Health Savings Accounts
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Distributions
Accountholders can take tax-free distributions for:
- Qualified medical expenses
- Long-term care insurance and services
- COBRA coverage
- Medicare expenses (not Medigap)
- Retiree health expenses for ages 65 and older
The HSA is completely separate from the HDHP. You can use the HSA funds tax-free for any medical
expense under section 213(d) of the Internal Revenue Code, except for health insurance premiums.
You may use distributions from an HSA to reimburse prior years’ expenses as long as
they were incurred on or after the date on which the HSA was established.
There is no time limit on when distributions must occur. You must keep
sufficient records to prove that the expenses were incurred for qualified medical expenses and
that they were not paid for or reimbursed by another source or taken as an itemized deduction.
Distributions made in error can be returned to the HSA to avoid the 10% excise tax provided that
you can show clear and convincing evidence that the distribution was a mistake of fact and you
certify as much to the custodian in writing. The account must be repaid by April 15 (or current tax filing deadline)
of the year following the year in which you knew or should have known the distribution was a mistake.
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