IRS issues rules on health savings account contributions

St. Louis Daily Record & St. Louis Countian, Sep 3, 2006 by Lawyers Weekly USA

The Treasury Department and the IRS have released a final guidance for employers that make contributions to employees' health savings accounts.

Health savings accounts were established under the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

Under that law, an individual may start a health savings account with a financial institution, or an employer may establish and contribute to an account on an employee's behalf.

Only individuals with "high-deductible" health insurance are eligible for health savings accounts. The deductible must be at least $1,000 for an individual or $2,000 for a family.

Under the "comparability rule," an employer must contribute the same amount or the same percentage of the deductible for all employees with a high deductible health plan.

The guidance clarifies that the comparability rule doesn't apply to employer HSA contributions made through a cafeteria plan.

It also includes examples of acceptable methods for employer HSA contributions.

The guidance applies to contributions to HSAs made on or after Jan. 1, 2007. It went into effect on July 31, when it was published in the Federal Register.