Questions and Answers
An HSA owner is age 63. His wife is age 62. His current HSA balance is $5,000. They are considering replacing their high-deductible health plan (HDHP) with traditional coverage. What options do they have with the HSA balance besides freezing the account or taking a taxable distribution?
An HSA owner may use HSA assets to pay for or reimburse eligible medical expenses, even if he/she is no longer eligible to contribute to an HSA.
IRS Notice 2004-2, Q&A-25 states, “Distributions from an HSA used exclusively to pay for qualified medical expenses of the account beneficiary, his or her spouse, or dependents are excludable from gross income. In general, amounts in an HSA can be used for qualified medical expenses and will be excludable from gross income even if the individual is not currently eligible for contributions to the HSA.”
(Posted: 03/05/2008)
