Tuesday, October 31, 2017

The Rationale Behind Getting Employers out of HSA-Account Selection

Whenever installing HSAs I encourage my clients to allow employees to select their own banks and set up their own accounts. Yes, if the employer is funding the HSA this is a small amount of extra work in the setup process - but no more work than setting up a person's paycheck via direct deposit.

My logic is that we nor HR needs to hear the complaints about any particular administrator or bank if and when that institution falls short of customer expectations.  (Think of the current events around Wells Fargo.) HSAs are owned by the employee themselves. So why tell them where they need to bank and/or invest their money? It is not like an HRA or an FSA for which the employer has ultimate responsibility. And it is just one less possible vendor's mistakes for which we and HR must answer.

There is now a reasonable legal argument to employe that practice so as to minimize the employer’s risk. The below is not saying an employer can't solely select one bank to use.  However, there is a very solid and practical argument to make that when an employer does select one bank that employer is necessarily restricting where and how an employee can and cannot not invest his or her money.

Hence, it would not surprise me in the least if this ultimately gets challenged by a group of aggrieved employees with an aggressive attorney. I say this especially since some HSA investment institutions are incredibly limited in how one can invest their money. Some institutions, for example, have only four mutual funds from which to choose. Well, if your employer is telling an employee that the employee can only invest in one of four funds, isn't your employer necessarily restricting investment options in such a way as to potentially run afoul of the below rules?

Maybe, maybe not. But for those of you wishing to install HSAs the way I historically have, you now have a good legal argument that doing so is the better risk management decision for the employer.

From InsuranceNewsNet.com

... HSAs often have an investment account option that allows their owners to invest in mutual funds and other investment vehicles much like they would in a 401(k) plan, EBRI said.

Employers may be impacted by the final rule if they: 1) provide investment advice to their employees concerning HSAs, or 2) benefit from such advice being given to their employees (such as revenue sharing in connection with a specific HSA investment, or compensation for directing employees towards a particular HSA vendor).

HSA mutual fund options charge annual fees and also may charge separate fees to administer the account. This could result in possible conflicts of interest can arise, and trigger liability under the DOL rule.

In a new white paper, HSA Bank, a large administrator of HSA plans, described how the DOL rule can affect employers who contract with HSA services firms. Alternatively, health insurers that administer the employer's HSA-eligible high-deductible health plan may contract with an HSA firm. In either case, the employer typically funds these accounts by transmitting employer contributions and workers’ own salary deferred dollars to the HSA administrator.

"Employers may be impacted by the [DOL's fiduciary] rule if they provide information to their employees about HSAs that crosses the line from general investment education to investment advice, or if they benefit in some way from the advice being given," said Kevin Robertson, a senior vice president at HSA Bank and the white paper's author, told SHRM. ...