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Rule

Health Savings Accounts

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Information about this document as published in the Federal Register.

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AGENCY:

National Credit Union Administration (NCUA).

ACTION:

Final rule.

SUMMARY:

The NCUA is amending its regulations governing a federal credit union's (FCU) authority to act as trustee or custodian to authorize FCUs to serve as trustee or custodian for Health Savings Accounts (HSA). The NCUA is issuing this final rule so that FCUs and their members can take advantage of the authority granted in the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act). The Medicare Act authorizes the establishment of HSAs by individuals who obtain a qualifying high deductible health plan and specifies that an HSA may be established and maintained at an FCU. The final rule also amends NCUA's incidental powers regulation to include trustee or custodial services for HSAs as a pre-approved activity.

DATES:

This rule is effective July 29, 2004.

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FOR FURTHER INFORMATION CONTACT:

Ross P. Kendall, Staff Attorney, at the above address, or telephone: (703) 518-6562.

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SUPPLEMENTARY INFORMATION:

Background

On May 20, 2004, the NCUA Board requested comment on a proposed change to parts 724 and 721 of its regulations to permit federal credit unions (FCUs) to serve as trustee or custodian for health savings accounts (HSAs) established by their members. 69 FR 29907 (May 26, 2004). As authorized by Title XII of the Medicare Act, HSAs are available to anyone with a qualifying high deductible health plan. The NCUA proposed amending Part 724 of its regulations to specifically include HSAs in the listing of the types of accounts for which an FCU may fulfill the role of trustee or custodian on behalf of members. In addition, NCUA proposed to amend Part 724 to clarify that an FCU's authority to fulfill this role is not limited to pension or retirement accounts, but rather includes other Start Printed Page 45238specific types of tax advantaged savings accounts, such as Coverdell Education Savings Accounts and HSAs. The amendment also clarifies that HSAs are among the types of accounts for which a member may direct investment decisions. Finally, NCUA proposed to amend Part 721 to include serving as trustee or custodian for member HSAs within the category of activities in which an FCU may engage as a preapproved exercise of its incidental powers.

NCUA received six comments regarding the proposed changes from three federal credit unions, two national credit union trade associations, and one credit union service provider.

Summary of Comments

The commenters uniformly supported all aspects of the proposal. All commenters noted that the proposed amendments would provide FCU members with a viable, tax-advantaged option for obtaining health insurance and health care at a reasonable cost. Three commenters noted the importance of the proposal in assuring that FCUs can maintain parity with banks and thrifts, each of which are able to offer these types of accounts to their customers. Two commenters specifically approved of the proposal to broaden the rules to refer to “Tax Advantaged Savings Plans,” which they believe is more accurate and will allow for a more flexible approach toward offering similar types of savings plans that may become available in the future. Three commenters noted their agreement with the NCUA's assessment, as discussed in the preamble to the proposed rule, that FCUs should not have difficulty in handling the administrative duties associated with serving as account trustee or custodian, based on their experience with IRAs.

Additional Guidance

Additional information about HSAs, including important details concerning the type of high deductible health plan an individual must obtain to qualify for an HSA, is available from the Public Affairs Office of the U.S. Department of the Treasury. The Treasury Department has also developed proposed model forms for use in establishing an HSA. The information and the proposed forms are directly accessible from the Treasury Web site, http://www.ustreas.gov.

Final Rule

In view of the comments, NCUA is adopting the proposed amendments as a final rule without change.

Regulatory Procedures

Regulatory Flexibility Act

The final rule conforms current regulations to recent changes in the federal tax law and implements authority for FCUs to offer HSAs to their members. The Board has determined and certifies that the rule will not have a significant economic impact on a substantial number of small credit unions. Accordingly, the NCUA Board has determined that a Regulatory Flexibility Analysis is not required.

Paperwork Reduction Act

NCUA has determined that the proposed rule would not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget.

Executive Order 13132

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. The final rule would not have substantial direct effects on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this rule does not constitute a policy that has federalism implications for purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families

The NCUA has determined that this final rule would not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998).

Small Business Regulatory Enforcement Fairness Act

The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the Administrative Procedure Act. 5 U.S.C. 551. The Office of Management and Budget has determined that this rule is not a major rule for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.

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List of Subjects

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By the National Credit Union Administration Board, this 22nd day of July, 2004.

Becky Baker,

Secretary, NCUA Board.

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For the reasons stated in the preamble, NCUA amends 12 CFR chapter VII as follows:

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PART 721—INCIDENTAL POWERS

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1. The authority citation for Part 721 continues to read as follows:

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Authority: 12 U.S.C. 1757(17), 1766 and 1789.

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2. Amend § 721.3 by revising paragraph (l) to read as follows:

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What categories of activities are preapproved as incidental powers necessary or requisite to carry on a credit union's business?
* * * * *

(1) Trustee or custodial services. Trustee or custodial services are services in which you are authorized to act under any written trust instrument or custodial agreement created or organized in the United States and forming part of a tax-advantaged savings plan, as authorized under the Internal Revenue Code. These services may include acting as a trustee or custodian for member retirement, education and health savings accounts.

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PART 724—TRUSTEES AND CUSTODIANS OF PENSION PLANS

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3. The authority citation for Part 724 continues to read as follows:

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Authority: 12 U.S.C. 1757, 1765, 1766 and 1787.

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4. Revise the part heading for Part 724 to read as follows:

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PART 724—TRUSTEES AND CUSTODIANS OF CERTAIN TAX-ADVANTAGED SAVINGS PLANS

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5. Amend § 724.1 by revising the section heading and first two sentences to read as follows:

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Federal credit unions acting as trustees and custodians of certain tax-advantaged savings plans.

A federal credit union is authorized to act as trustee or custodian, and may Start Printed Page 45239receive reasonable compensation for so acting, under any written trust instrument or custodial agreement created or organized in the United States and forming part of a tax-advantaged savings plan which qualifies or qualified for specific tax treatment under sections 223, 401(d), 408, 408A and 530 of the Internal Revenue Code (26 U.S.C. 223, 401(d), 408, 408A and 530), for its members or groups of its members, provided the funds of such plans are invested in share accounts or share certificate accounts of the Federal credit union. Federal credit unions located in a territory, including the trust territories, or a possession of the United States, or the Commonwealth of Puerto Rico, are also authorized to act as trustee or custodian for such plans, if authorized under sections 223, 401(d), 408, 408A and 530 of the Internal Revenue Code as applied to the territory or possession under similar provisions of territorial law. * * *

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6. Amend § 724.2 by revising the section heading and the introductory text to read as follows:

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Self-Directed Plans.

A federal credit union may facilitate transfers of plan funds to assets other than share and share certificates of the credit union, provided the conditions of § 724.1 are met and the following additional conditions are met: * * *

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[FR Doc. 04-17259 Filed 7-28-04; 8:45 am]

BILLING CODE 7535-01-P