Answers to tricky HR questions: The rules on HSA-based loans

Our team of experts fields real-life everyday questions from HR managers and gives practical answers that can be applied by any HR pro in the same situation. Today’s question: What are the IRS rules on employees using Health Savings Accounts as collateral for loans?
Question:
When we talked about trying Health Savings Accounts here and how they compare with other tax-deferred accounts, a question came up about IRS rulings on HSAs.Can employees use the money in HSAs as collateral for loans, say, for buying homes or financing education?
Answer:
No, they can’t, according to Edward Fensholt, an attorney and Director of Compliance Services with the firm of Palmer & Cay.
That’s one of a few differences between HSAs and some other types of tax-deferred investment accounts. At least that’s the situation now, as written by Congress and interpreted by the IRS.