In one of its final acts of 2006, the 109th Congress passed a significant revision of the rules governing Health Savings Accounts (HSAs) in an attempt to make them more attractive to workers and businesses struggling with the high cost of conventional health insurance.

One of the most significant changes is elimination of a regulation that tied maximum annual HSA contributions to a participant’s health plan deductible. Starting this year, HSA holders can make the maximum contribution ($2,850 for individual coverage, $5,650 for family coverage) to their accounts, regardless of the plan’s deductible. Previously, they could contribute no more than the amount of their deductible.

Benefits specialists believe this change will boost participation in HSAs. “Now that individuals are free to choose a low-deductible plan that matches their health care needs, while at the same time saving more money in the HSA accounts to help cover their medical expenses, much of the anxiety regarding the coverage these plans offer has been removed,” says Rob Smith, Manager of Government Relations at Ceridian, a leading human resources solutions firm.

Other changes include:

• HSA holders are permitted to make a one-time transfer from their Flexible Spending Accounts, Individual Retirement Accounts or Health Reimbursement Accounts to help fund their HSAs.
• Individuals who enroll in HSA coverage after the start of the year can still contribute up to the full annual maximum, regardless of how late in the year they enroll. Previously, participants enrolling after the start of the year could only contribute a prorated amount based on the month of their enrollment.
• Under previous comparability rules, employers could not contribute higher amounts to lower-paid employees; employer contributions had to be the same amount or percentage of the deductible for all employees with the same category of coverage. The rules lift that restriction.