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Gen Z Workers Go for HDHPs, but Don’t Forget Your Other Employees
July 2, 2024![faster Voluntary Benefits Demand Surges as Employees Seek to Defray Costs](https://strongsidesolutions.com/wp-content/uploads/2024/07/faster-Voluntary-Benefits-Demand-Surges-as-Employees-Seek-to-Defray-Costs-150x150.jpg)
Voluntary Benefits Demand Surges as Employees Seek to Defray Costs
July 16, 2024The Department of Labor’s new fiduciary rule, which mainly applies to 401(k) plans, will also affect employers who offer their staff health savings accounts.
The new rule, which takes effect September 2024, bars employers from providing advice to their workers on how they should invest the funds in the HSA they offer. It should be noted that just offering an HSA does not, in and of itself, make a sponsoring employer a fiduciary, as long as the employer doesn’t cross the investment advice line.
While HSAs are used to save for medical costs in the future, account holders can invest the funds in them just like they can with 401(k) plans and allow those returns to accrue over the years. HSAs are also portable, meaning they can be moved from one employer to the next, and they can be kept until retirement years.
Since HSAs were established 20 years ago, they have typically been exempt from ERISA, but this new rule changes that.
The rule states that a fiduciary may not receive a fee in connection with providing investment advice, which could occur when, for example, an individual recommends an HSA investment, investment strategy or rollover and receives a commission.
More importantly for employers, the new rule expands the definition of fiduciary advice to cover a one-time recommendation.
Investment education
That doesn’t mean that employers can’t educate their workers on the features of their HSAs. That’s because under current Department of Labor regulations, there has been a long-standing exception from fiduciary status if an individual or organization is providing “investment education.”
For example, employers may provide a wide range of information about the HSA program they offer, including the types of investments account holders have access to, without assuming fiduciary status. Topics that do not create a fiduciary relationship include information about:
- The benefits of participation,
- The benefits of increasing contributions,
- Investment fund strategies and objectives, and
- Fees and expenses.
To avoid fiduciary status, you simply should refrain from recommending how employees invest their HSA funds.
You should also check to see if your HSA provider offers investment advice regarding your employees’ accounts. If you have concerns, please reach out to us.