IRS Notice with HSA Implications Expands “Preventive” Care to Include Certain Chronic Conditions

The IRS has issued Notice 2019-45, in which it identifies certain chronic health conditions whose treatments will be considered “preventive.” As a result, such treatments can be covered by a health insurance plan without first meeting the minimum deductibles generally required of high deductible health plans (HDHPs) for health savings account (HSA) contribution eligibility purposes.  This guidance is effective July 17, 2019.

This guidance, which is effective July 17, 2019, notes that it is a response to an Executive Order issued by President Trump on June 24, 2019. The President charged the Secretary of the Treasury with the task of issuing guidance that would “expand the ability of patients to select HDHPs that can be used alongside an HSA, and that cover low-cost preventive care before the deductible, that helps maintain health status for individuals with chronic conditions.”

In general, “preventive” care does not include treatment for existing illnesses or conditions. Under current HDHP/HSA rules, treatments of a nonpreventive nature that are covered or reimbursed by a health plan without first satisfying HDHP conditions would generally disqualify a covered individual from HSA contribution eligibility.

Notice 2019-45 identifies the following conditions whose ongoing treatment may now be considered preventive, and, therefore, may be covered by a health plan without first satisfying an HSA-qualifying deductible.

  • Congestive heart failure
  • Coronary artery disease
  • Osteoporosis
  • Hypertension (high blood pressure)
  • Asthma
  • Diabetes
  • Liver disease
  • Bleeding disorders
  • Heart disease
  • Depression

The treatments listed for the above conditions include certain inhibitors, therapies, monitors, medications, screenings, tests, and statins, which will be considered preventive expenses for HDHP purposes. Items not listed in Notice 2019-45 will not be considered preventive for HDHP purposes.

House-Passed Financial Services Bill Would Block SEC Investment Guidance

The U.S. House of Representatives this week approved legislation to provide appropriations for funding various financial services provided by federal agencies. Added to the bill before its passage was an amendment by House Financial Services Committee Chair Maxine Waters (D-CA) that would block federal funding for administration and enforcement of guidance recently issued by the Securities and Exchange Commission (SEC). The vote was largely along party lines in the Democrat-controlled House.

Targeted by this amendment was the SEC’s recently finalized Regulation Best Interest and accompanying guidance, which provide standards of conduct for broker-dealers in making investment recommendations to retail customers. Elements of the guidance also impact registered investment advisors. In addition to retail investment accounts, the SEC guidance also applies to investment recommendations made for an individual’s own account in an employer-sponsored retirement plan, or an IRA, health savings account (HSA), Archer medical savings account (MSA), IRC Sec. 529 plan, or Coverdell education savings account (ESA).

Rep. Waters and others have criticized the SEC guidance as allegedly being insufficient to protect investor interests. This guidance generally is considered less restrictive than Department of Labor fiduciary investment advice guidance that was vacated by an appeals court in June of 2018.

Because appropriations bills must be identical in House and Senate versions, and there is a Republican majority in the Senate, many feel that de-funding the SEC investment guidance is unlikely to ultimately occur. The Senate has not yet taken up financial services appropriations.

President’s Executive Order Would Affect HSAs, FSAs, HRAs

On June 24, 2019, President Trump signed an Executive Order designed to “enhance the ability of patients to choose the healthcare that is best for them.”

The order has multiple directives that touch on different aspects of healthcare. It includes a request for the Department of Health and Human Services to produce a report on steps that the administration may take to eliminate surprise medical billing. It also instructs multiple departments to issue guidance on topics such as increasing price transparency for medical services, and developing rules to expand the use of health savings accounts (HSAs), health flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs).

The order specifically directs the Secretary of the Treasury to do the following.

  • Issue guidance that would permit HSA-compatible high deductible health plans to cover certain costs for individuals with chronic conditions before satisfying the plan deductible
  • Propose regulations that would expand eligible medical expenses under Internal Revenue Code Section 213(d) to include direct primary care arrangements and healthcare sharing ministries
  • Issue guidance that would increase the permitted FSA carryover amount (currently limited to $500)

The order places deadlines ranging from 120 to 180 days for the Treasury Department to produce the relevant guidance.

Watch Ascensus.com for any further information about this extensive guidance.

IRS Provides 2020 Cost-of-Living Adjustments for HSAs

The IRS has issued Revenue Procedure (Rev. Proc.) 2019-25, providing inflation-adjusted amounts for health savings accounts (HSAs) for calendar year 2020. Maximum annual HSA contributions will rise from $3,500 to $3,550 for those with self-only insurance coverage, and from $7,000 to $7,100 for those with family coverage. Minimum deductible amounts for qualifying high-deductible health plans will rise from $1,350 to $1,400 for self-only coverage, and from $2,700 to $2,800 for a family plan. Maximum annual out-of-pocket amounts under self-only coverage will rise from $6,750 to $6,900, and from $13,500 to $13,800 for family coverage.  IRS Rev. Proc. 2019-25 can be found here.

David Musto Discusses Benefits of HSAs

In a recent USA Today article, president David Musto explains how the triple tax breaks offered by HSAs help fast track retirement savings.”Longer-term advantages, after the age of 65, may include the payment of Medicare premiums and other long-term care expenses. The HSA becomes an important aspect of both solving near-term medical expenses, but also for larger expenses well into retirement with those accumulated​ earnings,” notes Musto.

Rick Irace Comments on the Retirement Industry Outlook for 2019

In a recent Wealth Management article,  Chief Operating Officer Rick Irace comments on the key developments that retirement plan consultants should monitor in 2019. Irace focuses mainly on recent proposals related to multiemployer plans (MEPs) and the convergence of health savings and retirement savings efforts.

“Most recently, the concept of the ‘open MEP,’ in which employers would not be required to have common ownership or business purpose, has gained some serious traction,” notes Irace. “The most recent DOL regulations stop short of permitting ‘open MEPs,’ but they do broaden the definition of an employer. This could be a step in the right direction…,” concludes Irace.

IRS Letter Expands Circumstances When Employers May Recover HSA Contributions

The IRS has released for publication an information letter that provides details on circumstances allowing an employer to request the return of Health Savings Account (HSA) contributions made on behalf of its employees. The IRS describes in Information Letter 2018-0033 certain contribution recovery circumstances that go well beyond the previous guidance found in IRS Notice 2008-59, which has served as a primary source of information on HSA issues and administrative procedures.

Notice 2008-59

Notice 2008-59 described limited circumstances under which an employer may seek the return of HSA contributions by an HSA custodian or trustee. These limited circumstances included contributions made on behalf of employees who were never HSA-eligible, and contributions in excess of the annual statutory contribution limit.

Information Letter 2018-0033

The information letter lists the following additional circumstances as examples of errors that also may be corrected.

  • HSA contribution exceeded an employee’s payroll withholding election
  • Amount was mistakenly contributed to an employee due to an “incorrect spreadsheet” or “similar names … confused with one another”
  • Contribution was incorrectly entered by a payroll administrator (in-house or third-party)
  • Additional contribution was received due to a duplicate payroll file transmission
  • Over-contribution resulted from delayed processing of a payroll withholding change for an employee
  • Over-contribution resulted from disparity between elected annual contribution and actual number of pay periods
  • Incorrect contribution resulted from misplaced decimal point

As is evident in these itemized reasons, the IRS has now gone well beyond the limited circumstances for employer recoupment of HSA contributions that were authorized by Notice 2008-59, the most detailed guidance on the subject available prior to Information Letter 2018-0033.

While an Information Letter is not considered as elevated in the IRS guidance hierarchy as a notice, revenue ruling, or revenue procedure, it nevertheless can be considered to express the agency’s intent for how other guidance—such as Notice 2008-59—may be interpreted. Perhaps most telling in the letter is the statement that the previously-issued Notice 2008-59 “was not intended to provide an exclusive set of circumstances in which an employer may request the return of contributed amounts.”


IRS Announces Archer MSA Health Plan Limits for 2019

The IRS has announced the 2019 cost-of-living adjustments associated with Archer medical savings accounts (MSAs) along with other tax-related adjustments in Revenue Procedure 2018-57.

For taxable years beginning in 2019, high deductible health plans in the MSA context will be defined as follows.

  • A health plan that has an annual deductible that is not less than $2,350 and not more than $3,500 (for self-only coverage), with annual out-of-pocket expenses not to exceed $4,650.
  • A health plan that has an annual deductible that is not less than $4,650 and not more than $7,000 (for family coverage), with annual out-of-pocket expenses not to exceed $8,550.

The definition of “high deductible health plan” in the MSA context as defined in IRC Sec. 220(c)(2)(A)  is different from the definition of high deductible health plan associated with health savings accounts (HSAs) defined in IRC Sec. 223(c)(2)(A).


Ascensus Announces Dates and Venues for 4th Annual Ascend Education Conference

Event Offers Robust Training, Certification, Continuing Education, and Networking Opportunities to Attendees

Dresher, PA — Ascensus—whose technology and expertise helps millions of people save for retirement, education, and healthcare—has announced the schedule for its 2019 Ascend education conference, which provides retirement, health, and education savings plan professionals from financial organizations across the nation with regulatory insight, training, and networking opportunities.

Ascend provides access to Ascensus’ expert consultants to help financial professionals remain competitive in the ever-changing retirement- and health-savings-plan marketplaces. Attendees can choose from more than 40 courses—both basic and advanced—covering IRAs, HSAs, employer-sponsored retirement plans, and industry topics. With its flexible format and interactive presentations on compliance issues and marketing opportunities, Ascend truly caters to its audience. In addition, Ascend attendees may also obtain the Certified IRA Specialist (CIS) II and Certified Health Savings Professional (CHSP) designations and earn continuing education credits for additional industry designations.

The scheduled dates and locations for Ascend 2019 include:

• September 9-11, 2019 – Walt Disney World Swan Hotel, Orlando, Florida
• October 7-9, 2019 – Sheraton Seattle Hotel, Seattle, Washington

“Every financial organization must now provide key offerings to the silent generation, baby boomers, generation X, and millennials,” states Steve Christenson, Ascensus’ executive vice president of retirement and health plan services. “Through Ascend, Ascensus has been providing training to financial organizations for over 30 years; we’re proud to continue to offer this interactive educational experience to help attendees better understand how consumers seek to interact with their financial services providers.”

For more information on Ascend 2019, visit https://www2.ascensus.com/academy/ascend/. Registration opens on December 3, 2018.

About Ascensus
Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit ascensus.com. View career opportunities at careers.ascensus.com.

Two HSA-Related Bills Passed by House, Senate Prospects Uncertain

The House of Representatives passed two bills that would make changes to health savings accounts (HSAs), Archer medical savings accounts (MSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs). There currently is no timetable for their being taken up by the Senate, nor certainty that they will be, during the 2018 session. HSAs are increasingly high profile savings vehicles, given the significant shift toward high-deductible health plans (HDHPs) as an employer health care benefit.

H.R. 6199

H.R. 6199, Restoring Access to Medication and Modernizing Health Savings Accounts Act of 2018, would do the following.

  • Allow HSA-eligible health plans to provide first-dollar coverage (coverage prior to satisfying a deductible) of a non-preventive nature in amounts up to $250 for those with individual coverage, $500 for those with family coverage
  • Allow treatment at an on-site employer or retail (e.g., pharmacy) clinic without the recipient being considered covered by an HSA-disqualifying health plan
  • HSA contribution eligibility under specified circumstances would not be affected by a spouse who is covered by a health FSA
  • A newly-established HSA could receive amounts transferred from a health FSA or HRA in an amount not to exceed the maximum annual FSA contribution limit ($2,650 for an individual and $5,300 for family for 2018)
  • Treat certain health and fitness expenses as qualified medical expenses for HSA, MSA, FSA, and HRA purposes
  • Allow individuals covered by a “direct primary care arrangement,” under which they receive ongoing care under a fixed periodic fee, as HSA-eligible, in the absence of any other HSA-disqualifying factor
  • Treat certain non-prescription medications and health aids (e.g., Ibuprofen, menstrual care products) as qualified medical expenses for HSA, MSA, HRA, and FSA purposes

H.R. 6311

H.R. 6311, Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018, would do the following.

  • Increase the maximum annual HSA contribution to $6,650 for single coverage, $13,300 for family coverage (indexed)
  • If both spouses are eligible for the $1,000 HSA annual catch-up contribution, both amounts could be allocated to the account of one spouse
  • Treat individuals enrolled in Medicare Part A-only as HSA contribution-eligible, if no other disqualifying factors
  • If an HSA is established within 60 days after an individual is covered by an HSA-eligible HDHP, that HSA will  be treated as if it was established on the date coverage began, for purposes of covering medical expenses
  • Treat certain catastrophic and bronze-level health plans (as defined under the Patient Protection and Affordable Care Act, “Obamacare”) as HSA-eligible HDHP plans
  • Allow FSA year-to-year carryover of up to three times the annual FSA contribution limit (currently $2,650 for individual)

Watch the Ascensus News for further developments.