Treasury Okays Limited Use of Health Savings Accounts With Other Medical Accounts

On May 11, 2004, the U.S. Department of the Treasury approved certain uses of Health Savings Accounts (HSAs) with Medical Reimbursement Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs).  HSAs are individual health savings accounts to which individuals may make tax-free contributions while they are covered under a high deductible health plan (HDHP).  The accounts may be used to pay for health care expenses on a tax-free basis.  Prior to the May 11 guidance, considerable uncertainty existed over whether individuals could contribute to an HSA if they were also covered by an FSA or an HRA.  However, Revenue Ruling 2004-45 allows individuals to remain eligible to contribute to an HSA even when they are also covered under an FSA and/or an HRA provided one of the following conditions is met:

• the FSA or HRA reimburses only limited types of medical expenses, such as dental or vision expenses;
• the individual elects to suspend reimbursement under an HRA for a stated period;
• FSA or HRA reimbursements are not available until the individual has met the minimum annual deductible required for the HDHP under the HSA rules; or
• the HRA reimburses only post-retirement medical expenses incurred after retirement.

To view Treasury's press release about the new HSA guidance, go here:  http://www.treasury.gov/press/releases/js1535.htm.

To view Revenue Ruling 2004-45, go here:  http://www.treasury.gov/press/releases/reports/js1535_revrul200445.pdf

To view an Ice Miller article about how HSAs and HDHPs work, go here:  http://www.icemiller.com/enewsletter/Jan04/04-jan.htm

To discuss this matter with your contact in the Employee Benefits Group at Ice Miller, please use this link to access our directory of attorneys.  If you do not have a contact in the Ice Miller Employee Benefits Group, please feel free to contact Christopher Sears, Marc Sciscoe or Tiffany Sharpley, who prepared this article.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

Ice Miller is a full-service law firm with offices in Chicago, Indianapolis and Washington, D.C.  The 27 employee benefits professionals of Ice Miller provide legal and consulting services for retirement and health and welfare benefits and executive compensation to public and private employers, financial institutions, insurance companies and other types of benefit service providers.
 
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