Future HSA disbursement question

[tylerjw12]

I find it helpful to frame the HSA this way:

The HSA is not a relationship between you and your health plan or insurance carrier. It's a relationship between you and the IRS. You make contributions to you HSA pre-tax IFF you are enrolled in a qualified plan, per IRS parameters. Contribution limits are based on TAX year, not insurance plan year. You can spend your HSA dollars on qualified expenses you incur after you open up your account initially. Qualified expenses can be incurred by anyone in your tax household (again, relationship between you and IRS) even if they are on a different medical plan.

[DavidGlennCPA]

@spiritrider

You're correct, 401(k) plans and IRAs are also trusts but I think that you won't ever find the term "owner" in §401 or §408 referring to the employee or plan beneficiary.

In §408 they use the term "for the exclusive benefit of an individual" which I take to be synonymous with beneficiary.  They need to distinguish between the original beneficiary, the one contributing to the account, and that person's beneficiaries of the account later.

§401 uses the term "for the exclusive benefit of his employees or their beneficiaries".  Again, for the benefit of indicates to me a beneficiary.

When you have a 401(k) plan or IRA you're not the owner, the trust is.  The assets are being held for your benefit.  Just like when your rich Uncle leaves you your inheritance in a trust.  You might benefit from it and even have some control over it but you don't own it.

Keeping on the theme that 401(k) accounts and IRAs are held in trust, why do you think they're excluded from bankruptcy proceedings and generally protected from creditors?  Because they're not owned by the beneficiary.  Creditors might lay claim to distributions from these accounts but my understanding is that they can't actually reach into the accounts.

 

 

 

[CFEonline]

DavidGlennCPA wrote:

expenses being reimbursed had to have been incurred after the account opened from which it is being reimbursed

Click to expand...

When referring to the account being opened, is the account separate from the custodian? For instance, if one opened an account with Health Equity, and 10 years down the line opened one at Fidelity, transferred the funds, and closed the Health Equity account, are health care expenses incurred during those 10 years no longer reimbursable from the new Fidelity HSA?

[DavidGlennCPA]

I haven't seen any guidance on that specific situation but I would argue that it's really the same account even though it's now with a different custodian.

[spiritrider]

This is specifically addressed in IRS Notice 2008-59 Q&A 41. The establishment date is considered to be that of the first HSA establishment date as long as there has been no period exceeding 18 months with a $0 balance in all HSAs.

Q-41. On what date is an HSA established if the account beneficiary had previously established an HSA?
A-41. If an account beneficiary establishes an HSA, and later establishes another HSA, any later HSA is deemed to be established when the first HSA was established if the account beneficiary has an HSA with a balance greater than zero at
any time during the 18-month period ending on the date the later HSA is established.