DoL: HSA Trustees Can Offer Signup Incentives

December 30, 2004 ( - The US


Department of Labor (DoL) has issued an advisory opinion


asserting that cash incentives offered by a trustee/custodian


of a health saving account (HSA) are not prohibited


transactions under federal law.

According to an EBIA report, the opinion was requested by an insurer that offers various health benefit plans including high deductible health plans (HDHPs) in the individual and group markets.

The DoL opinion covered two scenarios including one for group plans, EBIA said:

  • The insurer contracts with an unrelated bank to provide HSAs for those covered by HDHPs issued by the insurer in the group market, with the bank receiving compensation from the insurer for its services as trustee or custodian and recordkeeper. The bank gives customers a $100 HSA contribution if they establish an HSA with the bank when the insurer first covers them under a group HDHP.

In the opinion, the DoL noted that the Internal Revenue Service (IRS) Code Section 223 did not prohibit the insurer or bank from making cash contributions to its customers’ HSAs and that IRS guidance expressly provides that any person may make contributions to an HSA on an eligible individual’s behalf.

The DoL then determined that, although the insurer and bank were “disqualified persons” under the IRS Code’s prohibited transaction rules when acting as a trustee or custodian, the making of a cash contribution by the insurer or bank was not barred under Code Section 4975(c)(1).

Not only that, the DoL said, but the HSA account holder would not be engaging in prohibited self-dealing because the contribution would go to the HSA and not directly to the account holder. The DoL also indicated that the same analysis would apply under   the Employee Retirement Income Security Act’s (ERISA) prohibited transaction rules to HSAs that are ERISA plans under  Field Assistance Bulletin 2004-01 .