Presented as a series of questions and answers, technical notice 2004-50 was intended to respond to public questions about how to properly run an HSA that were voiced to the US Treasury Department in recent months.
The questions fell into the following areas:
- eligible individuals
- high deductible health plans
- preventative care
- cafeteria plans and HSAs
- account administration
- trustees and custodians
- other issues.
Regarding benefits under employee assistance plans (EAP), disease management plans and wellness programs, officials said the payments generally do not disqualify an otherwise eligible person from contributing to an HSA. “An individual will not fail to be an eligible individual solely because the individual is covered under an EAP, disease management program or wellness program if the program does not provide significant benefits in the nature of medical treatment, and therefore, is not considered a ‘health plan,” officials wrote.
Also, officials said an HSA owner would not incur federal income tax liability or be forced to pay the typical 10% early withdrawal penalty if they repay mistaken distributions from an HSA back to the HSA.
Officials also advised that:
- payments by individuals due to traditional benefit limits that are part of reasonable plan designs do not count against out-of-pocket maximums.
- employer matching contributions made through a cafeteria plan are not subject to comparability requirements.
- generally, the FSA-type salary reduction rules do not apply to HSA salary reduction contributions, which generally follow the more flexible 401(k) type rules which allow changes in elections throughout the year as long as any election is effective prospectively).
- account fees paid from HSAs are nontaxable distributions; account fees paid outside of the HSA directly to trustees are not treated as contributions.
For general information about HSA laws and regulations, the Treasury Department’s HSA Web site is at http://www.treasury.gov/offices/public-affairs/hsa/ .