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#2165422 - 02/22/18 03:15 PM Garnishment/Levy Against HSA Account
Compliance Ben Offline
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Our state (KY) has recently passed a new law (amendment to KRS 427.010, section 1), health savings accounts (HSAs) are now exempt from standard orders of garnishments. However, I cannot find any guidance about what to do when the garnishment comes from a child support enforcement authority or the federal government. Typically, these garnishment orders arrive with a notice giving the bank permission to take money from protected benefits payments in order to pay the order. However, the notices have not been updated to say anything about health savings accounts. Since they do not mention it, we have interpreted this to mean WE CANNOT garnish HSAs, even when the order comes from child support enforcement accompanied by the notice (since it does not speak to HSAs). Levies from the federal government/IRS are another matter; I don't see how state law can protect HSAs from federal levies (see IRS Memorandum 200927019).

Our Legal Department isn't sure how to handle these, so they are sending out letters to the accountholder using the same model form language as that found in Appendix A of 31 CFR 212, informing them about the attempted garnishment and that their funds were protected. However, the language in the notice talks about protected amounts based on benefits payments, which is not the case for HSAs. My question is, is this appropriate? Or should we just refuse the garnishment order due to protected funds and not send a notice to the accountholder other than the standard notification (no model notice from 31 CFR 212)? Any thoughts or references that anyone might share with me, I would greatly appreciate!

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General Discussion
#2165428 - 02/22/18 03:31 PM Re: Garnishment/Levy Against HSA Account Compliance Ben
rlcarey Online
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rlcarey
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Galveston, TX
Our Legal Department isn't sure how to handle these......

And you are asking us??? If you have a Legal Department, why aren't they on the phone with the Attorney General and getting an opinion if it is that confusing?
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#2165432 - 02/22/18 03:46 PM Re: Garnishment/Levy Against HSA Account rlcarey
Compliance Ben Offline
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Our Legal Department is pretty minimal; they aren't attorneys. They basically just produce documents in response to subpoena service and execute orders of garnishment/levies.

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#2165438 - 02/22/18 04:12 PM Re: Garnishment/Levy Against HSA Account Compliance Ben
BrianC Online
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To Randy's point. We are not attorneys either so we cannot comment on state law.
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#2165441 - 02/22/18 04:38 PM Re: Garnishment/Levy Against HSA Account Compliance Ben
rlcarey Online
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Galveston, TX
You also do not need to be an attorney to call the AG's office.
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#2165445 - 02/22/18 04:44 PM Re: Garnishment/Levy Against HSA Account Compliance Ben
Compliance Ben Offline
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OK, I was just wondering if the issue had come up with anyone else. Thank you for your help.

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#2166270 - 03/01/18 03:59 AM Re: Garnishment/Levy Against HSA Account Compliance Ben
John Burnett Offline
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Cape Cod
The one thing we can tell you is that 32 CFR 212 isn't going to have anything to do with protecting the HSA accounts. It only applies to specific federal recurring payments deposited via ACH to a customer's account. And the notice on child support garnishments and IRS levies only applies to those same direct deposits.
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#2166658 - 03/05/18 04:18 PM Re: Garnishment/Levy Against HSA Account Compliance Ben
Compliance Ben Offline
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Thank you, John. That is actually very helpful!

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