The proposed Taxpayer Assistance and Simplification Act of 2008 has a provision about Health Savings Accounts that has caused President Bush to threaten a veto.

Here's what is going on: Currently, if your employee health plan contains a Health Savings Account, the HSA is probably administered by a bank. You put money into the account, just like any other bank account, and you receive a debit card to use for applicable medical purchases, tax-free. But the bank doesn't monitor your spending to assure that you are using the account for medical purposes. My financial advisor told me he heard of someone using an HSA to buy a hot tub, saying it was "medically necessary." So the IRS wants the banks to make sure the HSA's aren't getting misused.

These new IRS regulations will mean a lot of extra administrative expense for the banks/HSA administrators, and more hassle for those of us with HSA's. No more debit cards. We will have to submit expenses for payment and wait for approval. Sounds like a giant pain to me.

For small business owners, this means the cost of HSA's will increase, and fewer small companies will provide them; this is why President Bush is threatening his veto. If passed, the bill would go into effect in 2011, giving the HSA administrators time to set up their new administrative rules.

I will keep you posted on this one.