July 23, 2004
BB 04—83

In this issue:

  • Treasury Issues Final Round of HSA Guidance; BENEFITS BRIEFING July 28
  • Senate Passes Patient Safety Legislation
  • Bipartisan Long-Term Care Bill Garners Significant Support in Senate
  • House Committee Approves Social Security Number Privacy Bill

Treasury Issues Final Round of HSA Guidance; BENEFITS BRIEFING July 28

On July 23, the Treasury Department and IRS released their sixth and final round of guidance on Health Savings Accounts (HSAs), as created by the Medicare Modernization Act of 2003. (Previously-released guidance is available in the Regulatory section of the Council's Consumer-Directed Health Web page.)

The guidance format includes 88 questions and answers on eligibility, high deductible health plans (HDHPs), the definition of preventive care, contributions, distributions, rollovers, cafeteria plans, and account administration. The Council will hold a Benefits Briefing conference call to review the new guidance on Wednesday, July 28 from 3:00 to 4:30 p.m. Eastern Time (details below).

We are pleased that the Treasury Department addressed so many of the Council's questions and issues that have been of concern to employers. The following are some of the highlights:

  • An individual generally may participate in an HSA and Employee Assistance, Disease Management, and/or Wellness Programs;
  • Plans may include reasonable lifetime maximums and treatment limits;
  • Employers may make matching contributions and pay wellness incentive bonuses to an HSA offered through a cafeteria plan (cafeteria plan nondiscrimination rules will apply);
  • Individuals over age 65 who are eligible but not enrolled in Medicare may continue making contributions to an HSA; and
  • Some drugs may be provided without regard to the deductible as preventive care (e.g., drugs to treat high cholesterol)

In addition, the guidance provides details about how to coordinate family coverage, what the contribution limits are if an HDHP has "embedded" family deductibles, how the deductible and contribution limits apply to short plan years, whether "fourth quarter deductibles" are allowed, the amount of long-term care premiums that may be paid on a tax-free basis, and the rules regarding payment of custodian fees for the HSA.

NOTE: On Wednesday, July 28 from 3:00 to 4:30 p.m. (Eastern Time), the Council will hold a Benefits Briefing conference call to discuss the guidance. Bill Sweetnam, Kevin Knopf and Tom Reeder, from the Treasury Department's Office of Tax Policy, will join us on the call to highlight the issues that may be of particular concern to plan sponsors in the new guidance, and Mark Wincek of the law firm of Kilpatrick Stockton will also talk about the aspects of the new guidance that are most likely to help employers who are considering offering these sorts of plans in the future. Click here to RSVP and for call-in information.

For more information, contact Susan Relland, Council health policy legal counsel, at (202)289-6700.

Senate Passes Patient Safety Legislation

On July 22, the Senate passed an amended version of the Patient Safety and Quality Improvement Act (S. 720) by unanimous consent. The amendment was a substitute drafted by Senators Judd Gregg (R-NH) and Edward Kennedy (D-MA). This bill, originally introduced by Senator Jim Jeffords (I-VT), would improve health care quality by encouraging voluntary reporting by health care providers of medical errors to certified patient safety organizations. Immediately after passage, the Senate appointed conferees to negotiate a compromise between S. 720 and H.R. 663, which the House approved in March 2003.

In March 2004 the Council sent a letter to Senate Health, Education, Labor and Pensions Committee Chairman Judd Gregg recommending passage. In a press release issued by the committee, Gregg said, "Creating an environment where information can be shared will benefit all patients. Getting this bill over the finish line this year will literally save lives, and so I'm grateful we were able to move this through the Senate." For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.

Bipartisan Long-Term Care Bill Garners Significant Support in Senate

On June 16, Senators Barbara Mikulski (D-MD) and Kit Bond (R-MO) introduced the Ronald Reagan Alzheimer's Breakthrough Act (S. 2533). In addition to providing increased funding for Alzheimer's research, the bill would provide an above-the-line income tax deduction for long-term care insurance premiums, institute the phase-in of a tax credit for family caregivers and improve consumer protections for long-term care insurance. The bill does not include provisions that would allow qualified long-term care coverage to be offered as a benefit under employer-sponsored cafeteria plans and flexible spending arrangements (FSAs) but Senate Finance Committee Chairman Charles Grassley (R-IA), who has been assured the measure would move through the Finance Committee, supports adding these provisions. The bill currently has 62 cosponsors in the Senate. A companion measure (H.R. 4595) has been introduced in the House of Representatives by Ed Markey (D-MA) and has 54 cosponsors.

The cost of the long-term care provisions is estimated to be approximately $40 billion over ten years, so despite bipartisan support for the measure, the cost of the plan is a significant obstacle for proponents to overcome. For more information contact Maria Ghazal, Council director, retirement policy, at (202) 289-6700.

House Committee Approves Social Security Number Privacy Bill

On July 21, the House of Representatives Ways and Means Committee approved the Social Security Number Privacy and Identify Theft Prevention Act (H.R. 2971) by a vote of 33-0. Prior to final approval, the committee adopted substitute language provided by Committee Chairman Bill Thomas (R-CA) which was designed to address some concerns raised by Representative Ben Cardin (D-MD); the changes relevant to private employers primarily relate to requirements for obtaining written consent, one of the exceptions to the general prohibitions. The original Ways and Means Social Security Subcommittee report is also available on the Council Web site.

In general, the bill would prohibit companies from selling, purchasing or displaying to the general public an individual's Social Security number. The bill, as originally drafted, could be read broadly to prohibit use of Social Security numbers in the administration of employee benefit plans. The Council therefore lobbied for an exception for the use of Social Security numbers in the administration of employee benefit plans as well as use of truncated Social Security numbers (all except the last four digits are blocked), both of which are contained in the current bill, although use of the truncated Social Security numbers would be limited to a 7½-year period — six years after the deadline for issuing regulations under the bill (18 months after the date of enactment).

Although many members of the Ways and Means Committee expressed their desire for enactment this year, the bill is also within the jurisdiction of the House Energy and Commerce Committee and the House Financial Services Committee and neither committee has acted on the bill at this time. Senate action on this issue is also unclear. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.


The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.