The Department of Labor’s (DOL’s) final fiduciary (or conflict-of-interest) rule exempted health and welfare plans from its final rule requirements except where they have an investment component, so if a health savings account (HSA) has an investment component, anyone giving advice about those investments will need to enter into a best interest contract (BIC) with the plan sponsor or participant.
In an article about what the fiduciary rule means for HSAs, Kevin Robertson, senior vice president, director of sales at HSA Bank, notes that much of the guidance focuses on the definition of “investment advice,” but the rule also provides guidance about what constitutes a “recommendation.” Plan sponsors and advisers need to make sure education does not cross over to where a participant might view anything as a suggestion or advice.
According to the article, many HSA administrators are banks and, by nature, are used to acting in a fiduciary capacity, so arguably, banks will have a much easier time complying with the new rules than non-bank administrators that will now have to institute additional oversight measures on all of the depositories and vendors they use. However, regardless of the structure of the HSA administrator, there are some likely actions that are going to be necessary, including:
- Ensuring that fees charged to participants within their program are appropriate and fully disclosed;
- Reviewing their education and communication materials and practices to make sure they are appropriate and do not constitute advice and recommendations;
- Potentially changing the investment options within their products; and
- Potentially needing new contracts or addendums with employers as a result of the above impacts.
Robertson says in the article that, as it pertains to advisers, the rules expand the requirements about how fiduciaries are required to act in the best interest of plan participants and beneficiaries. The “best interest standard” not only requires fiduciaries to act in the best interest of HSA account holders, but also that they provide much higher levels of disclosure and transparency. Failing to adhere to the rules puts advisers at risk of penalties and lawsuits.
Employers whose employees have HSAs were not the main targets of the regulations, and in most cases these rules will not increase potential risk or liability to employers, according to the article. However, employers may be impacted by the rule if they provide to their employees information about HSAs that crosses the line from general investment education to investment advice, or if they benefit from the advice being given.
Examples of the latter might include the employer receiving revenue sharing in connection with specific HSA investments suggested by financial planning tools it provides, or an employer receiving bonuses for steering employees towards particular HSA vendors. Most employers in those situations are likely to want to scale back those activities and/or revise their compensation arrangements, Robertson suggests.
Information from other parties like HSA vendors and their own carrier partners, which the employer merely makes available or passes along without endorsement, and investment lineups assembled by platform providers over which the employer has no say, should not have to be taken into account.The article, “DOL Fiduciary Standards: Potential Impact on HSAs,” may be downloaded from www.hsabank.com/DOL-Fiduciary-Standards.