Treasury Department, IRS Issue Guidance on Health Savings Accounts

The Treasury Department and the Internal Revenue Service on Friday issued a guidance on health savings accounts, answering 88 questions about the accounts raised by the public during the past year, the AP/Houston Chronicle reports (Crutsinger, AP/Houston Chronicle, 7/23). Under the new Medicare law, HSAs, which allow individuals to save funds tax-free for future medical expenses, are available to members of health plans that have a deductible higher than $1,000 for an individual and $2,000 for a family. Employees, employers or both can contribute as much as a combined $2,600 for individuals and $5,150 for families for HSAs each year. In addition, employees can establish HSAs when employers do not offer them (California Healthline, 7/12). Friday's notice on HSAs is the third set of guidelines issued since the Medicare law was signed in December (America's Health Insurance Plans release, 7/23). The guidance includes the following clarifications:

Otherwise eligible employees who belong to employee assistance plans, disease management plans or wellness programs would not be disqualified from HSAs;

Mistaken distributions from an HSA could be repaid to the account without penalty or tax;

Rules for flexible spending salary deductions do not apply to HSA salary-deducted contributions;

Employers cannot restrict HSA access to employees on the grounds that employers do not believe expenses qualify as covered health care;

HSA funds can be used for preventive medicine, including for weight-loss and tobacco cessation programs; and

Seniors who are not enrolled in Medicare can use HSAs.

Treasury officials said Friday that with the publication of the latest guidance, they have answered "pretty much all the questions that people have asked" about the accounts. While HSAs have been available since the beginning of the year, large employers that design their health care options one year in advance are not likely to offer the accounts until next year, according to Dow Jones (Walsh, Dow Jones, 7/23). Karen Ignagni, president and CEO of America's Health Insurance Plans, said the new guidance "will serve to broaden employer and consumer interest in these products" (AHIP release, 7/23). The complete guidance is available online. This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.