IRS Issues HSA Trustee/Custodian Reminder

August 11, 2005 ( - Federal tax officials have issued a reminder about the rules under which trustees or custodians can be appointed for a health savings account (HSA) or certain other tax-exempted trusts.

The Internal Revenue Service, in IRS Announcement 2006-45 , said a firm that is not a bank or insurance company must file a written application with the IRS, demonstrating in detail it complies with existing tax regulations.

While banks and insurance companies are automatically eligible to serve as trustees or custodians for HSAs, individuals are not eligible, the IRS said.

Tax officials reiterated that if they approve a trustee or custodian application, the applicant receives a notice of approval. If a non-bank is approved as a trustee, it must give a copy of the approval to prospective account holders before their HSAs are established, the IRS said.

In Announcement 2006-45, the IRS listed 250 non-bank trustees and custodians approved as of December 31, 2005.