In the new final rule, DOL has kept a provision from an earlier draft that requires HSA advisors to meet the same fiduciary standards that IRA advisors must meet. Officials seem to imply that the rules may also apply when advisors give advice about Archer Medical Savings Accounts (MSAs) and Coverdell Education Savings Accounts.
But the DOL has added a provision that excludes health insurance policies, disability insurance policies, term life insurance policies and similar assets that do not include an investment component from the final rule definition of "investment property," officials say.
DOL officials talk about how the new IRA fiduciary definition and related retirement investment advice conflict-of-interest standards will affect HSAs, health insurance and disability insurance in a preliminary version of the final rule. The final rule is set to appear in the Federal Register Friday.
In the final rule, DOL states that, for purposes of describing IRA fiduciary responsibilities, "the term 'IRA' means any account or annuity described in [Internal Revenue] Code Section 4975(e)(1)(B) through (F), including, for example, an individual retirement account described in Section 408() of the Code and a health savings account described in Section 223(d) of the Code."
IRA fiduciaries must agree to put their clients' interests first, get contracts describing that responsibility in place before advising clients, or prospects, and clearly disclose any potential conflicts of interest.
A DOL "Best Interest Contract Exemption" (BICE) procedure will let advisors receive common types of compensation, such as commissions, if they direct clients to websites that spell out contract and compensation terms.
The DOL normally regulates the employee benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA).
The DOL "received extensive comments on whether the proposal should play to other non-ERISA plans," officials say in the preamble to the proposed rule.
HSAs and other non-ERISA plans, such as Archer Medical Savings Accounts and Coverdell Educations Savings Accounts "are given tax preferences, as IRAs," officials say. "Further, some of the accounts, such as HSAs, may have associated investment accounts that can be used as long-term savings accounts for retiree health care expenses," officials say.
At the end of 2014, HSAs alone held $24 billion assets, according to officials.
The accounts hold fewer assets than IRAs, but "the owners of these accounts and the persons for whom these accounts were established are entitled to receive the same protections from conflicted investment advice as IRA owners," officials say. "The department does not agree with the commenters that the owners of these accounts are entitled to less protection than IRA investors."
Some advisors affected by the changes have argued that the new standards will help by improving consumer trust in their advisors.
Critics contend that complying with the new standards, as written, will be too complicated and expensive.
Janet Trautwein, the chief executive officer of the National Association of Health Underwriters (NAHU), said in a statement that NAHU fears the new fiduciary standard rules will hurt employees' access to HSAs.
The new regulations create "unprecedented new compliance responsibilities and liabilities for employers and licensed health insurance agents and brokers," Trautwein says. "NAHU is apprehensive that employers and health insurance agents and brokers will be unable to accept this new liability and will be unable to assist employers with HSAs through employer-sponsored health plans."
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