New IRS Guidance Clarifies Tax Treatment of HSAs

Health savings accounts (HSAs) are a useful tool for employees and employers because of their tax-favored status. The IRS has recently clarified that certain Affordable Care Act rules will not affect the tax treatment of HSAs.

An HSA must be paired with a high-deductible health plan (HDHP) to receive tax-favored treatment. The Affordable Care Act requires health plans to provide certain preventive services with no deductible or cost-sharing. There was some concern that this rule would result in loss of HDHP status with the effect of HSAs losing tax favorable treatment. The IRS, however, has indicated that HDHPs will not lose their status as HDHPs solely because they offer the preventive services required by the Affordable Care Act. Thus, HSAs will still be a strong, tax-favored tool for dealing with medical expenses.

© 2013 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

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