New IRS Regulation Drives HSA Procedural Change

Legacy Benefits & Insurance Services would like to make you aware of an important announcement which affects both Employees and Employers in the establishment, funding and administration of HSA accounts.

Pay particular attention to the following:

The IRS has clarified when an HSA account is effective: An HSA account must be funded in order to be effective and an account cannot legally exist before the effective date of the HSA qualifying plan coverage.

If HSA paperwork is received after the first day of the month, the HSA account cannot be effective any sooner than the first day of the following month. For example, your client's HSA compatible plan coverage begins on July 1, 2008 and you submit the paperwork to the HSA bank custodian on July 10th. An HSA account can be opened and made effective on August 1st. This means that the accountholder cannot use the HSA funds for any expense incurred prior to the effective date of the HSA bank account. Check with your HSA Bank Custodian to find out their administrative procedure to determine their definition of what constitutes having the HSA account open.

Please note that in the past, HSA Bank Custodians may have been able to retro the HSA account effective date to the start date of the HSA compatible HDHP coverage, but will no longer be able to do this based on these new regulations.

For more information, you can visit the US Treasury website:

http://www.treasury.gov/offices/public-affairs/hsa/

For more information or an free review of your current benefits package, please contact Ray Ward at Legacy Benefits & Insurance Service.