Opinion ID: 2823801
Heading Depth: 2
Heading Rank: 3

Heading: Health Savings Accounts

Text: Â¶11Â Â Â Â Â Â Â Â When Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act in 2003, it created, among other things, a new type of tax-favored accountâan HSAâto help eligible individuals save for medical expenses. See Pub. L. No. 108-173, Â§ 1201, 117 Stat. 2066, 2469 (2003). An individual can make contributions to an HSA only if that individual is separately covered by a âhigh deductible health plan,â which is a health plan that requires beneficiaries to pay a certain amount of out-of-pocket expenses before the insurance plan begins picking up the tab. See 26 U.S.C. Â§ 223(c)(1)(A)â(c)(2)(A) (2012). Â¶12Â Â Â Â Â Â Â Â Under federal law, HSA funds are held in trust âexclusively for the purpose of paying the qualified medical expenses of the account beneficiary.â Id. Â§ 223(d)(1). Eligible individuals may establish and make pretax contributions to their HSAs and then use those funds to pay or reimburse medical expenses at any time, regardless of age or employment status. Id. Â§ 223(e)â(f). The beneficiary may also access the funds for any purpose under the condition that any such distribution loses its tax-exempt status and must be included in the beneficiaryâs gross income, and such distributions are subject to a twenty-percent tax penalty. Id. Â§ 223(f)(2), (f)(4)(A). The penalty for non-health-care spending disappears once the beneficiary becomes Medicare-eligible at age sixty-five. Id. Â§ 223 (f)(4)(C); 42 U.S.C. Â§ 1395c (2012). Â¶13Â Â Â Â Â Â Â Â In general, HSAs are not plans that qualify under ERISA. See Retail Indus. Leaders Assân v. Fielder, 475 F.3d 180, 196 (4th Cir. 2007) (characterizing employer contributions to employeesâ HSAs as ânon-ERISA healthcare spendingâ). Although the U.S. Department of Labor has indicated that HSAs may constitute ERISA-covered plans in limited circumstances where employer involvement with and control over the account is extensive, 2 the facts do not support such a characterization in this case.