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Health Saving Accounts
Treasury Department and Internal Revenue Service Issue Guidance on How Health Savings Accounts Interact with Other Health Reimbursement Accounts
On May 11, 2004, the U.S. Treasury Department and the Internal Revenue Service (IRS) issued guidance which clarifies the interaction between HSA's and health Flexible Spending Accounts (FSA's) and Health Reimbursement Arrangements (HRA's). This guidance was issued in the form of IRS Revenue Ruling 2004-45.
In brief this ruling provides that individuals participating in an HSA can continue to be covered by the following types of arrangement which provide reimbursement of medical expenses:
- Limited purpose health FSA's and HRA's that restrict reimbursement to permitted benefits (i.e., dental and vision and preventative care) and additionally, in the case of HRAs to permitted insurance coverages under Code Section 223.
- Post deductible health FSA's and HRA's which provide benefits only after an HDHP's deductible has been met.
- Suspended HRA's where the individual elects to forgo reimbursements during their coverage under an HSA.
- Retirement HRA's which provide benefits only after an individual retires.
This guidance also provides that medical expenses can be reimbursed from a health FSA or HRA prior to taking a distribution from a HSA.
Additional HSA guidance is expected in June, 2004.