Employers and employees may have to pay higher health savings account (HSA) administration fees under newly proposed legislation that would increase scrutiny of expenses distributed from the tax-free funds.
Last week, the House Ways and Means Committee approved the legislation (H.R. 5719), which some say could have a chilling effect on HSAs. The provision would require banks and other HSA trustees to prove that distributions from individual accounts are for health care expenses only.
If unable to substantiate expenses, people would be required to report the money spent on tax forms. The account distributions then would be subject to income taxes and penalties. Under the current system, people now are able to withdraw money tax-free from HSAs, but they do not have to provide documentation showing how the money was spent.
HSAs have enjoyed wide popularity because they allow people to pay for health expenses that fall below deductibles or are not covered by insurance.
Opponents say the proposed legislation could double account fees and force some vendors out of the HSA business. Advocates, however, say the legislation would raise an estimated $308 million in tax revenues by 2018.
Source: Business Insurance
Written by Jenny Cromie, certfied human resources specialist (CHRS)
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