Relief Allows Non-Calendar Year Plans To Be HDHP With State Mandates

Transitional relief for certain health plans with non-calendar year renewal dates was provided by the IRS release of Notice 2005-83 on November 17, 2005. This update allows plans some reprieve for participants to be eligible, to the extent that the state mandates have been amended to be Health Spending Account (HSA) compatible. Any plans that would otherwise qualify as high deductible health plans (HDHPs) except for some below-the-deductible benefits due to state mandates may now be able to qualify.

Originally, Notice 2004-43 (released June 2004) provided transitional relief for individuals in states where HDHPs were not available because state laws barred or limited a deductible for certain benefits. This original transitional relief was effective until January 1, 2006, to give states time to amend their laws to comply with HSA regulations. This would have caused some participants to become ineligible to contribute to an HSA by the end of the year.

Generally, a health plan may not reduce existing benefits before the plan's renewal date. Thus, even though a state may amend its laws before January 1, 2006, non-calendar-year plans may still fail to qualify as HDHPs after January 1, 2006, because existing benefits cannot be changed until the next renewal date.

For example, a state amends its laws to authorize HDHPs, effective November 1, 2005. A health plan with a renewal date of July 1, 2005, is required to retain the state-mandated low-deductible coverage for the plan year July 1, 2005, through June 30, 2006, because the benefits can only be modified on the renewal date. As a result, although the state has amended its statute, the health plan will fail to be an HDHP for months after January 1, 2006 (i.e., for the months of January through June, 2006). The transitional relief continues to make the HSA eligible.

Infinisource has recently introduced a new, lower-cost HSA solution specifically designed with the investor in mind. The program provides four reimbursements per year, free, along with the current investment features of The Charles Schwab Trust Company, which is used to house the accounts, making it possible for participants to select from mutual fund options. In addition, the Infinisource HSA may be offered under a cafeteria plan to save tax dollars for both the employer and employees. The newest lower-cost HSA does not carry a debit card option. For assistance starting an HSA contact Infinisource at 800-779-6384 or email solutions@infinisource.net

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