WASHINGTON - The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued final regulations concerning Health Savings Account (HSA) comparability rules. Comparability rules provide that an employer contributing to one employee's HSA must contribute comparable amounts to all employees who have HSAs.

The final regulations expand the flexibility of the proposed rules issued in August 2005. In particular, the final regulations include the following features:

  • An exception from the comparability requirement for groups of collectively bargained employees;

  • The ability to make different comparable contributions based on different variations of family coverage; and

  • Further clarification of the exclusion from the comparability requirement for employer contributions made through a cafeteria plan. Generally, under the final rules, if employees are allowed to contribute to an HSA by salary reduction through a cafeteria plan, all employer contributions to the employee's HSA will be treated as being made through a cafeteria plan (and thus excluded from the comparability rules).

    These provisions are designed to accommodate the needs of employers for additional flexibility in designing plans to provide health benefits for employees while preserving the protections of the comparability rules. HSAs and HSA-compatible health insurance have enabled a number of employers - especially smaller employers - to provide affordable health coverage to their employees.

    Publication date: 08/14/2006