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How to Keep HSAs Exempt from ERISA
Lively · December 19, 2018 · 4 min read
![HSA-ERISA.png](https://images.ctfassets.net/4vd63898uzk5/5pfwgVBO3QjCbIiO8Dzo6F/c4e5548f6223b0162e5e2652471ef392/HSA-ERISA.png?fm=webp&w=2048&q=90)
As a business owner, you know there are rules to protect your employees. If you don’t follow these regulations, you may have to answer to your city, state, or the federal government. One federal law — the Employee Retirement Income Security Act of 1974 or ERISA for short — keeps an eye on your company’s retirement and health plans.
To stay compliant, you may have a lot of extra paperwork to navigate. As you may imagine, it can be stressful to stay on top of all the rules. Luckily, there are some accounts, like health savings accounts (HSAs), that may be exempt from ERISA’s guidelines. We will cover how to make sure your company stays in the government’s good graces — and why it matters.
The basics of how ERISA works
Before diving into how to stay exempt, it may be helpful to learn some of the basics. The goal of ERISA is to protect your retirement and health plan participants. The law also watches out for your employees’ beneficiaries who may one day inherit the balance of their plans.
Here’s a basic breakdown of which departments oversee ERISA’s rules:
Department of Labor (DOL) – The DOL creates rules and fiduciary duties for plan managers. They are also in charge of your plan disclosures and reporting. You can learn more here.
Internal Revenue Service (IRS) – The IRS sets the rules for your plan’s funding and vesting. You can learn more about qualified plans here.
Pension Benefit Guaranty Corporation (PBGC) – The PBGC insures private pensions. Learn more about these protections here.
ERISA impacts your company’s health savings accounts (HSA)
As you can see, there are a lot of moving parts and organizations to deal with. Before getting buried by pages of instructions, you need to figure out if they apply to your business. ERISA uses the term “employee welfare benefit plan” to describe which plans have to follow their guidelines. But the code doesn’t spell out whether this includes HSAs. To answer questions, the Department of Labor issued a couple of bulletins. These bulletins describe when HSAs are exempt and the rules you have to follow to stay compliant.
What happens when your company is not exempt from ERISA
No one would argue protecting workers is a bad thing. Still, ERISA creates a lot of extra legwork. That legwork takes time and money away from your business. If your company fails an audit, you could be stuck with attorney’s fees and fines. Some of ERISA’s disclosure and reporting requirements include:
File Form 5500
Give your employees written disclosures
Follow the Department of Labor’s claims procedures
Provide COBRA to employees
Comply with ERISA’s fiduciary standards
How to keep your HSA exempt for ERISA
If reading these guidelines makes you sweat, we have some good news — HSAs are generally exempt — but that doesn’t mean you are off the hook. If you want to steer clear of ERISA, you need to follow these rules.
Your involvement with your employees’ HSA must be limited. We have outlined some of the specifics below. You can read more in the Department of Labor’s first bulletin here.
Your employees can’t be forced to join your company’s HSA.
You can’t limit your employees’ ability to move their money to another HSA.
You can’t create restrictions on how your employees use their HSA money.
You can’t try to influence your employees’ HSA investment decisions.
You can’t refer to the company HSA as an “employee welfare benefit plan.”
You can’t receive compensation for establishing your company’s HSA.
The Department of Labor also issued a second bulletin to further clarify each of these rules. You can read those details here.
Don’t be afraid to seek outside guidance
When it comes to navigating ERISA, it’s easy to get confused. If the Department of Labor’s resources aren’t enough, don’t be afraid to seek outside help. A certified financial planner or an attorney specializing in employee benefits is well worth the expense. You may sleep better knowing you won’t encounter major mistakes down the road.
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Benefits
2023 and 2024 HSA Maximum Contribution Limits
Lively · May 16, 2023 · 3 min read
On May 16, 2023 the Internal Revenue Service announced the HSA contribution limits for 2024. For 2024 HSA-eligible account holders are allowed to contribute: $4,150 for individual coverage and $8,300 for family coverage. If you are 55 years or older, you’re still eligible to contribute an extra $1,000 catch-up contribution.
![comparing hsa versus fsa](https://images.ctfassets.net/4vd63898uzk5/6x1k1SvjdsQgoe1tfKfrWY/ff49bb67321ede1debe229ec1c35de87/hsa-vs-fsa.jpg?fm=webp&w=3840&q=90)
Benefits
What is the Difference Between a Flexible Spending Account and a Health Savings Account?
Lauren Hargrave · February 9, 2024 · 12 min read
A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.
![Benefits of HSA employer matching](https://images.ctfassets.net/4vd63898uzk5/5BY1DzvcLk0hSrIo6Ww0fa/00536b8eb1baa40e11c40bebd0102745/iStock-1070271624__1_.jpg?fm=webp&w=3840&q=90)
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Ways Health Savings Account Matching Benefits Employers
Lauren Hargrave · October 13, 2023 · 7 min read
Employers need employees to adopt and engage with their benefits and one way to encourage employees to adopt and contribute to (i.e. engage with) an HSA, is for employers to match employees’ contributions.
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