Last week the Treasury Department and the IRS issued comprehensive guidance on Health Savings Accounts that will help providers to establish HSAs and consumers to enjoy their benefits. The guidance answers questions on a wide range of issues that the public has brought to the Treasury Department since the creation of HSAs. The guidance is in an easy-to-use question and answer format.

"Health Savings Accounts are designed to help individuals take more control over how their health care dollars are spent and save for future medical and retiree health expenses on a tax-free basis," said Treasury Secretary Snow. "At a time when health care costs are rising rapidly and individuals, families and employers are struggling to find lower-cost alternatives, HSAs are a terrific option that I think every American ought to consider."

"Since HSAs were signed into law by President Bush in December of last year, we have received numerous questions about how HSAs work, from consumers, from employers, from insurance companies and from various potential HSA trustees," said Acting Assistant Secretary for Tax Policy Greg Jenner. "While we have answered many of the pressing questions about HSAs already, we hope that this guidance responds to most of the important remaining questions."

Among the items clarified by the guidance are the following:

• Benefits under Employee Assistance Plans, Disease Management Plans and Wellness Programs generally do not disqualify an otherwise eligible individual from contributing to an HSA.
• Mistaken distributions from an HSA can be repaid to an HSA without penalty or tax.
• Generally, the FSA-type salary reduction rules do not apply to HSA salary reduction contributions, which generally follow the more flexible 401(k) type rules which allow changes in elections throughout the year as long as any election is effective prospectively).
• Payments by individuals due to traditional benefit limits that are part of reasonable plan designs do not count against the out-of-pocket maximums.
• Employer matching contributions made through a cafeteria plan are not subject to the comparability requirements.
• Account fees paid from HSAs are nontaxable distributions; account fees paid outside of the HSA directly to trustees are not treated as contributions.

By answering the remaining questions about the rules for HSAs and the required accompanying High Deductible Health Plans, the guidance will assist employers, insurance companies and HSA trustees in designing health plans that incorporate HSAs.