Health saving accounts (HSAs) offer an excellent opportunity for participants to save money on healthcare expenses and for employers to support their employees’ wellness needs in a cost-efficient way. But there are HSA rules and regulations you and your employees need to follow in order to stay compliant. Keep reading to learn more about HSA compliance topics including: rules for employees, designing an HSA program, and how to keep HSAs exempt from ERISA. Or check out our Benefits Buzz podcast episode with Jason Cook, vice president of healthcare emerging markets at WEX, below. 

Employee eligibility 

When it comes to designing an HSA program at your company, there are a few things you need to keep in mind to stay compliant. To start with, you need to determine which employees are eligible to participate in an HSA. First, employees need to be covered by an HSA-eligible health plan, otherwise known as a high-deductible health plan (HDHP). They can’t be covered by any other health plan that would disqualify them from an HSA, such as a spouse’s plan or a medical flexible spending account (FSA). 

Also, employees can’t be enrolled in Medicare or be claimed as a dependent on someone else’s tax return.

Contribution rules for employers

There are comparability rules when it comes to an employer contributing to an HSA, but only if the employer is not running the program through a cafeteria plan. If they’re running an HSA program through a cafeteria plan, contributions are subject to non-discrimination testing and  comparability rules do not apply. Comparability rules for programs not run through a cafeteria plan means employers who contribute to an employee’s HSA must make comparable contributions (contributions that are the same amount or same percentage of the deductible for the HDHP) to all comparable participating employees’ HSAs.

Notifying your employees about HSA rules

What HSA rules should you communicate to your employees? You’ll want to notify them about contribution limits for a family or individual plan, why they need to be enrolled in an HDHP, and the wide array of HSA eligible expenses.

But before you get into the details of HSA rules, it’s important to tell your employees about the savings opportunities and additional benefits of an HSA. Benefits rules can be overwhelming for employees, so if they don’t understand what they can get out of an HSA, they will probably be less inclined to open an HSA account. 

“I always recommend that you really talk about the benefits of the HSA program [with employees],” said Cook on our Benefits podcast. “Help them understand the HSA better and then slowly weave in the rules and regulations the IRS requires.”

Contribution rules for employees

As we mentioned above, current HSA contribution limits are one of the top rules you need to communicate to employees with an HSA. If an employee does go over the HSA contribution limit, they will have to either withdraw their excess contribution before tax filing to avoid penalties, or include whatever amount is over-contributed to the account as other income and receive a 10% penalty.

Providing your employees with a simple and personalized HSA experience can help prevent contribution mistakes from happening. For example, WEX offers HSA holders an online account with an expense dashboard that manages and tracks their HSA funds throughout the year.

ERISA and HSAs 

The Employee Retirement Income Security Act (ERISA) was established with the purpose of protecting the rights and interests of workers who participate in employer-sponsored benefits plans. With employer-sponsored health plans, there’s fiduciary oversight. But fiduciary oversight does not exist with HSAs, because these accounts are owned by the employee. 

If an HSA is subject to ERISA, employers face many compliance obstacles. An article from SHRM says employers have to:

• File Form 5500s.
• Provide a summary plan description and plan documents.
• Follow DOL claims procedures.
• Provide COBRA continuation coverage.

So, what actions should employers avoid to keep their employees’ HSAs exempt from ERISA? 

• Controlling how much an employee contributes to their HSA.
• Not letting employees move their funds to another HSA.
• Controlling how employees use their HSA funds.
• Influencing employees on HSA investment decisions.
• Say that the HSA is subject to ERISA.
• Receive any form of compensation in relation to the HSA

Don’t forget to check out our podcast episode to learn more about HSA compliance and program design! 

This blog post was most recently updated in April 2024. 

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers. 

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