As healthcare coverage and retirement strategies rise to the top of workplace conversations, employers must understand what rules and boundaries they have to stay within when presenting plans and offering recommendations. For health and retirement benefits, that red tape is the called Employee Retirement Income Security Act (ERISA).
For starters, what is ERISA?
As mentioned above, ERISA stands for the Employee Retirement Income Security Act. Introduced in 1974, ERISA "is a federal law that sets minimum standards for most voluntary established retirement and health plans in private industry to protect individuals in these plans."
In non-government-speak, ERISA holds both employers and plan providers accountable by assigning a "fiduciary responsibility" to anyone who has some form of control over retirement and health plans and their assets.
The key here is that the definition of fiduciary includes anyone who might provide investment advice.
How does ERISA impact HSAs?
HSAs aren't typically subject to ERISA, but certain actions can trigger it. According to SHRM, if your HSA program were subject to ERISA, you would have to:
- File form 5500s annually with the Department of Labor (DOL)
- Provide a written plan document and summary plan description
- Follow DOL claims procedures
- Offer COBRA continuation coverage
Operating under ERISA creates a lot of extra work and opens up the possibility of lawsuits for both the employer and HSA administrator. However, experts widely agree that the likelihood of an HSA administrator agreeing to take any liability under ERISA in their contract is basically nonexistent.
But, there is good news: there are a handful of steps you can take to make sure your HSA plan is exempt from ERISA!
How do I make sure my HSA plan is exempt?
It's quite simple, actually! As long as you, as an employer, are diligent in checking all of these boxes, your HSA will not be subject to ERISA.
- Employee contributions must be entirely voluntary.
- You cannot limit your employees' ability to transfer funds to another HSA.
- Do not limit or conditionalize how employees use their HSA funds.
- Avoid making any suggestions on investment decisions.
- Do not communicate or represent that your HSA plan is subject to ERISA.
- You, the employer, cannot receive any form of compensation related to the HSA plan.
You might have heard about HSA incentivization to drive more use (we wrote about it), which can be treading in ERISA territory. Still, as long as every single employee is offered the same perk or incentive, you're in the clear.
It's always good to double-check!
ERISA's rules and regulations are incredibly complex, especially when it comes to the HSA safe harbor rules that we discussed above. It should be easy for most employers to comply, but it never hurts to double-check your HSA plan's communication and even bring in HSA counsel to ensure everything is in line.