Comment on FR Doc # 2010-15194

Under the proposed rules, disbursements of reimbursement funds from pre-tax flexible spending accounts (FSAs) for health care and dependent care expenses are excluded from the definition of prepaid program and will not fall within the regulatory strictures of the BSA. FSAs are part of a Section 125 Cafeteia Plan. In some situations Health Savings Accounts (HSAs) are also offered as part of a Section 125 plan. Many HSAs offer debit cards for reimbursements of medical expenses. These would meet the definition of a "prepaid access" and being subject to the proposed rules without an exception. The proposed regulations are silent on the treatment of HSAs. The regulations needs to address this ommission. The same rational that applies to excluding FSA from these rules, i.e, characteristics not condusive to money laundering or illicit behavior, applies to HSAs. This would be true whether the HSA contributions were pre-tax as part of a Section 125 Plan or after-tax to be claimed as a deduction on the individuals tax return. For these reasons, I think the exclusions under Section 103.11(uu)(4)(ii) should be expanded to also exculde HSAs from being a prepaid program. Additionally, the preamble to the proposed rules regarding excluding disbursements from FSAs from being subject to the rules has a mistaken reference to unused monies at the end of the calendar year being forfeited to the IRS. This is not correct. Unused amounts are, indeed, forfeited by the participant. But they do not go to the IRS. They can be used by the Employer to pay plan expenses or divided equally among all the plan participants.