Part Two: Are Health Savings Accounts Subject to ERISA and COBRA? No, Except . . .
By William G. Stuart | Originally posted on LinkedIn for MaxHSA
Most employer-based Health Savings Account benefits offerings are not subject to ERISA or COBRA continuation of coverage. But employers must follow the rules to avoid the trip wires.
This column is the second in a two-part HSA Monday Mythbuster series exploring the relationship between Health Savings Accounts and two federal laws that shape access to medical coverage. Last week, we explored COBRA, the more familiar and easier to understand of the two laws. Today, we shift our focus to ERISA.
Defining ERISA
The Employee Retirement Income Security Act of 1974 governs group health plans. It imposes standards with respect to plan information and disclosures, defines the sponsor's (employer's) fiduciary responsibility, outlines required grievance and appeals processes, and sets legal remedies for breaches.
Group health plans (including traditional medical coverage, dental and vision plans, Health FSAs, and Health Reimbursement Arrangements) fall under ERISA.
Health Savings Accounts and ERISA
Health Savings Accounts are not major medical plans. Rather, they are financial accounts that individuals who meet eligibility requirements, including enrollment in a qualified medical plan, can open and fund. The Department of Labor, which administers ERISA, has said (see here) that a Health Savings Account is not an "employee welfare benefit plan" under ERISA if the employer's involvement is limited.
Specifically, HSAs stay outside ERISA when:
The account is owned and controlled by the employee, not the employer. It moves with an employee when she changes jobs, just like a personal bank account.
Employee participation is voluntary and limited. The employer can offer the HSA-qualified high-deductible health plan (HDHP), allow payroll deduction, and even make employer contributions. However, the company cannot maintain control over how employees use their Health Savings Accounts.