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HSAs Can Exist Above ERISA Rules

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:

1. The program must be completely voluntary.
   
2. An employer cannot endorse the program, but can administrate payroll functions and publicize the program.
   
3. An employer may only receive reasonable compensation for payroll expenses.
4. 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 guidance is very positive. Overall, Field Assistance Bulletin 2004-1 should help increase HSA participation.

Click here to view FAB 2004-1 in its entirety