CUNA Comment Letter

Employer Comparable Contributions to Health Savings Accounts

August 30, 2007

CC:PA:LPD:PR (REG-143797-06)
Internal Revenue Service
POB 7604
Ben Franklin Station
Washington, DC 20044

Re:    REG-143797-06

Dear Sir/Madam:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Internal Revenue Service’s (IRS) proposed regulations regarding employer comparable contributions to Health Savings Accounts (HSAs). CUNA is the largest credit union trade organization in this country, representing approximately 90 percent of our nation’s almost 8,500 federal and state-chartered credit unions, which serve nearly 87 million members.


Our views are discussed in greater detail below. In general:


The IRS is proposing regulations that will facilitate compliance for employers with the comparability requirements for HSAs when employees either have not established an HSA by December 31 or have established an HSA but not yet notified the employer by the end of the calendar year.

HSAs are tax-exempt trust or custodial accounts established to help individuals covered by high deductible health plans pay for qualified medical expenses. Both an employee and employer may contribute to an employee’s HSA.

If an employer contributes to its employees’ HSAs, it must make comparable contributions to the HSAs of all participating employees with similar plans. An excise tax of thirty-five percent of the aggregate amount contributed by the employer to the employees’ HSAs for the calendar year is imposed on the employer when it fails to make comparable contributions to the HSAs of all eligible employees.

This is problematic for the employer when an employee does not establish an HSA by the end of the calendar year or establishes an HAS in a timely manner, but does not notify the employer of the account.

The IRS is now proposing that the requirements of the comparability rules will be met if an employer complies with both a new notice and contribution provision. Under the proposal, the employer would be required to provide a written notice to its employees by January 15. The notice would state that employees will receive a comparable contribution if they establish an HSA and that they must notify the employer of this action by the last day of February. The employer would also be required to contribute to the HSA by April 15 for each employee who complies with the notice. Incorporating this safe harbor for employers will facilitate the ability of employers to comply with the rules.

Moreover, we believe this proposal accurately balances the comparability requirements of the employer with the needs of the employee. Receiving a notice by January 15 will provide employees sufficient time to search for an HSA provider that best suits their needs. As more credit unions and financial institutions offer HSAs, employees will have more choices and time to compare the various costs and services associated with HSAs, which will assist them in making the right decision regarding the HSA.

Also, we commend the IRS for providing model notices that employers may use to assist them in meeting the notice requirements.

In addition, we support authority for employers to accelerate part or all of their contributions for the entire year to the HSAs of employees who have incurred qualified medical expenses.

Thank you for the opportunity to comment on the proposed regulations. If you have questions about our comments, please give Senior Vice President and Deputy General Counsel Mary Dunn or me a call at (202) 638-5777.


Lilly Thomas
Assistant General Counsel