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September 23, 2019

On September 10, the Department of Labor’s Wage and Hour Division (DOL) issued an opinion letter addressing employer contributions to employees’ health savings accounts (HSAs) and the Consumer Credit Protection Act (CCPA). The opinion letter clarifies that as long as an employer does not determine its HSA contribution on the value of an individual employees’ services and does not give employees the option to receive cash in lieu of an HSA contribution, an employer’s HSA contributions are not considered earnings under the CCPA.

The CCPA limits the amount of an individual’s earnings that may be garnished for any workweek. 15 U.S.C. § 1672. In the opinion letter, DOL considers whether employer HSA contributions constitute “earnings” by comparing such contributions to compensation (e.g., wages, salaries, commissions, and bonuses). There are two characteristics of compensation that DOL used to distinguish HSA contributions from earnings. First, HSA contributions are typically a fixed amount that is predetermined annually and not based on the value of an employee’s services. An employer is not contributing to an employee’s HSA to directly compensate the employee for the value of their services. Second, HSA contributions pass through a trust and are not part of an employee’s take-home pay. An employer’s HSA contributions are not available to an employee before the trust account and are limited because they are subject to income tax and a penalty when used for anything other than qualified medical expenses. 26 U.S.C. § 223.

DOL concludes that employers should not include HSA contributions when calculating an employee’s disposable earnings for the purposes of determining the maximum amount of an employee’s pay that can be garnished under the CCPA.