The joint Committee on Employee Benefits (JCEB) of the America Bar Association has posted a report on the May 2007 Q&A session between JCEB and DOL officials.

The following is an excerpt from the Q&A session between JCEB and the DOL.  The answers are considered unofficial DOL staff comments.

Question 24: An employer maintains an ERISA covered health reimbursement arrangement (HRA) and an ERISA covered health flexible spending arrangement (health FSA), both of which are group health plans.  As permitted under the Tax Relief and Health Care Act of 2006, see Pub. L. 109-432, 302(a) (2006) (adding Code 106(e)), the employer amends the HRA and health FSA to permit employees to voluntarily elect to rollover the amounts they have in these plans to health savings accounts (HSAs).  Does the ability to rollover amounts to HSAs result in the HSAs being subject to ERISA?  If the employer required the rollover of the amounts to HSAs, does this result in the HSAs being subject to ERISA?  Do either voluntary or mandatory rollovers violate ERISA’s exclusive benefit rule?

Proposed Answer 24: The ability to voluntarily rollover amounts to HSAs does not result in the HSAs being subject to ERISA.  The mandatory rollover amounts to HSAs, however does result in the HSAs being subject to ERISA.  Neither voluntary nor mandatory rollovers violate ERISA’s exclusive benefit rule.

 DOL Answer 24: The Department addressed Health Savings Accounts (HSAs) in Field Assistance Bullentins (FAB 2004-1 and 2006-2.  FAB 2004-1 provides that employer contributions to an employee’s HSA would not result in the HSA being covered by ERISA, as long as the HSA meets the other conditions established in the FAB.  (Staff notes that, depending on the circumstances, HSAs that do not satisfy the requirements in the FAB may present ERISA coverage issues.)  Accordingly, regardless of whether the HRA or FSA amounts characterized as employee or employer contributions, the voluntary rollover of those amounts would not result in the HSA being covered by ERISA.  With regard to mandatory rollovers of HRA and FSA amounts into HSAs, one of the conditions in the FAB is that employee participation in the HSA be completely voluntary, which the Department interprets to mean employee contributions must be voluntary.  A provision mandating that employees rollover FSA amounts, which are oftentimes attributable to employee contributions, would violate the condition that employee participation be completely voluntary.

For a copy of the Q&A click on the following link:

http://www.abanet.org/jceb/2007/2007dol.pdf

For a copy of FAB 2004-1 click on the following link:

http://www.dol.gov/ebsa/regs/fab_2004-1.html

For a copy of FAB 2006-2 click on the following link: