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HSAs
Can Exist Above ERISA Rules
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The Employee Benefits Security Administration
(EBSA) -- the administrative arm of the Department
of Labor (DOL) -- issued guidance on April 7, 2004,
confirming that employers can implement (and even
contribute to) Health Savings Accounts (HSAs) without
being subject to ERISA regulations.
Voluntary Safe Harbor Rules
According to Field Assistance Bulletin 2004-1, for
an HSA program to avoid ERISA regs, it must meet the
following four basic requirements:
- The program must be completely
voluntary.
- An employer cannot endorse the
program, but can administrate payroll functions
and publicize the program.
- An employer may only receive reasonable
compensation for payroll expenses.
- An employer can make no contributions
(exceptions below).
There are certain circumstances
in which an employer can contribute and still not
be subject to ERISA. The following conditions must
be satisfied:
Establishment of the HSA must be completely
voluntary.
The employer cannot make or influence
HSA fund investment decisions.
The employer cannot receive any compensation
in connection with the HSA.
No conditions can be placed on the
utilization of HSA funds beyond that permitted by
the Code.
The employer must allow the employee
to move funds to another HSA beyond that permitted
by the Code.
The employer cannot represent that
the HSAs are established or maintained by the employer.
Conclusion
This long-awaited guidance is very
positive. Overall, Field Assistance Bulletin 2004-1
should help increase HSA participation.
View the Entire Document - http://www.dol.gov/ebsa/regs/fab_2004-1.html
Setting up a Health Savings Account
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What do I have to do to “establish”
my account?
Your account trustee/custodian will determine what
you need to do, which may include completing and processing
appropriate paperwork, and making a minimum deposit.
Who can help me establish
my account?
Great Lakes HSA!!!!
My bank/credit union doesn’t
offer HSAs, can I be my own trustee or custodian?
No, you must establish your HSA with an approved institution.
What is the difference between
an HSA “custodian” and an HSA “trustee”?
The differences between a “custodian”
and a “trustee” are minor. A trust is
a legal entity under which assets are actually owned
and held on behalf of a beneficiary. The trustee has
some level of discretionary fiduciary authority over
the assets of the fund. The trustee must exercise
that authority in the best interests of the beneficiary.
A custodial arrangement, on the other hand, is like
a trust, but the custodian simply holds the assets
on behalf of the owner of the assets. Other than holding
the assets and doing as the owner orders, the custodian
has no fiduciary obligations to the owner. The determination
of what constitutes a trust or custodial arrangement
is a determination made under state law.
Can couples establish a “joint”
account and both make contributions to the account,
including “catch-up” contributions?
“ Joint” HSA accounts are not permitted.
Each spouse should consider establishing an account
in their own name. This allows you to both make catch-up
contributions when each spouse is 55 or older.
Must couples open separate
accounts?
If both husband and wife are eligible to contribute
to an HSA, they are both eligible to establish separate
HSAs. However, if both spouses want to make “catch-up”
contributions when they are age 55+, they must establish
separate accounts.
How soon can I open my account?
Your account can be established as early as the effective
date of your HDHP coverage. However, if your coverage
begins on any day other than the first day of the
month, you cannot establish your account until the
first day of the following month.
I want to make sure my HSA
is “established” as soon as possible.
Can I establish my account before my HDHP coverage
begins?
You can complete all the paperwork and make a minimum
deposit to your account prior to the effective date
of your HDHP coverage. However, your account is not
officially “established” until your HDHP
coverage begins. But completing the necessary steps
before your coverage begins ensures that your HSA
will be “established” as early as possible.
This is especially important when your HDHP coverage
is effective on a non-business day.
