HSAs and HRAs

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Proposed Regulation on Cafeteria Plans Lays Out Document Requirements.
Managing Benefits Plans; no08-12 pp 2-3 Dec 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Speakers at an American Law Institute-American Bar Association audioconference outlined cafeteria plan documentation requirements in IRS proposed regulations. The proposal, which makes no allowance for correcting documents, must specify benefits, participation requirements and eligibility rules, method for and maximum amount of employer contributions and the plan year. Sponsors can use a wrap document with cross references to other documents. The document must fully describe contributions governing health savings accounts if offered and let plan members change contribution elections. Rules governing flexible spending accounts must be explained, as well as grace period arrangements if available.
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Mass. Employers Hail Change to Health Rules.
Geisel, Jerry; Business Insurance; v42 no43 pp 3, 44 Oct 27, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Massachusetts regulators approved final rules that make it easier for employer-sponsored health plans to meet the coverage requirements of the state's 2006 health care reform law. The final rules retain most provisions of earlier proposed rules, including requirements that plans offer a broad range of services and may not impose annual deductibles of more than $2,000 for individuals for in network services. The major change is that plans which do not meet the state's coverage standards will be considered in compliance if their relative value is comparable to the lowest level of state provided coverage. The final rules also make provisions to consider health savings accounts linked to high deductible plans in compliance.
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Health Savings Account Update.
Singleton, Leah M.; Murray, Ann E.; Employee Benefit Plan Review; v63 no4 pp 29-32 Oct 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The IRS has issued three notices that provide long-awaited guidance on health savings accounts (HSAs). IRS Notice 2008-51 explains the rollovers permitted from an individual retirement account to an HSA and describes the consequences of becoming ineligible for the HSA after making a rollover. Notice 2008-52 clarifies that a full annual contribution to an HSA is allowed only if the individual is eligible for the HSA on the first day of the last month of the tax year. Notice 2008-59 covers a variety of topics, including the impact of worksite health clinics on HSA eligibility, switching from self only to family coverage during the tax year and the use of HSA debit cards to control how HSA money is spent.
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High-Performing Companies Gain Advantage Managing Health Care Costs.
Towers Perrin: Monitor; 3 pp Oct 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Towers Perrin's survey examining projected 2009 health care costs for 321 large companies finds the high performers that focus on employee health will pay 14 percent lower insurance premiums than low performing firms. Forty-two percent are keeping cost increases to three percent or under, and their employees will pay $350 less than peers at low performing companies. High performing companies also see results in the corporate bottom line and employee engagement, satisfaction and retention. While the savings are significant, health care costs still climb relative to employee compensation. The survey found over half of those polled plan to offer account based health plans in 2009, mostly health savings accounts, though enrollment still remains around 20 percent.
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The Fine Print on HSAs.
Coyle, Dan; Benefits Quarterly; v24 no4 pp33-35 4th Qtr 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A Health Savings Account (HSA) plan, when properly understood, can be a great tool for managing health care costs for employers. It also can be a great tool for employees who want to save for future medical costs; howeer, there are many administrative and compliance complexities. Human resource (HR) and benefits professionals should know ten major points when considering whether to add an HSA plan.
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Ask the Auditor: Important Facts About Payment Card Compliance.
Denyer, Charles; Employee Benefit News; v22 no12 p 16 Sep 15, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Employers offering benefits linked to debit or credit cards, such as health savings accounts, need to be aware of their obligations to protect cardholder data. Major card issuers, such as Visa and MasterCard, require merchants, employers and other entities that store, process or transmit cardholder data to take steps to ensure data security. Employers are encouraged to visit the PCI Security Standards Council's web site for information on industry standards and compliance.
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Not as Easy as Flipping a Switch.
Bridgeford, Lydell C.; Employee Benefit News; v22 no11 pp 35-36 Sep 1, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : IRS Notice 2008-51 provides guidance on moving funds from an IRA to a health savings account (HSA) without the usual tax penalty for an early IRA distribution. An IRA owner can make the transfer only once and cannot exceed the maximum annual HSA contribution limit. The tax exemption and ability to save tax free for medical expenses are advantageous for retirees. But the IRS permission is limited to the relatively few who have both an IRA, whether traditional or Roth, and an HSA. Making the transfer also requires trustee-managed HSA and IRA accounts and maintaining a high deductible health insurance plan for at least a year after transfer.
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Health Reimbursement Arrangements Still an Appealing Choice.
Pallarito, Karen; Business Insurance; v42 no32 pp 18-19 Aug 11, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : While health savings accounts may have taken the spotlight, health reimbursement arrangements (HRAs) remain a strong option for the right employers, large ones with sufficient infrastructure to handle the administration. HRAs need not be tied to a high deductible health plan and are often able to provide better drug benefits for disease management. HRAs are not well suited for industries with high employee turnover or below average income. Some employers are looking at novel ways to use HRAs, for example, rewarding employees for healthy behaviors such as taking a health risk screening, giving pretax incentives and creating HRAs strictly for retirees.
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Consumer-Driven Health Care: Employees Need Information to be Savvy Consumers.
Jenkins, Shawn; Benefits & Compensation Digest; v45 no8 pp 40-43 Aug 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Consumer-driven health plans (CDHP) have handed employees both the money and the responsibility for their health care, fixing the amount employers spend. Now employees need adequate information to go with the responsibility. Employers can capitalize on the increased cost savings and cost control of CDHP if they provide the tools that allow employees to shop, compare and simplify a complex health care landscape. The main tool to provide is consumer information.
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Link To Full Article
Health Insurance Lexicon.
HR Magazine; v53 no8 pp 61-74, 76-80 Aug 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Employers offering health plans have a parallel relationship with their employees around benefits, involving plan administrators, outside plan service providers and care providers. Payments can be based on service only, discounts, diagnosis, per diem, capitation or other scheme or combination. Most employees face some cost sharing through premiums, deductibles, copayments or coinsurance, though most plans limit out-of-pocket expenses. A glossary and point-by-point comparison illustrates similarities and differences between health savings accounts, health reimbursement arrangements and flexible spending accounts.
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IRS Provides Guidance on HSA Contribution Limits and One-Time Transfers From IRA to HSA.
Boling, Deborah K.; Employee Benefit Plan Review; v63 no2 pp 20-22 Aug 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In 2008 the maximum annual health savings account (HSA) contribution by an individual is $2,900, and $5,800 for those with family coverage. Expenses incurred before an HSA is established are not qualified expenses. Under Internal Revenue Code Section 408(d)(9), individuals may make a one time transfer from their IRA or Roth IRA to their HSA. A SIMPLE or SEP IRA is not eligible for such a transfer. Only one qualified HSA funding distribution from an IRA is allowed in a lifetime. However, if that distribution occurs when an individual has individual only coverage and later in the same year has family coverage, a second distribution subject to the individual's maximum HSA contribution for the year may be taken.
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Saving for Health Care Expenses in Retirement: The Use of Health Savings Accounts.
Fronstin, Paul; EBRI Notes; v29 no8 pp 10-13 Aug 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Since Medicare covers just over half of a typical older couple's health expenses, the couple is likely to need almost $376,000 to pay the balance. Health savings accounts (HSAs) offer saving advantages with limits, since even saving the maximum permissible still leaves individuals unable to cover insurance premiums and other medical expenses. Saving 90 percent each year for ten years builds only $38,000 for an individual and $76,000 for a couple, far short of the needed $59,000 and $118,000, respectively. Taking any distributions along the way further erodes the amount saved.
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Health Savings Accounts: IRS Proposal Would Require Some Employers That Sponsor HSAs to File Excise Tax Returns.
Olsen, Florence; BNA's Pension & Benefits Reporter; v35 no29 p 1,712 Jul 22, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Internal Revenue Code Sections 4980E and 4980G levy a 35 percent excise tax on employers who omit making equivalent contributions to their employees' health savings accounts (HSAs) in a calendar year. Sections 4980B and 4980D impose an excise tax of $100 per day per beneficiary on plans that do not comply with contribution requirements. An IRS proposal seeks to amend those codes and allow employer contributions to HSAs of less compensated workers to be larger than contributions to the HSAs of more highly paid employees. The proposal would forbid employers from providing greater contributions to higher paid employees' HSAs than to lower paid workers. A hearing will be held on the proposed changes on October 30, 2008.
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Notice 2008-59: Health Savings Accounts.
Internal Revenue Bulletin; no2008-29 pp 123-130 Jul 21, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : IRS Notice 2008-59 follows up on four notices from 2004 on health savings accounts (HSAs). Using a question-and-answer format, this Notice addresses who is eligible to hold an HSA and how it interacts with health reimbursement arrangements, high deductible health plans (HDHPs), Medicare and coverage through the Department of Veterans Affairs. It explores benefits, deductibles and expenses in HDHPs and changing coverage. The Notice describes contribution limits for individuals, couples and families, overlap with an HDHP, how rollovers from an existing HSA to a new one are handled, catch up contributions and error correction. It answers questions on benefit distribution through various methods, prohibited transactions, and establishing and administering HSAs.
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HSAs' Reign Among Consumer-Driven Plans May Come to an End.
Geisel, Jerry; Business Insurance; v42 no28 pp 13-14 Jul 14, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Health savings accounts (HSAs) gained popularity rapidly since their authorization in 2003, promoted by numerous tax advantages. But proposed legislation would tighten substantiation rules, consequently increasing the cost and administrative burden for financial institutions. Questions about health care quality and cost under HSAs and inequitable use as tax shelters have also been raised. The future of HSAs may depend on the 2008 presidential election results, since the candidates have differing views on them. But with 6.1 million enrollees by early 2008, HSAs are unlikely to be abolished.
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Mass. Plans Revisions to Health Reform Rules.
Geisel, Jerry; Business Insurance; v42 no28 pp 1, 21 Jul 14, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Massachusetts Health Insurance Connector Authority is proposing changes to the state health care law. Consumer driven plans will have an easier time showing they offer minimum creditable coverage. However, those tied to health savings accounts will have to show by the start of 2010 that they provide coverage equivalent to other plans. The proposal will also change the mandated three preventive care visits annually for an individual to a schedule that follows national standards. Out-of-pocket limits that are too high will require employers to increase benefits or cause employees to be taxed.
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IRS Provides Answers to Questions on HSAs.
Geisel, Jerry; Business Insurance; v42 no26 pp 1, 29 Jun 30, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : IRS Notice 2008-59 has cleared up many issues employers had about health savings accounts (HSAs). The guidance includes information on issues such as the eligibility of employees with access to onsite clinics, erroneous employer contributions and whether HSA debit cards can be designed to pay only medical expenses. Experts say resolving these issues will increase the already rapid rate at which employers are adopting HSAs. The biggest area of confusion clarified by the Notice is that of onsite clinics. According to the IRS, access to an onsite clinic which provides discounted medical services does not disqualify an employee from opening an HSA as long as the clinic does not provide significant medical benefits.
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Notice 2008-51: Health Savings Accounts.
Internal Revenue Bulletin; no2008-25 pp 1,163-1,166 Jun 23, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : As a result of the Health Opportunity Patient Empowerment Act of 2006, the IRS added Internal Revenue Code Section 408(d)(9). The addition regards distributions from IRAs or Roth IRAs to health savings accounts (HSAs). These distributions are not considered part of gross income for the year of the distribution except in certain circumstances and generally escape the ten percent tax that would imposed under Section 72(t). In most cases, an individual can take only one HSA funding distribution in his or her lifetime.
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Notice 2008-52: Health Savings Accounts.
Internal Revenue Bulletin; no2008-25 pp 1,166-1,169 Jun 23, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Sections 303 and 305 of the Health Opportunity Patient Empowerment Act of 2006 change the cap on annual contributions to health savings accounts (HSAs). Starting in 2007, the indexed maximum contribution is independent of deductibles for the associated high deductible health plan (HDHP). For 2008, the maximum for an individual HDHP is $2,900, and $5,800 for a family HDHP. A person in a calendar year plan who is eligible on December 1 is considered eligible for the entire year and can make a higher contribution than one not eligible until after that date. Numerous examples illustrate different situations, rules and calculations.
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Prepaid Benefit Cards Poised for Growth.
Shepherd, Leah Carlson; Employee Benefit News; v22 no8 pp 46, 48-49 Jun 15, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Debit cards, preloaded with funds for health expenses, are catching on for their ease and simplicity. Debit cards boost participation in consumer driven health plans using health savings accounts, health reimbursement arrangements or flexible spending accounts. Even if cost sharing changes require higher employee contributions, the ease of use with approved providers eliminates collecting and submitting receipts to substantiate expenses. Multiple accounts can also be linked to a single card. By paying with pretax dollars, members avoid out-of-pocket expenses, and employers enjoy lower FICA taxes.
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HSA Tames Cost Hikes.
Gallagher, Amy; Employee Benefit News; v22 no7 pp 1, 27-28 Jun 1, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : By switching to health savings accounts (HSAs), the nonprofit Preservation Society of Newport County, Rhode Island, significantly cut health insurance premiums from annual increases as high as 30 percent. Trimming benefits and employer contributions did not lower costs enough. HSAs enabled members to understand actual costs and quality of care and make better, more informed decisions. The Preservation Society provided education and support and supplemented the effort with an expansive wellness program. With the savings, the organization is paying all premiums for several years and part of the employee deductible starting at half in the first year and declining to a third thereafter.
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Bank On It.
Chordas, Lori; Best's Review; v109 no2 pp 42-44, 46 Jun 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to a census by America's Health Insurance Plans, more than 6.1 million Americans are enrolled in a health savings account (HSA) insurance plan in 2008, 35 percent more than in 2007. This growth prompted UnitedHealth Group to charter its own bank in 2003 to manage its more than 400,000 HSAs. To utilize HSAs an insurer needs to offer checking and or debit cards for participants to pay their medical expenses. Offering those and other services can only be done by banks, so insurers can partner with a bank or charter their own as UnitedHealth did. Despite the prediction that HSAs will hold more than $75 billion in assets by 2010, most big insurers are not ready to take that step and plan to continue partnering with banks.
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Education and Simple Plan Design Drive Success in Consumer-Driven Health Plans.
Wicker, John; Broker World; v28 no6 pp 22, 24 Jun 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Educating consumers about the advantages of their consumer driven health plan (CDHP) can be done with booklets, handouts, online webinars or in person. That education along with a plan of simple design that the consumer can understand are the best ways to achieve success with a CDHP. Health care consumers seeking lower cost treatment options will lead to increased competition between providers and reduced prices. Employees who pay half of their medical costs will want to determine which treatments are worthwhile. They will also recognize that changing their behavior to a healthier lifestyle will not only improve their health but lower their expenses.
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The Ongoing Evolution of Health Savings Accounts.
Bunnell, Wendy W.; Benefits Law Journal; v21 no2 pp 9-13 Summer 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Since their introduction, health savings accounts (HSAs) have grown slowly. They are poorly understood, and some IRS provisions remain as obstacles. The Tax Relief and Health Care Act of 2006 raised participants' annual contribution limits, and participants can roll over funds from IRAs, health reimbursement accounts and flexible health spending accounts into HSAs where permitted by the sponsor. Employers hope for more flexibility in plan funding and the ability to make matching contributions. Drugs for preventive care remain an issue, though the IRS, in Notice 2004-23, addresses drugs aimed not only at disease symptoms but also at disease risk factors, supporting many wellness program efforts.
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Health Care: AHIP Finds 6 Million Covered by HSAs; Stark, Waxman Say Accounts Favor Wealthy.
Daily Labor Report; no84 p A9 May 1, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to America's Health Insurance Plans (AHIP), over six million Americans were covered by an insurance plan eligible for a health savings account (HSA) in January 2008. But a Government Accountability Office (GAO) report, released by Congressmen Fortney Pete Stark and Henry Waxman, finds 40 percent of those in an HSA eligible plan did not open HSAs. According to the GAO report, tax filers with HSAs had a mean income of over twice that of other tax filers, and contributions to HSAs were more than double the withdrawals. The report concludes that HSAs are being used as tax shelters by higher income people. AHIP notes the GAO report used outdated 2005 data and reflects a time when fewer people were enrolled in HSA eligible plans.
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