What is ERISA and how does it impact your health savings account (HSA) benefit? Here's everything you need to know.
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).
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.
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:
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!
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.
You might have heard about HSA incentivization to drive more use, 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.
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.