Department of Labor Announces Health Savings Accounts Generally Are Not Covered Under ERISA
Robyn Smith Ellis
On April 7, 2004, the U.S. Department of Labor’s Employee Benefits Security administration released Field Assistance Bulletin 2004-1 which provides enforcement guidance to field investigators on health savings accounts (“HSAs”). The guidance is intended to facilitate the adoption of health savings accounts by employers. The Department of Labor believes that HSAs will lead to more choices and lower health care costs for American workers and their families.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“Act”) permits eligible individuals to establish HSAs effective January 1, 2004. Generally, eligible individuals are those who are covered under a high deductible health plan; are not also covered by any other health plan that is not a high deductible health plan; are not entitled to benefits under Medicare; and are not claimed as a dependant on another person’s tax return. Since the Act was signed into law, a number of questions arose regarding whether HSAs constitute employee welfare benefit plans under the Employee Retirement Income Security Act (“ERISA”).
Field Assistance Bulletin 2004-1 clarifies that while employer-sponsored high deductible health plans in the private sector or group health plans are subject to ERISA, HSAs are generally not covered. Specifically, employer contributions to HSAs are not covered by ERISA where the establishment of the HSA is completely voluntary on the part of the employee and the employer does not: (1) limit the ability of eligible individuals to move their funds to another HSA beyond restrictions imposed by the Internal Revenue Code (“Code”); (2) impose conditions on utilization of HSA funds beyond those permitted under the Code; (3) make or influence the investment decisions with respect to funds contributed to an HSA; (4) represent that the HSA is an employee welfare benefit plan established or maintained by the employer; or (5) 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 does not affect whether an HSA funded with employer or employee contributions is covered under ERISA, 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.