In response to IRS's request for comments, the Employers Council on Flexible Compensation* (ECFC) recently submitted comments on the IRS proposed regulations for Health Savings Account Comparability rules. The treatment of the cafeteria plan exception in the proposed regulations was a prominent topic in their comments.

In their comments, ECFC contended:

• An HSA could still be a benefit under a cafeteria plan even when the employer only allows employer credits to be contributed to the HSA through the cafeteria plan.

• Since any employer contribution made on behalf of a cafeteria plan participant is subject to the Section 125 cafeteria plan non-discrimination rules, the contributions would be subject to the cafeteria plan rules prohibiting disproportionate contributions for highly compensated and key employees. These rules are very similar to the comparability rules.

• ECFC stressed the importance that any final regulations clarify the following: (1) the cafeteria plan exception applies in situations where an employer makes HSA contributions on behalf of an employee who has made an HSA election through the cafeteria plan, (2) an HSA election is made through the cafeteria plan when the employee has a choice to make additional HSA contributions with pre-tax contributions or receive his/her regular compensation in lieu of additional HSA contributions, and (3) an HSA can be provided through a cafeteria even where there is not a specific choice of cash in lieu of the HSA (cash is a choice of at least one benefit in the cafeteria plan) and the plan documents specifies that the HSA is a cafeteria plan benefit.

Other comments included:

• ECFC contended that an employer should not be required to make the same contributions for collectively-bargained employees as they make for non-collectively bargained employees.
• ECFC requests that the Treasury recognizes other levels in addition to self and family.

Comments were also made on Subsidiaries, multiple HDHP options, testing, and delayed effective dates.

*ECFC is a non-profit membership association committed to the study and promotion of 401(k) plans, cafeteria plans, and other elective compensation and flexible benefit plans. You can view their website at http://www.ecfc.org.