Some HSAs Exempt From ERISA Status

Health savings accounts (HSAs) that meet certain conditions will be exempt from Employee Retirement Income Security Act (ERISA) regulations, according to guidance issued by the U.S. Dept. of Labor's Employee Benefits Security Administration (EBSA).

EBSA took the action with the aim of encouraging more employers to use health savings accounts with a high-deductible health plan. HSAs would be exempt from ERISA plan status if they meet conditions outlined in Field Assistance Bulletin 2004-1.

According to that bulletin, the exemption would apply to HSAs that are completely voluntary for employees, do not limit the ability of participants to move funds to another HSA, do not impose conditions on the use of the funds or make or influence investment decisions. In addition, the HSA must not be represented as an employee welfare plan and the company must not receive any payment in connection with the HSA.

EBSA noted that HSAs are "personal health care savings vehicles rather than a form of group health insurance. . .funds deposited in an HSA generally may not be used to pay health insurance premiums, and the beneficiaries of the account have sole control and are exclusively responsible for expending the funds."

According to the bulletin, a group health insurance plan "typically establishes the type of benefits provided, the conditions for their receipt, and the manner in which claims will be adjudicated." With HSAs, the employer may be doing little more than contributing funds to an account controlled solely by the employee.

Susan Relland, legal counsel for the American Benefits Council, said some employers are considering accepting ERISA responsibility if it means they can impose more control over HSA spending. "There's nothing. . .that keeps the employee from just cashing out the HSA, taking the 10% excise hit, and (spending the money). Employers. . .would like to make sure that. . .they control the account, that it's being spent on health care."