February 9, 2012


Our guest asks:

There is an employee who signed up for a High Deductible Health Plan last year. Since he chose this plan he was eligible for an HSA plan through a bank as well. The company puts an allotted amount of money in the employee’s HSA account each pay period, however, the company was not able to put the funds in the employee’s account, because the employee failed to set up the account. The employee would like the company to go back and calculate the monies that would have been put into his account last year and deposit them in his account. What are our options? The company is taking the position that if you didn’t open the account, they couldn’t deposit the funds, therefore, so sorry---open the account and we can start depositing the funds going forward for you now. I am not sure if there will be ramifications for this, what are your thoughts.

OnlineAdviser responds:

The benefit plan document would control here; this is a good example of why well-drafted employee health plan benefit plan documentation is important. Too many small firms simply rely on the insurance policy and HSA custodian documents provided by the product providers; these protect the product vendors but are inadequate for the employer’s purpose as this example shows.

The HSA plan documents we currently use for small companies require the employee to make account information available to the employer for this purpose. A failure to provide account information would cause the contribution to be voided. We have used other plan documents in the past that create a default HSA account on the employee’s behalf. So your first step should be to review the plan documents. If it specifies a procedure then obviously that procedure should be followed.

In the event the plan document is inadequate to answer the question (and I presume this is the reason that you are asking) then the plan administrator would apparently have the obligation to interpret the action subject to the employee’s right to appeal. You would wish to consider the overall dollar cost, the impact to employee morale, the time and cost involved in handling an employee appeal, etc. in the decision. As a practical matter, I would suggest that if the administrator does not have adequate substantiation for the decision then it may make more business sense to avoid the negatives associated with declining the employee’s request by simply paying the amount and closing the possibility of this confusion in the future.

The real lesson here is to avoid such situations with a well-drafted employee health plan going forward. The master plan document and the Summary Plan Description provided to each employee should both address this potential situation. Freedom Benefits can help provide this documentation; see www.freedombenefits.org for more information on small business benefit plan services.

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