Distributions & Account Holder Responsibilities
- Qualified medical expenses are expenses paid by the accountholder for diagnosis, cure, alleviation, treatment, or prevention of disease. Examples of these expenses are certain over-the-counter and prescription drugs, transportation to care providers, qualified long-term care expenses, and certain health insurance premiums. Such expenses are "qualified medical expenses" only if they are ineligible for insurance or any other type of coverage. For more information, visit www.irs.gov/pub/irs-pdf/p502.pdf.
- Once your account is opened and you have made contributions, you can withdraw funds from the HSA at any time.
- An HSA is tax-free and distributions are not included in gross income if used for qualified medical expenses. Earnings on money in the HSA are not considered part of your gross income.
- Funds withdrawn from an HSA that are used exclusively to pay for the qualified medical expenses of the accountholder, spouse, or dependents, are tax exempt and not included in gross income. In general, funds retained 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 to make contributions to the HSA. Any amount of the funds withdrawn are not used exclusively to pay for qualified medical expenses of the accountholder, spouse or dependents is includable in the gross income of the accountholder. Such distributions are subject to an additional 10% tax on the amount includable, except in the case of distributions made after the accountholder's death, disability, or attaining age 65.
- Medical services may be paid for with a Texas Trust Debit Mastercard, by check, by authorized ACH debit, or by cash withdrawal used for direct payment or reimbursement of the qualified medical expense.
- Yes, PIN-based withdrawals are allowed and will be considered as normal distribution requests for the member.
- Normal overdraft fees will be assessed for returned checks or rejected debit card transactions.
- IRS form 8889 must be completed with your tax return each year to report total deposits and withdrawals from your account. You do not have to itemize to complete this form.
- Distributions used exclusively to pay for qualified medical expenses are not taxed, whether or not the accountholder is eligible to contribute to an HSA at the time of distribution.
- Upon death, ownership of the HSA is transferred to your designated beneficiary.
- Upon death, any balance remaining in the accountholder's HSA becomes the property of the individual named in the HSA instrument as the beneficiary of the account. If the accountholder's surviving spouse is the named beneficiary of the HSA, the HSA is treated as though the surviving spouse were the accountholder, and distributions used for qualified medical expenses are not subject to income tax. If, by reason of the death of the accountholder, the HSA passes to a person other than the accountholder's surviving spouse, the HSA ceases to be an HSA as of the date of the accountholder's death, and the person is required to include n their gross income the fair market value of the HSA assets as of the date of death.
- As the HSA accountholder, you must ensure that distributions are used for qualified medical expenses. Records of medical expenses should be maintained as evidence that distributions have been made for these purposes. You are responsible for ensuring contributions to the HSA do not exceed the maximum limits.
- Since you are the owner of the HSA, you may continue to maintain the account if you change employers. However, if your HSA was opened mid-year and you cease to be covered by a HDHP before 12 months have passed since the end of the plan-year in which your HSA was opened, all contributions will be considered as taxable income and if you are under 65, will be subject to an additional 10% penalty.
- Statements are available according to the ordinary Texas Trust schedule of statement mailings for the account type selected, and subject to account activity levels. E-statements are available at no additional charge.
- No. Qualified medical expenses may only be reimbursed, tax-free, if the expenses are incurred after the date your HSA was opened.