Most HSA rules and regulations are set at the national level by the IRS. In a federal republic, states sometimes alter the rules as they pertain to their individual state residents, but cannot change the federal rules for their state’s citizens.
Some states define income differently than the IRS. As a result, some income that may be tax free at the federal level may not be at the state level. The federal government does not tax qualified HSA contributions, distributions and rollovers from an Archer MSA to an HSA, but some states do. While these state laws are not necessarily a barrier to offering HSAs, such state laws could be considered a disincentive to having one.
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