CUNA Regulatory Comment Call


July 1, 2004

Draft Model Trust and Custodial Agreements for Health Savings Accounts (HSAs)

EXECUTIVE SUMMARY

  • The Department of the Treasury and the Internal Revenue Service (IRS) have issued for public comment two model Health Savings Accounts (HSA) documents – one that can be used as trust agreement and one that can be used as a custodial agreement. HSAs, created by the 2003 Medicare reform legislation, are special accounts that allow individuals to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax free basis. An HSA must be used in conjunction with a high deductible health plan. More detailed information regarding HSAs can be found on CUNA’s website at www.cuna.org/reg_advocacy/member/hot_topic/hsa.html and at www.cuna.org/compliance/member/eguide/eguide_hsa.html.

  • According to the announcement, the IRS has received numerous requests from the public for a safe-harbor document like this one: “Many … prospective HSA trustees and custodians would like to offer a product off the shelf and be certain that the form of the trust or custodial agreement meets the requirements under the Internal Revenue Code."

  • The model documents have been released in proposed form in order to give the public the opportunity to comment on the content before being issued in final form. The Treasury and IRS would like to finalize the documents for use by HSA trustees and custodians as soon as possible.

  • In a town hall meeting on June 25, Treasury Secretary Snow stated that prospective HSA trustees and custodians can incorporate some or all of the language from the draft forms into their current HSA paperwork and begin using those documents immediately. However, the forms are not intended to be used as stand-alone trust or custodial agreements until they are finalized after the end of the comment period. Once finalized, these safe-harbor forms will not be mandatory; they are offered for those trustees and custodians who wish to use them.

  • In May, NCUA issued a comment call to provide federal credit unions (FCUs) with authority to serve as custodians or trustees for HSAs; the agency is expected to promulgate a final rule shortly. NCUA’s proposal is available at www.cuna.org/reg_advocacy/reg_call/rcc_052804.html; and CUNA’s comment letter is available at www.cuna.org/reg_advocacy/comment_letters/cl_062504.html. When NCUA’s final rule comes out, federal credit unions will be able to use either the trustee or the custodian form; given that the member will be managing the HSA assets, there is no differentiation between the authority for FCUs to serve as trustees and the authority to serve as custodians. However, state chartered credit unions should check with their state law to see if there are any state law restrictions on serving as either custodian or trustee of HSAs.

  • As is the case for most IRS forms, the public comment period will be open for 30 days following the announcement. Comments are due to the IRS by July 26, 2004. Please send your comments to CUNA by July 16, 2004. Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.coop or to Senior Regulatory Counsel Catherine Orr at corr@cuna.com; or mail them to Mary or Catherine in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, 6th Floor - South Building, Washington, DC 20004-2601. You may also contact us if you would like a copy of the Treasury/IRS announcement containing the draft model HSA forms, or you may access it on the Internet at the following address: www.treas.gov/press/releases/js1748.htm.

QUESTIONS REGARDING THE PROPOSAL

  1. Do you feel that the model HSA trustee and custodial agreements are clear, understandable and user-friendly?

    Yes ______ No ______

    If not, which changes would you recommend to make the forms more user-friendly?











  2. Do you feel that the model HSA trustee and custodial agreements are sufficiently comprehensive?

    Yes ______ No ______

    If not, what additions should be made?











  3. Other comments?











      4. Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
      Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
      Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
      Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com
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