DALLAS, June 16, 2005 (PRIMEZONE) -- Health Savings Accounts (HSAs) and Nonsubscription can work together, says a new IRS information letter obtained by Linda Wilkins, a partner with Locke Liddell & Sapp, with support from PartnerSource Inc., a leading employee benefits consulting and insurance agency that specializes in nonsubscription. More than 114,000 businesses nonsubscribe or opt-out of the Texas workers' compensation system. The rate of nonsubscription continues to increase. Prior to this IRS letter, there has been some questions as to nonsubscribers' eligibility to offer their employees participation in HSAs.
Specifically, a person is eligible to contribute to an HSA if he or she has a high-deductible health plan (HDHP). As well, they are allowed to have an HSA if they have other "permitted insurance." The law specifies that workers' compensation is a form of permitted insurance. Accordingly, if a nonsubscriber offers an ERISA occupational injury plan, it was not clear whether that plan was "permitted insurance."
According to the IRS, an ERISA occupational injury plan does not preclude employees' participation in HSAs. Importantly, the employer's high-deductible health plan (HDHP) did not cover occupational injuries or illnesses, while its occupational injury plan was limited to these instances. Therefore, there was no "overlapping" coverage in the employer's welfare plans.
"The IRS letter is considered advisory only, but addresses this issue in a straight-forward manner," says Wilkins. "Roughly 40 percent of Texas employers are nonsubscribers, many of whom want to offer HSAs. So the effect of this ruling is far-reaching," said Bill Minick of PartnerSource.
Copies of the IRS information letter are available at
http://www.lockeliddell.com/Public/Index.asp?Page_ID=244 or www.partnersource.com/HSA.
Established in 1891, Locke Liddell & Sapp LLP is one of the leading law firms in Texas and throughout the nation. A full service law firm with offices in Austin, Dallas, Houston and New Orleans, Locke Liddell & Sapp has approximately 400 lawyers who represent a broad range of businesses and individual clients having extensive domestic and foreign business interests. Contact: Julie Gilbert, 214/740-8827
PartnerSource is an employee benefit services company based in Dallas, Texas providing product and service solutions that reduce employer cost and improve employee productivity. PartnerSource personnel are nationally recognized in the areas of Nonsubcription to Texas Workers' Compensation, Employee Benefits, Dispute Resolution, and Absence Management. For more information, visit www.partnersource.com. Contact: Russell Huber, 214/239-4590