The Department of Labor (“DOL”) has clarified that individuals who provide advice on health savings accounts (“HSAs”) may be considered fiduciaries under its recently-released Fiduciary Rule if their communications rise to the level of investment recommendations.
Background. The DOL’s Fiduciary Rule, which was released in 2016, expands the definition of who is considered a fiduciary as a result of providing investment advice for a direct or indirect fee. Fiduciary status means that the individual or entity must act in their client’s best interest and may be held personally liable for breaches of fiduciary duties. In addition, fiduciaries are prohibited from engaging in certain transactions where they may be in a position to exercise improper influence.
Fiduciary Rule. The Fiduciary Rule generally defines “investment advice” to include the following:
- recommendation to buy, sell hold or exchange investments or how to invest assets rolled over, transferred or distributed from a retirement plan or IRA.
- recommendations concerning the management of retirement plan or IRA assets or rollovers, transfers, or distributions from a retirement plan or IRA.
Under the final rule, DOL defines “IRA” to includes HSAs. DOL explained that it determined that HSA account holders are entitled to receive the same protection as IRA owners, and that HSAs have associated investment accounts that can be used as long-term savings accounts for retiree health care expenses.
Impact of Fiduciary Rule on Employers that offer HSAs. The Fiduciary Rule does not necessarily increase the risk of liability for employers that offer HSAs to their employees. However, employers may be impacted by the final rule if they: (i) provide investment advice to their employees concerning HSAs, or (ii) benefit from such advice being given to their employees (i.e., revenue sharing in connection with a specific HSA investment, or compensation for directing employees towards a particular HSA vendor).
Finally, employers should review their arrangements with HSA vendors to determine whether they qualify as fiduciaries under the Fiduciary Rule.