IRS: Certain Texas Workers Still HSA Eligible

June 21, 2005 ( - The Internal Revenue Service has issued an information letter advising that employees in Texas can still contribute to a health savings account (HSA) if they have an "injury benefit plan" instead of workers' compensation benefits.

According to a report, Section 223(a) of the Internal Revenue Code allows a deduction for contributions to an HSA by an “eligible individual,” which is anyone who, in addition to other requirements, is covered under a high-deductible health plan (HDHP) on the first day of the month and is not, at the same time, covered under a non-HDHP.

According to the report, an eligible individual may have permitted insurance, disregarded coverage, and preventive care in addition to an HDHP.

According to the IRS, the Texas plans provide disregarded coverage within the meaning of the Code because coverage is limited solely to accident or illness with a workplace origin so there is no overlap between the plans and the employers’ high-deductible group health plans.