Non-discrimination rules for Health Savings Accounts
Q: If an employer offers a HSA program, is it subject to discrimination testing? In other words can if be offered to one group but not another group of associates?
A: HSAs are subject to discrimination testing and they can be offered to one group and not another. The basic underlying concept of discrimination testing in employee benefits is that benefits cannot favor highly compensated employees. But there is no prohibition on offering HSAs on a only to lower paid employees, for example. (This presents the possibility of another type of allowable discrimination since there is also no prohibition on offering low deductible comprehensive health insurance to highly paid employees and high deductible HSA-type insurance to lower paid employees). Some disparity in employer contributions is also allowed for employees with different types of health coverage -single coverage vs. family coverage. But the lower paid employees must receive at least the same amount in employer contributions as the highly paid employees with the same type health coverage.
The non-discrimination rules for Health Savings Accounts are referred to as "HSA comparability rules" and are explained in much more detail in the Treasury Department's 45 pages of regulation on this topic. More information is also available in the "Employee Benefit Issues" section of the FAQs at www.healthsavingsaccount-hsa.com.