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MILWAUKEE – Credit unions may have to significantly change their standard approaches if they want to take advantage of the burgeoning market in health savings accounts, according to John Reynolds, president of Metavante Healthcare Payment Solutions, one of the new firms offering specialized services in the new payments area. The shift may be necessary because right now the only model for how a CU can market HSAs is where the CU offers the accounts directly to its members directly, Reynolds said. In that model, the retail model, a credit union might set itself up to be able to offer HSAs with the help of a firm like Metavante and then market them to its own members or to individuals in its own field of membership. But in the wholesale model, which would likely be even more applicable to many credit unions, a CU would establish the ability to offer HSAs and then approach a third-party benefits provider who already had relationships with a number of employers or approach its select employee groups directly and offer its services. The CU would have to pay additional attention because HSAs are, unlike other sorts of deposit accounts, to some extent cooperative products depending on the relationship between the individual credit union member, his or her employer, the credit union and maybe one or more third-party vendors. HSAs are a type of depository account in which an individual can set aside money as part of their pre-tax wages in order to have savings for health care needs. Similar accounts have been authorized to help employees save pre-tax money on transportation and dependent care. These types of accounts are very popular with employers as well as employees since they cut the tax burden both carry on wages. Reynolds said that once a credit union decides to begin offering HSAs, it may also find itself having to offer securities and other financial vehicles that it may not have begun to offer previously. Unlike the so-called flexible spending accounts, with which they are often confused, HSAs do not have to be emptied each year, nor is the money forfeited back to the employer. HSAs are and remain the property of the individual employee and can be expected to grow year to year if there is no call to spend the funds. This means that HSA owners often look for better rates than other depository accounts might offer, Reynolds explained. “I think many people have come to see them almost as healthcare 401(k)s,” Reynolds said, “investment accounts only for healthcare and not for retirement. Those sorts of accounts need investment strategies.” Reynolds said that once a credit union began offering the accounts, their reporting and regulatory burden is pretty minimal. There is a notice that the credit union will have to file each year with the Internal Revenue Service and with the account holder that indicates how much the account holder has spent from the account that year. More importantly, Reynolds explained, the credit union is not required to keep track of how the account holder spends the money. In other words the credit union does not have to check that the money has been spent on health care needs and not on other things. “The ultimate responsibility for how the money is spent is with the account holder,” Reynold’s said, though he explained that third-party vendors which can provide debit cards attached to the accounts can set the cards so they will only recognize merchant codes in the health care field. “Though even that can provide a lot of gray area,” he added. He used the example of a Target or Eckerd or other chain drug store or general retailer, which has a pharmacy but also sells a lot of other merchandise. Someone could use their HSA money to pay for a prescription as well as other goods and it would be up to the person to keep track of the purchases, he explained. Third-party vendors of HSA-related services, such as Metavante, can help in that they can offer the CU products, such as debit cards, for the HSA accounts. For example, should a credit union start offering HSAs and should it have a SEG that also wants to offer one of the depository benefit accounts, such as the transportation spending account, Metavante can offer a debit card, which is tied to both accounts. In that circumstance Metavante can even offer the back office accounting that will recognize that a charge at a gas station involves the transportation account and a transaction at a drug store goes against the HSA. The bottom line is that HSAs are a growing market in the payments world and credit unions should start looking into how they can offer them, including contacting their SEGs and exploring whether they would want to offer the accounts to their employees. Employers are particularly open to the accounts, Reynold’s said, because they have the overall effect of reducing healthcare costs and making them overall more predictable. -

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