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Plan Sponsors’ Quick, Handy Guide To HSAs And ERISA

Plan Sponsors’ Quick, Handy Guide To HSAs & ERISA


Since HSAs offer unparalleled tax savings for both employers and their employees, they are a powerful addition to many employers’ benefit packages. However, by not structuring their HSAs according to Department of Labor guidelines, plan sponsors run the risk of subjecting their HSAs to ERISA regulations, which create additional responsibility and processes. Here’s what employers need to know about how HSAs and ERISA interact, as well as how they can set up their HSAs to stay clear of ERISA.

What Is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that protects employees by regulating how employer-provided employee benefits plans are administered. ERISA sets guidelines on the plan information employers must provide, holds plan administrators to a fiduciary standard and gives employees the right to sue if employers don’t meet it, and requires plans to have an appeals process.

How Are HSAs Impacted By ERISA?

In their Field Assistance Bulletin 2004-01, the Department of Labor ruled that there are two ways employers can offer HSAs to employees without falling under ERISA regulations:

  1. Employers can set the HSA to meet the conditions of the safe harbor for group and group-type insurance programs (as found in 29 C.F.R. § 2510.3-1(j)(1)-(4)). However, employers are not allowed to contribute to their employees’ HSAs in this scenario.
  2. Employers can follow the below five requirements, as well as ensure employee HSA participation is completely voluntary:
    • • Not accept any payment or compensation related to HSAs
    • • Not influence employees’ investment decisions
    • • Not limit employees’ ability to move their HSA funds to another HSA provider
    • • Not limit employees’ ability to use HSA funds
    • • Not represent that the HSA is an employee welfare benefit plan established and maintained by the employer

In this second scenario, employers are free to contribute to employees’ HSAs if desired, but they aren’t required to.

Note: To contribute to an HSA, participants must be covered under a qualified high deductible health plan (HDHP). While HSAs themselves are generally outside the scope of ERISA, those HDHPs are generally subject to ERISA regulations.

Specific Questions About HSAs And ERISA

Two years after their first bulletin, the Department of Labor issued Field Assistance Bulletin 2006-02 to clarify several scenarios regarding HSAs and ERISA. Here are the most important points that came from this bulletin:

  • • Employers can open HSAs for employees and deposit employer funds into those HSAs (even without the employees’ affirmative consent) without falling under ERISA regulations
  • • If employers maintain an HDHP for their employees, employers can choose a single HSA provider to hold employees’ contributed funds without falling under ERISA regulations
  • • Employers can pay HSA-related fees for employees without falling under ERISA regulations
  • • Employers can set up cafeteria plans for employees to contribute to their HSA via payroll deduction (saving the employer and employees FICA and FUTA taxes) without falling under ERISA regulations
  • • Employers can select an HSA provider(s) that offers some or all of the investment options that are also offered in their 401(k) plan without falling under ERISA regulations
  • • Employers can provide general information on the advisability of using an HSA with an HDHP without “endorsing” the HSA or falling under ERISA regulations

In short, as long as employers follow the guidelines outlined in Field Assistance Bulletin 2004-01, they can offer HSAs to their employees without fear of being subject to ERISA. Employers, if you’re looking for a knowledgeable partner to offer your employees a low-cost HSA with best-in-class investment options, we can help. Learn more here or get started today by calling us at (888) 354-0697.

For More Information

When ERISA Applies to HSAs” – Marcia Wagner

DOL Provides Important Follow-Up Guidance on HSAs and ERISA Issues” – John Hickman and Ashley Gillihan

Author: James Denison