Department of Labor Rule Change Could Impact HSA Account Holders

Department of Labor Rule Change Could Impact HSA Account HoldersThe United States Department of Labor (DOL) finalized a conflict of interest rule designed to ensure that investment advisors deliver the best available investment information to their clients.

A fact sheet published by the Department of Labor states, the “conflict of interest final rule and related exemptions will protect investors by requiring all who provide retirement investment advice to plans, plan fiduciaries and IRAs to abide by a ‘fiduciary’ standard—putting their clients’ best interest before their own profits.”

HSA account owners are affected in several ways. First, an HSA can be utilized as a retirement account – like a 401(k) – and account owners can invest their funds once they meet their administrators’ minimum threshold. Plus, they incur annual fees from HSA mutual fund options in addition to account administration fees, which is where the possible conflicts of interest can come into play, according to SHRM.

There are some clear distinctions to how information is delivered. When the investment education becomes investment advice, or if the advisor stands to profit in some way from the information, then the line is crossed. For example, an employer or advisor is prohibited from steering the investor toward a specific vendor due to a revenue sharing agreement. However, information that is passed along without endorsement is acceptable.

The best interest standard goes into effect in April 2017 with a transition period to January 2018. Once in effect, HSA account holders will have to be more thoughtful about their investment decisions, though they should now receive advice and information that minimizes concern that they’re being guided to profit someone else.

Finalized in April 2016, the new rule is the result of a multi-year regulatory project that the Department of Labor started in 2009 “to address the problems with conflicts of interest in investment advice, balancing the need to better protect retirement savings while minimizing disruptions to the many good practices and good advice that the industry provides.”

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