Health Insurance

  Colorado Health Insurance HSA Information

Health Savings Account (HSA) Basics

1. What is an HSA?
 An HSA is a tax-favored account that allows eligible individuals covered by a qualified high-deductible health plan (HDHP) to pay for current and future qualifying medical expenses tax-free.
2. Who is eligible for an HSA?
 The IRS and Treasury have established the eligibility requirements for an HSA. To be eligible for an HSA, an individual:
_ must be covered by a High Deductible Health Plan (HDHP)
_ must not be covered by any other health insurance (except being covered by any other HDHP, specified disease or hospital indemnity insurance, accident, disability, dental care, vision care or long-term care)
_ must not be entitled to Medicare benefits (generally age 65, but certain exception apply)
_ must not be eligible to be claimed as a dependent on someone else's tax return
3. What is an HDHP?
An HDHP is a health insurance plan with the following characteristics:
_ Minimum deductibles of $1,000 for individual coverage and $2,000 for family coverage in 2004; amounts are indexed for inflation for subsequent years
_ Annual out-of-pocket expenses (including deductibles and co-pays) do not exceed $5,000 for individual coverage and $10,000 for family coverage in 2004; amounts are indexed for inflation for subsequent years
_ An HDHP can have first dollar coverage (no deductible) for preventive care (such as immunizations, annual physical exams and screening tests) and higher out-of-pocket (copays & coinsurance) for non-network services
4. How were HSAs introduced?
 _ Title XII of the Medicare Prescription Drug Improvement and Modernization Act of 2003 introduced the new, consumer-oriented, tax-advantaged, health-financing vehicles called health savings accounts beginning January 1, 2004.
_ HSAs are likely to drive growth in consumer-driven health plans, and address some of the limitations in existing products like medical savings accounts (MSAs) and flexible savings accounts (FSAs).
5. What are the core characteristics of an HSA?
 _ An HSA is portable custodial or trust account owned by the individual and established with a bank or financial institution.
_ An HSA is only available to eligible individuals covered under a qualified highdeductible health plan (HDHP).
_ Contributions to an HSA can be made by any person for the benefit of the eligible individual.
_ The HSA does not have to be funded every year.
_ The HSA balance carries over year after year.
6. What is a custodial account?
 A custodial account is a restricted account where the accountholder is notified in advance and agrees to the conditions of the custodian in accordance with the rules for operating an Health Saving Account.
7. What's the difference between an MSA and an HSA?
 HSAs, unlike MSAs, provide the following:
_ An eligible individual with a qualified HDHP can participate, which includes all size employers, the self-employed and individuals.
_ HSAs can be funded by the employer, employee or a combination of both
_ HSAs have broader deductible ranges
_ HSAs allow for larger tax-deferred contributions to custodial accounts
8. When are indexed increases for the deductible, out-of-pocket maximum and allowable contribution to an HSA announced every year?
 The IRS typically releases inflation adjustments during the months of October and November for the following calendar year. Any required change to the deductibles and out-of-pocket expense limits may be applied as of the renewal date of the HDHP in cases where the renewal date is after the beginning of the calendar year, but in no event longer than a 12-month period ending on the renewal date. Thus, a fiscal year plan that satisfies the minimum annual deductible on the first day of the first month of its fiscal year may apply that deductible for the entire fiscal year, even if the minimum annual deductible increases on January 1 of the next calendar year.
9. Who can contribute to an HSA?
 Contributions to HSAs for an eligible individual can be made by either the employer or the individual, or both. Contributions made by an individual can be made on a pre-tax basis through the individual's employer, or can be claimed as an "above-the-line" deduction at the end of the year. If a contribution is made by the employer, it is not taxable to the employee (excluded from income). Contributions can also be made by others on behalf of an eligible individual and deducted by the eligible individual. All contributions are aggregated and subject to limitations.
10. Can another person who is over 65 contribute to the HSA of an individual under 65?
 Yes, as long as the contribution is made into an account of an eligible individual.
11. Has the Treasury defined who a "family member" is in reference to contributions to an HSA?
 In its most recent guidance, Treasury eliminated the need for a definition. A contribution can be made by any person, even if there is no family relationship.
12. If employers elect to contribute to their employees' HSAs outside of a cafeteria plan, must those contributions be comparable for all employees participating in the HSA?
 Yes, for all non-cafeteria plans contributions by an employer must be comparable to all its employees participating in the HSA. If the contributions are not comparable, the employer will be assessed an excise tax equal to 35% of the amount the employer contributed to all employees' HSAs.
If the HSA plan is part of a cafeteria plan, employers have greater flexibility to tailor contributions, but the entire cafeteria plan would be subject to annual non-discrimination testing under IRC Section 125.
13. How is "comparable" defined in terms of the contributions to the HSAs?
 For non-cafeteria HSAs "comparable" contributions are contributions that are the same dollar amount or are the same percentage of the annual deductible. The "comparable" contributions are determined based on the number of employees who are eligible individuals covered by the employer under the HDHP and who have the same category of coverage (i.e. self-only or family).
14. What about part-time employees? How are they factored in to the "comparable" contributions equation?
 Part-time employees can be considered separately. "Part-time" means those employees who are employed fewer than 30 hours per week.
15. If an employer is contributing to an HSA for his or her employees, can the employer require the employee to use the custodian identified by the employer for the HSA as a condition of receiving the employer contribution?
 Yes, this would be considered a reasonable administrative restriction.
16. Is the employer required by law to electronically transfer funds or payroll deduct to any HSA that any of his employees may have established, whether the preferred custodian or not?
 No.
17. How much can I contribute to an HSA?
 The maximum contribution is the lesser of the deductible amount under the HDHP or (for 2004) $2,600 for individuals or $5,150 for family coverage. These dollar limits will be adjusted for inflation each year and are based on a full year of participation in an HDHP.
18. Do contribution limits include both employer and employee contributions or can both parties contribute up to the limit separately?
 Individual contribution limits are based on all contributions to the HSA from all sources combined.
19. Are "catch-up" contributions allowed?
 Yes. For eligible individuals age 55 and older, additional "catch-up" contributions to HSAs are allowed as follows:
_ 2004 - $500
_ 2005 - $600
_ 2006 - $700
_ 2007 - $800
_ 2008 - $900
_ 2009 and after - $1,000
Above amounts are pro-rated for periods of eligibility of less than a calendar year.
20. Can individuals make their entire contribution to the HSA at the beginning of the year?
 Individuals can contribute their entire contribution at the beginning of the year, up to the applicable contribution limit. They might, however, have to make a corrective distribution later in the year if the individual's eligibility status changes during the year. (E.g., become covered under another plan, HDHP coverage ends, change from family coverage to single coverage status, etc.).
21. Can an individual contribute a certain amount of dollars over the deductible amount to cover the set up and administrative fees? For example, with a $1,000 deductible, could an individual contribute $1064 to meet the deductible plus the set up fee and administrative fees for one year?
 The maximum contribution is determined in reference to the level of the policy deductible of the statutory limit in effect for that year, if less. Amounts contributed to the account to cover administrative costs still count against the maximum contribution limit. Fees can be paid directly without impacting the contribution limits. Alternatively, administrative fees can be paid from the HSA without incurring taxable income.
22. If one or both eligible spouses have family coverage under a HDHP, how is the contribution limit computed?
 In the case of individuals who are married to each other, if either spouse has family coverage, both are treated as having family coverage. If each spouse has family coverage under a separate health plan, both spouses are treated as covered under the plan with the lowest deductible. The contribution limit for the spouses is the lowest deductible amount, divided equally between the spouses unless they agree on a different division. The family coverage limit is reduced further by any contribution to an Archer MSA. However, both spouses may make catch-up contributions for individuals age 55 or over without exceeding the family coverage unit.
Example 1: H and W are married. H is 58, and W is 53. H and W both have family coverage under separate HDHPs. H has a $3,000 deductible under his HDHP and W has a $2,000 deductible under her HDHP. H and W are treated as covered under the plan with the $2,000 deductible. H can contribute $1,500 to an HSA (1/2 the deductible of $2,000 + $500 catch-up contribution) and W can contribute $2,000 to an HSA (unless they agree to a different division).
Example 2: H and W are married. H is 35, and W is 33. H and W each have a self-only HDHP. H has a $1,000 deductible under his HDHP and W has a $1,500 deductible under her HDHP. H can contribute $1,000 to an HSA, and W can contribute $1,500 to an HSA.
23. How is the maximum annual HSA contribution limit determined for an individual with family coverage under an HDHP that includes embedded individual deductibles and an umbrella deductible?
 Generally, the maximum annual HSA contribution limit for an eligible individual with family coverage under an HDHP (without regard to catch-up contributions) is the lesser of the annual deductible under the HDHP or the statutory limit on family coverage contributions. An HDHP often has a stated maximum amount of expenses the family could incur before receiving benefits (i.e. the umbrella deductible), but also provides payments for covered medical expenses if any individual member of the family incurs medical expenses in excess of the minimum annual deductible. The maximum annual HSA contribution limit for an eligible individual who has family coverage under an HDHP with embedded individual deductibles and an umbrella deductible as described above, is the least of the following amounts:
1. the maximum annual contribution limit for family coverage
2. the umbrella deductible
3. the embedded individual deductible multiplied by the number of family members covered by the plan
Example 1: In 2004, H and W, a married couple have HDHP coverage for themselves and their two dependent children. The HDHP will pay benefits for any family member whose covered expenses exceed $2,000 (the embedded deductible), and will pay benefits for all family members after their covered expenses exceed $5,000 (the umbrella deductible). The maximum annual contribution limit is $5,150. The embedded deductible multiplied by the number of family members covered is $8,000. The maximum annual contribution which H and W can make to their HSAs is $5,000 (the least of $5,000, $5,150 or $8,000). The $5,000 limit is divided equally between H and W, unless they agree to a different division.
Example 2: The same facts as the above example apply, except the HDHP provides coverage only for H and W. The maximum annual contribution limit is $5,150. The umbrella deductible is $5,000. The embedded individual deductible multiplied by the number of family members covered is $4,000. The maximum annual contribution which H and W can make to their HSAs for 2004 is $4,000 (the least of $5,000, $5,150 or $4,000).
24. How do the maximum annual HSA contribution limits apply to family HDHP coverage that may include an ineligible individual?
 The maximum annual HAS contribution for a married couple with family coverage is the lesser of the lowest HDHP family deductible applicable to the family (minimum $2,000) or the statutory maximum ($5,150 in 2004). Although the special rule for married individuals generally allows a married couple to divide the maximum HSA contribution between spouses, if only one spouse is an eligible individual, only that spouse may contribute to an HSA (not withstanding the treatment of both spouses as having only family coverage).
Example 1: In 2004, H and W are a married couple and neither qualifies for catch-up contributions. H and W have family HDHP coverage with a $5,000 deductible. H is an eligible individual and has no other coverage. W also has self-only coverage with a $200 deductible. W, who has coverage under a low-deductible plan, is not an eligible individual. H may contribute $5,000 (the lesser of $5,000 or $5,150) to an HSA while W may not contribute to an HSA.
Example 2: The same facts in example 1 apply, except that in addition to the family HDHP with a $5,000 deductible, W has self-only HDHP coverage with a $2,000 deductible rather than self-only coverage with a $200 deductible. Both H and W are eligible individuals. H and W are treated as having only family coverage under the legislation. The maximum combined HSA contribution by H and W is $5,000, to be divided between them by agreement.
25. When must HSA contributions stop?
 HSA contributions must stop once an individual is entitled to Medicare benefits (generally age 65) or is no longer an eligible individual. However, if an individual reaches age 65 but does not enroll in Medicare he or she may continue making contributions through the month that he or she enrolls in Medicare.
26. Can I take a distribution and make tax-free rollovers from a Medical Savings Account (MSA) or another HSA to an HSA?
 Yes. However, a tax-free rollover between HSAs can only occur once per calendar year. Direct trustee to trustee transfers are not subject to any frequency limitation.
27. Are tax-free rollovers from HSAs to IRAs permitted?
 No.
28. Can HSA contributions be made through cafeteria plans?
 Yes, thereby allowing employees to contribute to an HSA with pre-tax salary reductions.
29. Is there a limit on the annual HSA contribution which the trustee or custodian may accept?
 Except in the case of rollover contributions described in section or trustee-to-trustee transfers, the trustee or custodian may not accept annual contributions to any HSA that exceeds the sum of the dollar amount in effect (i.e., the maximum family coverage deductible) plus the dollar amount in effect (i.e., the catch-up contribution amount). All contributions must be in cash, other than rollover contributions or trustee-to-trustee transfers.

HSA Distributions
 30. What are the guidelines for using HSA funds tax-free?
 Distributions from HSAs are tax-free when used for qualified medical expenses for the individual covered by the HDHP and his/her spouse and dependents. Qualified medical expenses are defined under Section 213(d) of the IRS code*. For HSAs qualified medical expenses generally do not include health insurance premiums.
Additionally, HSA funds can be used for the following without federal tax:
_ Qualified long-term care insurance, subject to certain dollar limitations
_ COBRA continuation coverage
_ Health plan coverage while an individual is receiving unemployment compensation
_ At age 65 and over, Medicare premium and out-of-pocket expenses or any health insurance premium s(e.g. Medicare HMO and Group Retiree Plans), other than a Medicare supplemental (Medigap) policy
* Refer to the IRS web site for a complete list of Section 213(d) expenses (http://www.irs.gov/pub/irs-pdf/p502.pdf).
31. What happens to unused funds at year-end?
 HSA account balances automatically carry over from year to year for use for future medical expenses.
32. What happens to the HSA funds once a person is entitled to Medicare benefits (generally age 65)?
 Once a person is entitled to Medicare benefits future contributions to an HSA must cease but existing HSA funds can still be used tax-free for qualified medical expenses. However, if the person is eligible for, but does not enroll in Medicare, he or she may continue to make contributions.
33. What happens if HSA funds are used for something other than qualified medical expenses?
 Generally, the amount used for non-qualified expenses is subject to income tax plus a 10 percent additional tax penalty. If the individual is age 65 or older at the time of distribution, the additional penalty does not apply.
34. What happens to an HSA when a couple divorces?
 The HSA can be transferred to the appropriate owner through a divorce or separation instrument. If an HSA is established for the ex-spouse, HSA funds are not subject to taxes at the time of the division.
35. Can distributions be used to cover domestic partner medical expenses tax-free?
 Distributions can be used to pay for qualified medical expenses of the account holder, his or her legal spouse or tax dependents. For federal tax purposes, a spouse is required to be a person of the opposite sex. Please consult your tax advisor for guidance under your specific situation.
36. Who is responsible for documenting that HSA funds were used for qualified medical expenses?
 The HSA account holder is responsible for providing documentation to the IRS to prove that HSA distributions were used for qualified medical expenses to the extent the expense is not covered by insurance or otherwise.
37. Should the HSA account holder keep receipts of his or her purchases to prove the purchases were medical expenses?
 Yes, the account holder should retain receipts of his or her purchases to prove to the IRS that distributions from the HSA were for medical expenses. It is recommended the HSA account holder retains all medical expense receipts and insurance company's explanation of benefits (EOB) to demonstrate amounts were paid for qualifying medical expenses and not reimbursed.
38. How can I obtain tax forms that I need to use in preparing my taxes at year-end?
Each January you will receive a Form1099-SA for any distributions made from the HSA during the calendar year.
 Contributions for the plan year and the year-end account balance will be reported on a Form 5498-SA each May.
39. How does an individual handle a situation where he or she doesn't have enough money in his or her health savings account to pay for eligible medical expenses?
 The individual must pay for the expenses out of pocket, and seek reimbursement once the HSA has sufficient funds to cover the expenses. The IRS has clarified there are no time limits on the reimbursement of eligible medical expenses, so long as the individual retains adequate documentation.
40. What happens to a person's HSA when he or she dies?
 Upon death, any balance remaining in the account beneficiary's HSA becomes the property of the individual named in the HSA instrument as the beneficiary of the account. If the account beneficiary's surviving spouse is the named beneficiary of the HSA, the HSA becomes the HSA of the surviving spouse. The surviving spouse is subject to income tax only to the extent distributions from the HSA are not used for qualified medical expenses.
If, by reason of the death of the account beneficiary, the HSA passes to a person other than the account beneficiary's surviving spouse, the HSA ceases to be an HSA as of the date of the account beneficiary's death, and the person is required to include in gross income the fair market value of the HSA assets as of the date of death. For such a person (except the decedent's estate), the includable amount is reduced by any payments from the HSA made for the decedent's qualified medical expenses, if paid within one year after death.

Anthem's HSA
 41. Does Anthem currently offer HSAs?
 Anthem supports the objectives of HSAs, and will be offering HSA-qualified highdeductible health plans (HDHPs) to individuals and employers later in 2004. Anthem has aligned with Chase to serve as the HSA custodian. Any Health Savings Account will be established between the individual account holder and the HSA custodian or trustee. Anthem is responsible for the administration of the health plan, and the custodian is responsible for the administration of the HSA. The relationship aligns Anthem's health plan management proficiency with Chase's financial expertise.
42. Will Anthem offer its HSA-qualified HDHPs as another product in its consumerdriven health care product portfolio, Anthem ByDesign?
 Yes, Anthem will offer its HSA-qualified HDHPs as an additional consumer-driven health product option that complements its already existing portfolio of Anthem ByDesign products.
43. Why will Anthem offer its HSA-qualified HDHPs to customers?
 Providing HSA-qualified HDHPs is another way Anthem is consistently trying to offer its customers more alternatives for paying for and managing their health care costs. Anthem is very pleased to offer HSA-qualified HDHPs to its members because HSAs give consumers more flexibility and affordability to prepare for long-term health and financial safety. Specifically, HSAs are portable, can be used tax-free and HSA funds have the ability to grow with investment earnings.
44. How will Anthem's HSA-qualified HDHPs further help members become more educated about their health care?
 Coupled with our online consumer tools (self-service, a consumer health and wellness portal, hospital quality comparison tools, medical treatment decision-support information, provider directories, and discounts on health merchandise), our HSA-qualified HDHPs will allow members to become further involved in managing their health care decisions. Through Anthem's online consumer-driven health tools and wellness education, members have become more educated and active regarding their health care; Anthem's new HSAqualified HDHPs further complement these resources, and further define Anthem's leadership role regarding consumer-driven health care products - all in an effort to provide more options to improve the health of the people it serves.
45. What is the process that Anthem uses to enroll an employer's new hires into an HDHP?
 The process would be very similar to how Anthem enrolls new hires today. Specifically, the process would follow the following steps:
1. Enrollment information is sent to Anthem
2. Chase sign-up forms sent to Chase
3. If the individual is eligible for an HSA, the new hire could contribute a pro-rated amount to the HSA based upon when he/she joined the company and became effective in the HDHP.
46. Why are there individual and family plan designs with limits greater than the statutory maximum contribution amounts for an HSA?
 Part of the philosophy of consumer-directed heath care is to increase awareness of the cost of health care. One way to do so is to make the individual personally responsible for some part of the cost.
47. Do brokers need a securities license to sell HSAs?
 Anthem brokers and sales representatives do not need a securities license to sell an HSAqualified HDHP or to help an enrollee complete his or her enrollment forms to set up their HSA. In 2005, a selection of securities investments will be offered through JPMorgan to Chase HSA customers who have accumulated sufficient balances. (Specific investment offerings and the thresholds for investing are being evaluated and are not yet finalized.) Anthem is not a broker/dealer, is not a member of any stock exchange or SIPC, and will not facilitate HSA customers' securities investments in JPMorgan, Anthem or other companies.

HDHP Product Design Specifics
 48. How will prescription drugs be covered?
 Generally, prescription drugs are subject to the HDHP annual plan deductible. Through a transition period ending December 31, 2005, as allowed by the U.S. Treasury, some Anthem states will offer HSA-qualified health plans that cover prescription drugs subject to co-pays rather than the annual plan deductible. In addition, for future product releases, Anthem will examine the feasibility of covering "preventive" prescription drugs outside the annual plan deductible, as allowed by July 2004 Treasury guidance.
49. Can an individual covered by a separate prescription drug benefit plan contribute to an HSA?
 Individuals covered by a separate prescription drug benefit plan that does not satisfy the HDHP minimum annual deductible will only be eligible to make a contribution if the participant's drug benefit plan qualifies for special transition relief, which is available until December 31, 2005.
50. Can the dental and vision coverage or services contribute to the medical deductible on the HDHP?
 No.
51. Do all medical expenses paid out of the HSA have to be covered expenses that are charged against the HDHP deductible?
 No, HSA distributions can be used for uncovered items such as dental care and vision care that are not charged to the deductible.
52. If a child is covered under his or her mother's HDHP, can that child also be covered by his or her father's non-HDHP?
 Yes. Rules around coverage under an HDHP are for eligibility to make contributions to an HSA, not for additional coverage or coordination of benefits.
53. Do HDHP coverage qualifications have to be met each year when the government releases its new indexed limits?
 HDHP coverage qualifications have to be met each year for a participant to be an eligible individual to make contributions to an HSA. Benefits must be compliant with the law in effect at the time an individual makes a contribution into the HSA. For fiscal year plans, the benefits may remain in effect until the next annual renewal date.
54. Does the coordination of benefits with HDHP plans work the same way as any other health plan, and is there coordination of benefits on the prescription drug portion of the HDHP?
 Yes, the coordination of benefits works the same for an HDHP plan as it does with any other health plan. As far as coordination of benefits on the prescription drug portion of the HDHP, that's subject to each plan design.
55. Does the single vs. family arrangement indicated by legislation restrict rates?
 The rates for HDHP coverage can still remain three of four tier. The single and family divisions are the two categories as defined by the legislation on HSAs.
56. How do I access the funds in my HSA?
 It depends on the depository used. In some cases you get a debit card and in some cases you get checks to use. Remember that you can only spend your funds as you deposit them into your account. Distributions can not exceed your HSA balance.
57. Can I write checks from my HSA?
 It depends on the depository managing the HSA. If they provide checks then you are able to do so.
58. Are there any forms I need to file to be reimbursed for medical expenses?
 No. You pay for medical expenses with your debit card, or by writing a check if you have chosen that option.
59. What happens if I don't spend all the funds in my HSA by the end of the year?
 Unused funds carry over from year to year.
60. What is the minimum amount I can contribute to my HSA?
 The amount varies between depositories.
61. Who can contribute to my HSA?
 Anyone can contribute to en eligible individual's HSA; however, it is the individual account holder's responsibility to ensure HSA contributions do not exceed maximum limits.
62. How do I contribute funds to my HSA in addition to my monthly contribution?
 Depending on the institution you will be mailed deposit coupons once your HSA is established. Remember, the amount you can deposit is limited by the lesser of your annual deductible or ($2600/$5150). These amounts are indexed for inflation for subsequent years.
63. What happens if I contribute too much to my HSA and exceed my highdeductible health plan deductible?
 The IRS imposes a penalty on excess contributions, but allows, under certain circumstances, for corrective distributions to be made. Additionally, you would be required to pay tax on the interest earned on those excess funds.
64. In the event that I marry or have children, how do I change the amount of my contribution?
 Call the depository managing the HSA account
65. Are there any tax forms that I need to use in preparing my taxes at year-end?
 Yes. Similar to IRAs, each January you will be sent a 1099 form for any distributions made from the HSA during the calendar year.
If the contributions were made by you or your employer through an employer plan, those contributions will be reported on your W-2 issued by your employer.
66. What if I change jobs?
 Your HSA funds are portable when you change jobs, and in some cases your account can remain with the depository managing the HSA, although it may be subject to different administrative fees.
67. What happens if I'm no longer participating in an HDHP?
 You can continue to spend any funds in your HSA to pay for qualified medical expenses. However, you can no longer contribute to your HSA.
68. I know that the Treasury keeps issuing guidance on HSAs since the new accounts were first introduced in December. How many times has the Treasury issued guidance?
 The United States Treasury, through the Internal Revenue Service, has issued five sets of supplemental guidance on HSAs since the law was enacted. It issued guidance on December 22, 2003 (IRS Notice 2004-2); March 30, 2004 (IRS Notice 2004-23, IRS Notice 2004-25, IRS Revenue Ruling 2004-38 and IRS Revenue Procedure 2004-22), May 11, 2004 (IRS Revenue Ruling 2004-45), June 21, 2004 (IRS Notice 2004-43) and July 23, 2004 (IRS Notice 2004-50).
69. What guidance did the IRS issue on December 22, 2003?
 IRS Notice 2004-2 represented the initial guidance for implementing an HSA. It is in the form of questions and answers, and offered guidance in the following five areas:
_ What is an HSA, and who can have them?
_ How can an HSA be established?
_ How can contributions be made to an HSA?
_ What distributions made be made from an HSA?
_ Other matters pertaining to HSAs
70. What guidance did the IRS issue on March 30, 2004?
 The IRS issued guidance on March 30 regarding preventive care services (IRS Notice 2004-23), prescription drug coverage (IRS Revenue Ruling 2004-38 and IRS Revenue Ruling Procedure 2004-22) and transition relief for HSAs (IRS Notice 2004-24).
71. What guidance did the IRS issue regarding preventive care services?
 Before this guidance (IRS Notice 2004-23) was issued, there had been some ambiguity with regard to what is classified as "preventive care services" under an HSA. This guidance, however, clarified that health care benefits - such as annual physicals, immunizations, and screening services as well as routine prenatal and well-child care, tobacco cessation programs, and obesity weight-loss programs - are preventive care for purposes of HSAs. Further, the determination as to whether such state-mandated benefits are preventive care for purposes of an HSA must be made under standards set forth in the Treasury guidance, rather than how it is treated for state law purposes.
72. What guidance did the IRS issue regarding prescription drug coverage?
 The guidance issued in IRS Ruling 2004-38 stated persons covered by a health plan that provides prescription drug benefits before the minimum annual deductible of an HDHP has been satisfied is not eligible to make contributions to an HSA. It also stated, however, that those persons covered by both an HDHP and by a separate health plan or rider that provides prescription drug benefits before the deductible of the HDHP is satisfied would be permitted to contribute to HSAs before 2006.
73. What guidance did the IRS issue regarding transition relief?
 The guidance issued in IRS Notice 2004-25 states that an HSA established by an eligible individual on or before April 15, 2005, may reimburse expenses incurred on or after the later of January 1, 2004 or the first day of the first month that the individual became an eligible individual.
The IRS made this decision based on the perception that many plans and/or trustees were not ready to administer HSAs in 2004, and many individuals and employers were willing to wait until 2005 to implement such plans. In subsequent years, persons using an HSA are only able to reimburse expenses for one calendar year.
74. What guidance did the IRS issue on May 11, 2004?
 The guidance issued in IRS Revenue Ruling 2004-45 discussed the instances in which consumers covered by an HSA could also be covered by an FSA or HRA. Combining HSA coverage with FSA or HRA coverage - commonly referred to as "stacking" - is permitted in the following instances:
_ Limited purpose FSAs and HRAs that restrict reimbursements to certain permitted benefits such as vision, dental or preventive care benefits
_ Post-deductible FSAs or HRAs that only provide reimbursement after the minimum annual deductible has been satisfied
_ Retirement HRAs that only provide reimbursement after an employee dies
_ Suspended HRAs where the employee has elected to forgo health reimbursements for the coverage period.
75. What guidance did Treasury issue on June 21, 2004?
 The guidance issued in IRS Notice 2004-23 provided transitional relief for individuals in states where an HDHP is not available because of state laws that require certain benefits be provided without regard to the annual deductible minimums. The transition relief is provided for individuals through December 31, 2005.
76. What guidance did Treasury issue on July 23, 2004?
 The guidance issued in IRS Notice 2004-50 answers questions on a wide range of issues that the public has brought to the Treasury Department since the creation of HSAs. The highlights of the guidance are as follows:
_ Benefits under Employee Assistance Plans, Disease Management Plans and Wellness Programs generally do not disqualify an otherwise eligible individual from contributing to an HSA.
_ Mistaken distributions from an HSA can be repaid to an HSA without penalty or tax.
_ Generally, the FSA-type salary reduction rules do not apply to HSA salary reduction contributions, which generally follow the more flexible 401(k) type rules which allow changes in elections throughout the year as long as any election is effective prospectively).
_ Payments by individuals due to traditional benefit limits that are part of reasonable plan designs do not count against the out-of-pocket maximums.
_ Employer matching contributions made through a cafeteria plan are not subject to the comparability requirements.
_ Account fees paid from HSAs are non-taxable distributions; account fees paid outside of the HSA directly to trustees are not treated as contributions.
77. Has the Department of Labor (DOL) released any guidance regarding HSAs provided by an employer?
 Yes, on April 7, 2004, the DOL released Field Assistance Bulletin 2004-1, which states that HSAs generally will not be governed by the Employee Retirement Income Security Act (ERISA), if employer involvement with the HSA is limited. In other words, if the employer's involvement is limited, an HSA is not considered to be part of the employer's ERISA benefit plan. This is true even if the employer contributes to the HSA or allows the employee to make pre-tax contributions to the HSA under the employer's cafeteria plan.

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