IRS Broadens HSA Rules to Enable Some Combining of Healthcare Plans Guidance Provided Regarding HSA Interaction with Other Health Accounts (TDNR JS-1535; Rev. Rul. 2004-45)
The IRS issued guidance on the interplay between health savings accounts (HSAs) and health flexible savings arrangements (health FSAs) or health reimbursement arrangements (HRAs). Code Sec. 223 allows a deduction for contributions to an HSA for an "eligible individual," defined as an individual who is covered under a high-deductible health plan (HDHP). An eligible individual may not be covered by a health plan that is not an HDHP, unless that health plan provides only permitted insurance, permitted coverage or preventive care as defined in Code Sec. 223(c)(1)(B). Health FSAs and HRAs are generally health plans that are not HDHPs and, therefore, an individual covered by such a plan is generally not eligible for HSA contribution deductions. However, under the new guidance, an individual will continue to be an eligible individual for HSA contribution purposes if the individual is also covered by a:
Limited-purpose health FSA or HRA. If a health plan pays only for insurance, or other benefits that are disregarded for the purposes of the HDHP deductible under the terms of Code Sec. 223, the covered individual is considered an eligible individual for the purpose of making contributions to an HSA. Vision and dental benefits are permitted coverage, as are reimbursements for preventive care.
Suspended HRA. If an individual elects, before the beginning of the HRA coverage period, to forgo the payment or reimbursement of medical expenses incurred during that coverage period other than, possibly, preventive care, permitted insurance and permitted coverage, the individual is an eligible individual for the purpose of making contributions to an HSA. When the suspension period ends, the individual will no longer be eligible.
Post-deductible health FSA or HRA. An individual is an eligible individual for purposes of making contributions to an HSA if the individual is covered by a health FSA or HRA that does not pay or reimburse any medical expense incurred before the minimum annual deductible under Code Sec. 223(c)(2)(A)(i) is satisfied.
Retirement HRA. An individual is an eligible individual for the purpose of making contributions to an HSA before retirement, if the individual is covered by a retirement HRA that pays or reimburses medical expenses incurred after retirement. The individual ceases to be an eligible individual after the HRA takes effect. |
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