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DOL Letter Addresses Status of Employer HSA Contributions Under Consumer Credit Protection Act



WHD Opinion Letter CCPA2019-1 (Sept. 10, 2019)

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The DOL’s Wage and Hour Division (WHD) has issued an opinion letter that addresses how the wage garnishment provisions of the Consumer Credit Protection Act (CCPA) apply to employer contributions to employees’ HSAs. The letter responds to an inquiry asking whether such contributions are earnings under the CCPA. As explained in the letter, the CCPA limits the amount of a debtor’s disposable earnings that may be garnished. Disposable earnings for this purpose means the portion of an individual’s earnings that remains after deducting any amounts required by law to be withheld. Earnings are defined as “compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, [including] periodic payments pursuant to a pension or retirement program.”

According to the letter, employer HSA contributions are not earnings under the CCPA and should not be included when calculating an employee’s disposable earnings for purposes of determining the maximum amount that may be garnished under the CCPA. The letter notes that contributions already in an HSA cannot be garnished by an employer. However, HSA contributions that are still in an employer’s possession (i.e., amounts that have not yet been paid to the HSA) could be included when calculating the CCPA’s limitations if they were earnings under the CCPA’s definition. The letter concludes that employer HSA contributions, while made because of an employment relationship, are not earnings because they do not compensate an employee directly for the amount or value of the employee’s services. Furthermore, employer HSA contributions differ from the CCPA’s examples of compensation, which indicate that the statute is intended to protect funds as they pass from the employer to the employee. Unlike those examples, employer HSA contributions are not part of an employee’s take-home pay; they are contributed to a trust account, are not made available to the employee before being contributed, and cannot be used for anything other than qualified medical expenses without triggering taxes and penalties. The letter suggests that the conclusion might be different if the amount of the employer’s HSA contributions were based on the amount or value of individual employees’ services, or if employees were given the option of receiving the employer’s contribution in cash (as would be the case for HSA contributions made through pre-tax salary reductions under a cafeteria plan).

EBIA Comment: Employers and others may request opinion letters from the WHD regarding the CCPA and other statutes within its jurisdiction (which also includes the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA)). There is no user fee, but the WHD has discretion to determine whether to answer a request and the form of any response. This letter serves as an important reminder that laws other than the Code may need to be considered by those that sponsor or work with HSAs. For more information, see EBIA’s Consumer-Driven Health Care manual at Section XVIII.D (“HSAs and Other Laws”), which will be updated to address this development.

Contributing Editors: EBIA Staff.

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