IRS Issues HSA "Grab Bag" Guidance, Changes Mileage Rates

On Wednesday, June 25, 2008, the IRS published Notice 2008-59, which clarifies many of the rules for Health Savings Accounts (HSAs). This long-awaited guidance focuses on major aspects of HSA administration, including eligibility, high-deductible health plans (HDHPs), contributions, distributions and prohibited transactions.

The IRS organized the 28-page Notice, which takes immediate effect, in a question-and-answer format. Brief highlights of the Notice include:

A limited-purpose HRA can reimburse health plan premiums and still be compatible with an HSA.

An employee's use of free health care or health care at charges below fair market value from an employer's on-site clinic do not affect HSA eligibility as long as the clinic does not provide significant benefits in the nature of medical care.

An employee with family HDHP coverage can contribute the annual HSA family amount ($5,800 in 2008) even if one or more of the employees' dependents has non-HDHP coverage. Of course, the employee cannot be covered under the non-HDHP plan.

An HSA offering a debit card may restrict the debit card's use to medical expenses as long as funds are readily available for non-medical expenses by other means.

HSA loans and lines of credit are prohibited.

A more thorough analysis of the Notice will be available in the July issue of the News & Review. In addition, Infinisource will offer an HSA webinar, addressing Notice 2008-59 and recently issued guidance on HSA rollovers (Notices 2008-51 and 2008-52) on Wednesday, August 20, 2008. More information will be available in the near future at www.infinisource.net.

Also, on Tuesday, June 24, 2008, the IRS published Announcement 2008-63, which increases the mileage rates for the remainder of 2008 for Health FSA/HRA/HSA reimbursements: $.19 to $.27 per mile. The mileage changes take effect on Tuesday, July 1, 2008. Infinisource will include an article in the July News & Review.

You can find a copy of Notice 2008-59 at www.treas.gov/press/releases/reports/notice200859.pdf and Announcement 2008-63 at www.irs.gov/pub/irs-drop/a-08-63.pdf.