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Answers To Your 'The HSA Opportunity for Retirement Advisors' Questions

Posted by on August 31, 2017

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Guest presenter Pat Jarrett of HealthSavings Administrators was kind enough to answer the leftover questions for this follow up blog post.  

If you weren’t on the webinar, make sure you check out the recording

Q: Are HSA accounts subject to ERISA? 

A: No. HSAs are not generally subject to ERISA unless the employer is aggressive in their involvement. Typically, ERISA is avoided by making the program voluntary, not restricting employees from opening an HSA outside of the employer selected vendor and by not mandating specific investment choices. The other red flag is compensation - if the employer receives direct or indirect compensation (i.e. a discount on a related service) then the HSA may be subject to ERISA.

Q: Do you typically see advisors working with HSA holders in personal brokerage accounts or in a fund lineup like a 401k plan?         

A: Mostly in a lineup similar to the 401k plan.

Q: Are you able to fund HSAs for beneficiary of your adult children (grandkids/great-grandkids)?  Similar to 529?               

A: Not likely. You can contribute to ANYONE's HSA, but they must meet the eligibility requirements in order have an HSA (See IRS Publication 969, Page 3 for details).

Q: Can parents contribute to the HSA of an adult child?

A: Yes, but the children (assuming they are eligible to open and fund the HSA) will receive the tax benefits. (IRS Notice 2004-2, Q&A 18)

Q: As a K-1 pass-through taxpayer, filing by 04/15 for the preceding tax year, if my spouse drains her FSA by 12/31, can I not do an HSA in the next tax year by 04/15 for the preceding year since her FSA was zero in December of the preceding year?              

A: Her plan year runs to 12/31/16. The balance in the account does not change the period for which you were covered by the FSA. This means you had no eligible months in 2016. If her plan year had ended on 11/30/16, then you would not have been covered by the FSA for December and you could invoke the last month rule.

Q: Can you expand a bit on how HSA dollars can be used to pay LTC insurance premiums. The premium max is age related (e.g. for those 61-70 it's $3,900), right? And, is it the case that LTC premiums are "qualified medical expenses" and how does that "work" in practice?          

A: You are correct, the amount of HSA dollars that can be used is based on age banding.  Below are the amounts for 2017. For more details see 1040 Schedule A Instructions, Page A-2, left hand column.

Attained Age Before Close of Taxable Year

2017 Limit

40 or less 


More than 40 but not more than 50


More than 50 but not more than 60


More than 60 but not more than 70


More than 70



Q: What is the tax ramification of spending the proceeds of HSA after age 65 if not for medical expenses?         

A: You will pay no penalty, but you will pay your prevailing Federal and State income tax rate. Remember, if you have receipts for past medical expenses paid out-of-pocket, you can withdraw that amount from your HSA tax free.

Q: Do firms allow advisors to be added as broker of record on these accounts?

A: Yes. 

Q: Are there HSA products that advisors can sell and be compensated for?         

A: Yes. HealthSavings provides an open architecture product and some fund family lineups where the advisor can be compensated. Some advisors charge a fee per account, others add a fee to their charges for overseeing the 401k, while a third group adds a wrap fee of 10 to 50 bps on the investment balance.

Q: How do we get our Broker Dealer to allow HSA to be sold?  We have zero contracts with HSA products.

A: Have your BD contact us, or, provide their contact info an we will reach out to them. We can register the firm and put together a fund lineup for you. Our system allows us to track the advisor and report enrollments and assets back to the BD. Any fees are distributed through the BD on a quarterly basis.

Q: How long can you shoebox receipts for?

A: There are no time limits. You can hold your receipts for an indefinite period.

Q: I have heard elsewhere that there is no fiduciary responsibility for advising on HSA accounts at all.  

A: The DOL is fairly clear on that, mentioning HSAs specifically.

Q: Without getting into the weeds, how difficult is it for an employer to establish a Section 125 cafeteria plan if they don't have one already?              

A: It is relatively simple. You can find simple plans on the internet for a few hundred dollars. I have also heard of local attorneys setting them up for similar amounts.

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