HSA Accounts & Reg D Transfer Limitations

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Question:

We are beginning to delve into the Health Savings Account (HSA) market. We currently offer this account to employees only. Both employee and employer contributions are deposited directly into the HSA. We have linked a checking account to the HSA and issued both checks and a debit card for accessibility convenience. The checking account balance is always "zero $." When either a check or debit card purchase comes through it is memo posted to the checking and the exact amount of the transaction is electronically transferred from the HSA to the checking to cover the transaction. My question is, is the HSA held to the same withdrawal restrictions in this case as any other "savings" account under Reg. D (6 transfers)? This account is both a savings and an IRA...I have not been able to get a clear answer on this.

Answer:

Answer by Randy Carey: If the HSA account is a savings account, it would be subject to the same withdrawal restrictions as any other savings account. An IRA is an IRS designation and it really has no meaning in this context. An IRA can be a savings or a demand deposit account.

Answer:

Answer by John Burnett: If you want HSA customers to have unfettered debit card access, you can use a NOW account instead of a savings account. That would eliminate the need for the second account. Alternatively, you could set the savings accounts up under an ATS arrangement and make them transaction accounts. That seems like a lot of extra effort when a NOW account takes care of things for you.

[Editors Note: As of 7/2/09, the separate limit of three per month for checks, POS debit card transactions, etc., has been eliminated, and those transactions are now only subject to the 6/month limit that applies to other restricted transfers and withdrawals.]

First published on BankersOnline.com 8/04/08