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Guest Article

(From the October 2, 2006 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

HSAs Would Expand Under House Ways and Means Reported Bill

Health Savings Accounts (HSAs) would be able to accept rollovers from health flexible spending accounts and health reimbursement arrangements under H.R. 6134, the "Health Opportunity Patient Empowerment Act," reported by the House Ways and Means Committee on September 27, 2006. The bill would amend current law in a number of ways, including some that would expand HSAs significantly and others that would remove certain glitches that significantly reduce the allure of consumer-directed health plans.

Under the provisions of H.R. 6134, as approved by a 24 to 14 committee vote, several HSA obstacles would fall.

HSAs could accept rollovers from health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) up to the lesser of the amount in the FSA or HRA as of September 21, 2006 or the date of distribution of the account.
HSA maximum annual contributions would not be based on the health plan's deductible, but would be limited to $2,700 for those with individual coverage and $5,450 for those with family coverage and indexed for inflation after 2006.
For taxable years after 2006, inflation adjustments for HSA contributions and deductibles would be published no later than June 1, based on inflation for the 12 month period ending in March of that year.
"Grace period coverage" (which allows health FSAs to cover expenses incurred within two and one-half months after the end of the FSA's plan year) would not be treated as impermissible coverage when determining eligibility to establish a high deductible health plan (HDHP).
Individuals who become covered under a HDHP after January could contribute the full annually permissible amount to a HSA for that year.
Employers could contribute more to non-highly compensated employees than to highly compensated employees, but all non-highly compensated employees with similar coverage would have to receive comparable contributions.
A one-time direct trustee-to-trustee transfer from an IRA to a HSA would be available up to the otherwise maximum deductible contribution to a HSA, computed based on the type of coverage held at the time of the transfer.

In the Senate, bills expanding HSAs also have been introduced, including S. 3585 introduced by Senator Hatch (R- UT) and S. 3488 introduced by Senator Coburn (R-OK). As of September 28, no action on those bills has occurred.

Given the brief amount of time left in the 109th Congress, these bills would appear to have little chance of enactment in this Congress. But they will give their sponsors something to talk about on the campaign trail and they are likely to be introduced again when the 110th Congress convenes early in 2007. While further action on these bills is a very long-shot, a few of these provisions could be separately pulled into one of the few measures Congress is likely to address before the members leave to campaign full time through the November election day.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608 , Bart Massey 202.220.2104, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Carlisle Toppin 202.220.2067, Tom Veal 312.946.2595, Deborah Walker 202.879.4955.

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.