More HSA Guidance

Do You Have an FSA or an HRA and Want an HSA? More Guidance is Out.

On May 12, 2004, the Internal Revenue Service (IRS) issued additional guidance in Revenue Ruling 2004-45 on the new Health Savings Accounts (HSAs). You may recall our Management Alert on January 26, 2004 describing HSAs as new tax-preferred accounts that assist individuals in saving for future health care needs. [click here for a copy of that Management Alert] At that time, the new legislation left a number of unanswered questions. The IRS issued guidance in March 2004 regarding preventive care and prescription drug programs under High Deductible Health Plans (HDHPs), which was described in our second Management Alert on this topic [click here for a copy of that April 1st Management Alert]. Now the IRS has offered guidance on how HSAs interact with other existing types of health care savings vehicles, specifically, health care flexible spending accounts (FSAs) and health care reimbursement accounts (HRAs)1. This latest guidance confirms what most practitioners had expected, but the confirmation is good.