Exclude health savings accounts from fiduciary rule, ECFC says

Health savings accounts (HSA) are primarily used to fund health care expenses and should not be subject to the fiduciary rule like individual retirement arrangements (IRA). That’s according to a letter from the Employers Council on Flexible Compensation (ECFC) to the Department of Labor (DOL) in response to a request for information in connection with its examination of the final rule defining who is a “fiduciary” of an employee benefit plan as a result of giving investment advice for a fee or other compensation with respect to assets of a plan or IRA (fiduciary rule).

Administrative overreach.

To impose the same fiduciary requirements for HSAs as are imposed on IRAs is administrative overreach by the DOL, according to ECFC. The DOL can justify its need to regulate IRAs under the fiduciary rule because IRAs are frequently a conduit for ERISA-covered retirement plans. But HSAs are different because they are personal accounts that are established to fund health care expenses.
“While an HSA owner can make a one-time transfer from an IRA to an HSA, the amount of that transfer is limited to maximum annual contribution limit for the HSA in that year. This indicates that the transfer is allowed for the HSA owner to provide initial funding for an HSA and not as a means of transferring retirement assets from an IRA to an HSA,” the letter states.

Additional layer of regulation.

As deposit-type accounts, HSAs are already subject to numerous federal and state banking requirements and regulatory agencies. The imposition of an additional layer of regulation as set forth in the proposed fiduciary rule will unnecessarily increase costs and reduce effective rates of return, according to the ECFC. Thus, ECFC requests that the DOL amend the fiduciary rule to exclude HSAs.

Platform provider exception.

The ECFC indicates that if the DOL disagrees with its suggestion about amending the rule, then the DOL should permit HSAs to be eligible for the platform provider exception in the prohibited transaction exceptions.

“Under this exception, a service provider would not be considered a fiduciary due to selecting and monitoring investment alternatives that they offer to participants, as well as identifying investment alternatives meeting objective criteria specified by the plan fiduciary (e.g., expense ratios, fund size, or asset type specified by the plan fiduciary) or providing objective financial data regarding available alternatives to the plan fiduciary,” the letter states.
SOURCE: www.ecfc.org

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