HSAs Given Boost By IRS, Treasury Notice

Taxpayers prevented from establishing health savings accounts (HSAs) because they reside in states where their health insurance plans fail to meet the federal requirements for a high deductible may find temporary relief in Notice 2004–43 issued by the Internal Revenue Service (IRS) and the U.S. Treasury Department. The Notice allows such individuals to contribute to HSAs until Dec. 31, 2005—giving states time to modify their laws to conform to the high deductible requirements.

The IRS noted that some states did not have time to modify their laws to specify the need for high deductibles. The transition period is expected to allow them to have time for reform, allowing "otherwise eligible" individuals to contribute to an HSA.

According to the Employers Council on Flexible Compensation, the Notice "will allow HSAs to flourish and give an incentive for legislatures and insurance commissions to make changes" by the deadline. The transition relief period will not apply to state mandates that were not in effect on Jan. 1, 2004.

Further information regarding the notice is available from Shoshanna Tanner of the Office of Division Counsel/Associate Chief Counsel at 202-622-6080.