CUNA Comment Letter

Authority for FCUs to Serve as HSA Trustees/Custodians

June 25, 2004

Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Dear Ms. Baker:

The Credit Union National Association (CUNA) is pleased to provide comments on NCUA’s proposal to provide federal credit unions (FCU) authority to act as trustees or custodians for health savings accounts (HSAs). CUNA is the largest credit union trade association, representing approximately 90% of our nation’s 9,400 state and federal credit unions.



HSAs were created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 passed last December. As Treasury Secretary Snow stated in a press release regarding HSAs, “At a time when health care costs are rising rapidly and individuals, families and employers are struggling to find lower-cost alternatives, HSAs are a terrific option that … every American ought to consider.” Under NCUA’s proposal, two parts of the agency’s rules would be amended to authorize federal credit unions (FCUs) to serve as trustees or custodians for HSAs established by members -- Part 724 (Trustees and Custodians of Pension Plans) and Section 721.3(l)) in NCUA’s incidental powers rule.

We applaud NCUA for moving expeditiously to provide this authority. With the authority in place, FCUs will be able to begin offering HSAs to their members. CUNA has already heard from a number of credit unions that are interested in researching the potential for offering such accounts. A key consideration will be if their membership base includes core members who are likely to have high deductible health plans (HDHPs), such as people employed by small businesses and those who are self-employed. HSAs enable FCUs to enhance service to their members by providing another savings and retirement vehicle in addition to existing options -- including individual retirement accounts (IRAs) and 401(k) plans. In our view, NCUA’s amendments will allow flexibility for credit unions should new types of tax-advantaged savings plans be created in the future.

The proposal states that NCUA does not intend at this time to amend its share insurance rules to allow for separate share insurance coverage for HSAs. Likewise, the Federal Deposit Insurance Corporation (FDIC) has indicated that it does not consider HSAs to be a separate category for insurance coverage purposes. We support NCUA’s policy of maintaining parity with the FDIC on matters involving the scope of account insurance coverage. We further agree that the statutory limits on annual contributions along with the likelihood of frequent withdrawals means that substantial balances will not accrue in HSAs in the near term. The proposal notes that the Board will monitor developments in this area and may reconsider its position at a later time if circumstances warrant. We endorse this course of action and hope NCUA will revisit the issue if it turns out that HSA balances do, in fact, become significant compared to other accounts at FCUs.

FCUs, as employers, may also consider the merits of providing HSA contributions in conjunction with structuring or restructuring their health insurance coverage as a qualifying HDHP. Section 701.19(a) of NCUA’s rules (Benefits for Employees of Federal Credit Unions) clearly allows for FCUs to provide HSAs as a reasonable employee benefit. No change is needed to the agency’s regulations to allow for FCUs as employers to provide this benefit. We think that HSAs could be an excellent option for FCUs to provide more flexibility in providing health care coverage for their employees. FCUs can utilize HSAs to help with their employee health care expenses while providing their employees with more control over how their health care dollars are spent.

Finally, it is important to have additional guidance out as soon as practicable so credit unions can begin to build their HSA programs. Many employers have already started the process of selecting health plans for the upcoming year. As the proposal indicates, the U.S. Treasury Department and Internal Revenue Service (IRS) are expected to issue guidance later this summer regarding: (1) the disclosures that must be provided to explain the terms and conditions of the HSA account such as eligibility, prohibition on pledging and tax consequences and (2) the forms to be used for reporting – both to the HSA accountholder and to the IRS. In fact, the Treasury and IRS just issued for public comment draft model documents that can be used as trust or custodial agreements for HSAs. We believe that credit unions that want to begin offering HSAs should have the authority to do so as soon as possible so they will not be at a disadvantage. We encourage the Board to issue a final HSA rule at its July 22 Board meeting that is consistent with its proposal. If that timeframe is not possible, we urge the Board to approve a final rule on this noncontroversial issue at the earliest opportunity.


In conclusion, we commend NCUA’s willingness to move quickly in issuing a proposal to provide FCUs with the authority to act as trustees or custodians of HSAs. We feel that HSAs are likely to become viable, permanent vehicles for FCU members to pay their medical expenses not covered by health insurance as well as to save for retirement. We feel strongly that FCUs have the option to offer HSAs should they fit with their field of membership needs.

Thank you for the opportunity to share our comments. If you have questions about this letter, please feel free to contact me or Senior Regulatory Counsel Catherine Orr at (202) 638-5777.


Mary Mitchell Dunn
Associate General Counsel and Senior Vice President

Catherine A. Orr
Senior Regulatory Counsel