They may not be retirement accounts per se, but health savings accounts are subject to the Department of Labor's fiduciary rule.
InsuranceNewsNet reports on alert sent out by the Wagner Law Group, which warns that those who provide advice on HSAs may be considered fiduciaries subject to the DOL rule if their communications amount to investment recommendations.
Under the DOL rule, "investment advice" includes recommendations to buy, sell, hold or exchange investments; recommendations on how to invest assets rolled over, transferred or distributed from a retirement plan or individual retirement account (IRA); and recommendations on managing retirement plan or IRA assets or rollovers, transfers, or distributions from a retirement plan or IRA.
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Strictly speaking, HSAs are not retirement accounts and are not subject to the Employee Retirement Income Security Act. However, since HSAs have associated investment accounts that can be used as long-term savings accounts for retiree health care expenses, the DOL has decided that HSA account holders are entitled to receive the same protection as IRA owners.
According to the Society for Human Resource Management, cited in the report, a major reason retirement advice is an element in the decision is the triple-tax-free treatment of HSAs. Contributions to HAS accounts are not subject to federal and state income taxes and FICA taxes, in most states. Also, any earnings on HSA investments are not taxed, nor is there any tax on funds withdrawn to pay for qualified medical expenses.
Because of this, it can be more advantageous from a tax perspective for some to use their HSAs to save for health care expenses in retirement instead of saving in a 401(k) plan or other retirement savings plan, the Employee Benefit Research Institute (EBRI) reported.
So if employers provide investment advice to employees on their HSAs, or if they benefit from such advice provided to their employees—such as through a revenue-sharing arrangement attached to a specific investment, or through compensation for sending employees to a particular HSA vendor—they could run afoul of the fiduciary rule.
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