Dr. HSA

Guest Columnist, Roy Ramthun

Former Economic Advisor to President Bush

US Treasury Update for HSAs

June 2007 - Vol. 10

More good news from the U.S. Treasury was released today regarding Health Savings Accounts (HSAs).  Under proposed regulations that are printed in today’s Federal Register, employer funding of employees’ HSAs could work the same way Flexible Spending Accounts (FSAs) work today. 

This proposed regulation will greatly enhance the appeal of HSAs by reducing employees’ concerns that their accounts could be exhausted if they incur big medical bills early in the year before employers make all of their contributions.

To illustrate by example, John Smith elects to have $2,000 taken out of his salary for his out-of-pocket expenses covered by his FSA for 2007.  If John is hospitalized with a ruptured appendix on January 2, one of the benefits of how FSAs work is that the full amount -- $2,000 – can be reimbursed from the FSA immediately even though the full $2,000 will be taken out of his paycheck over the course of the year.

With HSAs, John Smith cannot reimburse $2,000 of expenses until he has $2,000 deposited into his account.  Under regulations proposed Treasury, John’s employer could accelerate the company’s contributions to his HSA account, as well as for other employees whose medical care expenses are greater than what the employer has so far contributed to the HSA during the year.

The proposed rule by Treasury also addresses situations where companies agree to make contributions to eligible employees’ HSA accounts but the employee doesn’t open an HSA account or fails to notify their employer that their account has been established.  The rule states that companies must provide timely written notice to eligible employees that it will make contributions for the year if the employee establishes their account and notifies the company by the last day of February of the following calendar year.  If the employee does this, the company must make the promised contribution (plus reasonable interest) to the employee’s HSA account by April 15 of such following calendar year.  Treasury provided model notice language that companies can use to meet this requirement.

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Related Links:

Federal Register Regulation 143797-06 NPRM 060107

About the author...

Roy Ramthun is President of HSA Consulting Services, LLC, a health care consulting practice specializing in Health Savings Accounts and consumer-driven health care issues. Mr. Ramthun is also a Visiting Fellow at the Council for Affordable Health Insurance. Click here for Roy's website.