Benefit decision-makers and employer groups have heard dozens of questions regarding their employees’ health savings accounts, but there are less frequently asked questions that can take days of research to find answers to, according to a benefits expert.
Mickey Webb, chair of the employee benefits practice group for RiskProNet International Inc., a network of 29 leading independent brokers in the United States and Canada, created a list of the most common, uncommon questions she and her colleagues have encountered since the creation of health savings accounts in 2003.
These questions are asked “often enough that we had to do research and try to find some guidance, or answers,” Webb notes, “but there wasn’t any strong guidance, so you had to make an educated decision about what makes the best sense.”
Although “it’s easy to find the frequently asked questions, these are the ones that are rarely addressed and the trickiest to deal with,” she says, adding that these questions and answers should be made available to employees–an ideal spot is a company Web site.
At the top of the list of uncommon questions, according to Webb, is whether employer contributions into HSAs count toward income for child support calculations.
“For an infrequent question, this one is pretty common,” she says. “There will be one or two people who have to deal with that in any given organization.”
Webb, also senior vice president, director of employee benefits, for Associated Financial Group in Minnetonka, Minn., says that since child support is a state law issue, the response would vary from state to state.
The conservative answer, she says, is to treat it as income; the other option is to determine the child support difference and give that amount to the child support agency to hold until there is a court decision.
She adds that there is no question that the employer owes this additional amount to someone–the question is whether it’s to the employee as wages, or to the child support collection agency, as child support.
In most cases, she explains, the employer would calculate child support as usual, without including the HSA contributions, and send that to the child support agency. The employer would then calculate the additional child support that would be owed if the HSA contributions are considered income, deduct that from the employee’s wage and pay the second amount into the state court as well.
The second viable option here is to treat the HSA contribution as income and calculate child support including that amount, she explains. The HSA money, which is portable, could be used for things other than medical expenses.
Another infrequent but important question is whether employees and/or the employer should frontload contributions into an HAS. She explains that some employers, instead of putting 1/12th of the yearly amount into an employees’ account every month, opt to “frontload” the money on Jan. 1–making the full amount available to the employee during the entire year.
“The short answer is yes,” she says, “but be aware that there are potential problems, particularly if the employee leaves.”
An employee who leaves and drops out of a high-deductible health plan “will have an excess contribution for the year,” she notes. That employee will face paying income tax on the excess amount, as well as a 10 percent excise tax unless they remove the excess by April 15 of the next year.
Another question regards the requirement to offer an HSA during a leave of absence.
This is not required, she says. “However, an employer’s policy must be uniform. If a continuing HSA is offered to one employee, it must be offered to all of them.”
Employees on military leave are eligible for COBRA, she says, and contributions must be made if the leave is less than 30 days. As yet, she notes, there is no guidance from the U.S. Department of Labor on employees taking leaves to care for relatives under the Family and Medical Leave Act. “However,” she says, “any decision is likely to be employee-friendly.”
Can we make this part into some sort of graphic box? With big/bold Q & A’s?
Other questions asked by benefits administrators include:
Q. Should an employer receive a year-end HSA account balance report?
A. No. HSAs are employee-owned. Therefore, employers should not have access to this private information.
Q. What if the trustee or custodian declines to open an HSA for an employee?
A. Because many HSA plans allow employees to use credit cards to withdraw their money, a trustee may decline to open an account for an employee with a poor credit history.
Webb says this can be handled by telling the employer that the account will not be opened, but not why, on the grounds that this is private information; or by telling the employee why, and offering an opportunity to correct any misinformation.
The employer then has three options about offering the benefit:
1. Offer dual options, such as providing a more traditional plan to their employees instead of just a high-deductible health plan and HSA.
2. Offer only the high-deductible health plan
3. Have the employer sign on or co-sign on behalf of an employee who can’t open his or her own account.