ruling:

   Accordingly, we would not find that 
   employer contributions to HSAs give 
   rise to an ERISA-covered plan where 
   the establishment of the HSAs is 
   completely voluntary on the part of 
   the employees and the employer does 
   not: 
   
   (i) limit the ability of eligible individuals 
   to move their funds to another HSA 
   beyond restrictions imposed by the 
   Code; 

   (ii) impose conditions on utilization of 
   HSA funds beyond those permitted
    under the Code; 

   (iii) make or influence the investment 
   decisions with respect to funds 
   contributed to an HSA; 

  
 (iv) represent that the HSAs are an 
   employee welfare benefit plan  
   established or maintained by the 
   employer; or 

   (v) receive any payment or 
    compensation  in connection with an
    HSA.

   The mere fact that an employer 
   imposes terms and conditions on 
   contributions that would be required 
   to satisfy tax requirements under the 
   Code or limits the forwarding of
   contributions through its payroll 
   system to a single HSA provider (or 
   permits only a limited number of HSA 
   providers to advertise or market their 
   HSA products in the workplace) would 
   not affect the above conclusions 
   regarding HSAs funded with employer 
   or employee contributions, unless the 
   employer or the HSA provider restricts
   the ability of the employee to move 
   funds to another HSA beyond those 
   restrictions imposed by the Code.

UPDATE: BenefitsBlog has more.

      Bookmark: del.icio.us • Digg • reddit