IRS Provides Guidance on HSA Issues

By Staff Report

Jun. 26, 2008

Internal Revenue Service guidance released Wednesday, June 25, provides answers to many health savings account-related questions raised by employers and consultants.

In particular, Notice 2008-59 makes clear that employees who receive free or employer-subsidized health care services from an employer’s on-site medical clinic generally will be eligible to participate in a high-deductible health insurance plan linked to an HSA so long as the clinic does not provide significant medical services.

In an IRS-provided example, a clinic operated by a manufacturer that provides such free services as physicals, immunizations, allergy injections, nonprescription painkillers and treatment of plant accidents would not be considered as providing significant medical services, so employees would eligible for HSAs.

The guidance also makes clear that employers who erroneously make contributions to an HSA on behalf of employees not eligible for HSAs can request that the financial institution holding the money return it. If the money is not recovered by the end of the tax year, then the amounts must be included as wages on an employee’s W-2 form for the year in which the contributions were made.

In addition, according to the guidance, while an HSA account holder can take a distribution to pay for Medicare Part D prescription drug premiums, if the account holder is not age 65, distributions would not be allowed to pay for Medicare premiums for a spouse who is age 65 or older.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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