Questions and Answers

The Federal Deposit Insurance Corporation (FDIC) may insure Health Savings Accounts (HSAs) as revocable trust accounts, single accounts, or under the pass-through rules when an employer establishes an HSA for an employee.

One of the rules for revocable trust coverage requires that the title of the account must reflect the owner's intention that the funds will pass to the beneficiaries upon the owner's death. FDIC Advisory Opinion 05-06 states that this requirement can be satisfied through the use of commonly accepted terms such as “in trust for,” ”as trustee for,” “payable on death to,” or any corresponding acronym such as ITF, ATF, or POD. The account must also be structured so that the funds will pass to named qualifying beneficiaries upon the owner's death. Qualifying beneficiaries are the owner's spouse, children, grandchildren, parents, or siblings.

Revocable trust coverage provides $100,000 of coverage per qualifying beneficiary. If there are no beneficiaries or if all the rules for revocable trust coverage are not satisfied, the HSA will be covered by the rules for single accounts.

Examples of titles that should satisfy the deposit/share insurance rules for titling revocable trust coverage include:

•  ABC Bank, Custodian for the HSA of John Doe/POD Account
•  John Doe, Health Savings Account/POD Account
•  XYZ Credit Union, Custodian for the HSA of John Doe, POD Steven Doe and Susan Doe
•  John Doe, Health Savings Account, POD Steven Doe and Susan Doe

Examples of titles that should satisfy the deposit/share insurance rules for titling for single account coverage include:

•  John Doe, Health Savings Account
•  ABC Bank, Custodian for HSA of John Doe

All single accounts, such as savings, checking, Certificates of Deposit, established by, or for the benefit of, the same person are added together. The total is insured up to a maximum of $100,000.

These titling requirements create some risk for the financial organization. It is critical that any beneficiaries named at the investment level match the beneficiaries named at the plan level. Any inconsistencies could result in lawsuits and potential liability for the financial organization. To minimize these inconsistencies, a financial organization may want to consider the titling option:

•  XYZ Credit Union, Custodian for the HSA of John Doe/POD Account

Also consider listing the beneficiaries in a single location, such as on the HSA plan document.
Note: State law typically dictates whether POD accounts are available, which may determine whether titling for revocable trust purposes will include POD, ITF, or ATF.

Note also that state law will typically dictate whether an authorized signer can be assigned to a revocable trust account. In most states it is unlikely to be an issue. However, in Texas, for example, the definition of “convenience account” does not include a provision for a POD beneficiary. In such a circumstance it might be best to use a separate power of attorney to gain the additional signing authority.

For more information regarding how the FDIC insures the various deposit categories, go to the FDIC web site at www.fdic.gov. For similar NCUA information, go the NCUA web site at www.ncua.gov. For specific HSA titling guidance, refer to FDIC Advisory Opinion FDIC--05--06.

For deposit/share insurance purposes, including “HSA” in the investment title is recognized in the industry as a standard means of identifying the account type. For consistency, a financial organization may use the same titling for an overall HSA plan as well as each HSA investment under a plan. If such consistency is not possible, it is still appropriate to reference “HSA” in the title.

Ultimately it is up to the account owner to structure his/her accounts to ensure the desired deposit/share insurance coverage.