[Federal Register Volume 69, Number 145 (Thursday, July 29, 2004)]
[Rules and Regulations]
[Pages 45237-45239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17259]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 721 and 724


Health Savings Accounts

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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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.

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

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

[[Page 45238]]

specific 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.

List of Subjects

12 CFR Part 721

    Incidental Powers.

12 CFR Part 724

    Pensions, Reporting and recordkeeping, Trusts and trustees.

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

0
For the reasons stated in the preamble, NCUA amends 12 CFR chapter VII 
as follows:

PART 721--INCIDENTAL POWERS

0
1. The authority citation for Part 721 continues to read as follows:

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


0
2. Amend Sec.  721.3 by revising paragraph (l) to read as follows:


Sec.  721.3  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.

PART 724--TRUSTEES AND CUSTODIANS OF PENSION PLANS

0
3. The authority citation for Part 724 continues to read as follows:

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


0
4. Revise the part heading for Part 724 to read as follows:

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

0
5. Amend Sec.  724.1 by revising the section heading and first two 
sentences to read as follows:


Sec.  724.1  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

[[Page 45239]]

receive 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. * * *

0
6. Amend Sec.  724.2 by revising the section heading and the 
introductory text to read as follows:


Sec.  724.2  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 Sec.  724.1 are met and the following 
additional conditions are met: * * *

[FR Doc. 04-17259 Filed 7-28-04; 8:45 am]
BILLING CODE 7535-01-P