The LOB is proposing a process whereby the amount of an incoming EFT debit could be split, allowing a portion of the transaction to come from the HSA deposit account, and in the case that there were insufficient funds to cover the entire amount, allow the remainder of the funds to come from a HSA line of credit.

I know HSA's aren't covered under Reg E, but we afford the same coverage to these accounts, provide the same disclosures, thus we feel we need to comply with Reg E.

My concern is that when the transaction amount posts to the deposit account, it wouldn't match the actual amount of the transaction and may not meet periodic statement requirements under Reg E. They proposed a solution of including the full transaction amount in the description of the item on the statement, but will this work and satisfy all aspects of Reg E?

That's an intriguing question, and I'm responding with some random thoughts that should not be considered authoritative.

First, and at the risk of sounding ignorant, who or what is an LOB?

I assume that the purpose of this plan is to get around what everyone seems to agree is a prohibition against allowing an overdraft in an HSA.

What I'm not certain about is what your LOB thinks the HSA client will gain. Will he avoid IRS penalties? Have you run the idea past anyone with good working knowledge of the HSA regulations?

I'm not the one to go to for those answers. Perhaps someone else can shed light on how your strategy would interact with the HSA rules.

Sorry- LOB is Line of Business.

We have had outside counsel opine on the HSA requirements, which we are working around.

Thank you for taking a look at this.