Tax legislation approved April 9, by the House Ways and Means
Committee could significantly increase the costs of administering health savings
accounts.
H.R. 5719, approved on a 23-17 vote, includes a provision that would
effectively require HSA administrators—which often are banks—to put new systems
in place to substantiate that HSA distributions are used to pay for health
care-related expenses.
That would be a big change from the current low-overhead system, in which
employees with HSAs pay their uncovered health care expenses, such as those
falling under a deductible, from their accounts with a bank-issued debit card or
bank-issued checks. No substantiation is required that the distributions are, in
fact, used for payment of health care expenses.
HSA advocates say banks now lack such substantiation systems, which would
require them to make significant investments to develop them—a cost that would
be passed on to account holders or those employers that now pay HSA
administrative fees.
“Because most community banks and credit unions simply do not have the
resources to put such costly technology into production, they would have to buy
from vendors and pass on the cost to their accountholders,” said a memorandum
prepared by the HSA Coalition, an HSA advocacy group in Washington.
Under current law, funds can be withdrawn tax-free from HSAs if used to pay
for health care-related expenses. Funds withdrawn for other purposes are taxed,
with an additional 10 percent penalty tax imposed.
The provision is expected to generate about $308 million in additional tax
revenue for the federal government over the next 10 years, according to the
congressional Joint Committee on Taxation.
The bill could be taken up by the full House as soon as next week.
Filed by Jerry Geisel of Business Insurance, a sister publication of
Workforce Management. To comment, e-mail editors@workforce.com.
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