closing an MSA?


G

ge

We currently have an MSA, and are considering switching to
an insurance plan that is not MSA-eligible. I haven't found
anything on what the rules are for terminating an MSA. My
guess is that it would have to be treated as a lump
distribution? Any information would be appreciated.

TIA,
George
 
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J

Jay

Let me try provoking discussion by making an observation.

Since IRS publication 969 is light on info about closing
down an Archer MSA account, I looked at form 8853 (and
instructions) for clues.

Consider a year in which:
- there are no contributions into the Archer MSA account.
- there are some distributions for qualified medical expenses.
For such a year, form 8853 does not ask about one's health
plan or one's work status. The "eligibility" issue appears
to arise only if one makes contributions during the year.

Does this indicate that one is allowed to drain the account
by applying it to qualified medical expenses without penalty
after becoming no longer qualified to make contributions? Is
there any other support for such a conclusion?
 
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G

ge

Jay said:
Let me try provoking discussion by making an observation.

Since IRS publication 969 is light on info about closing
down an Archer MSA account, I looked at form 8853 (and
instructions) for clues.

Consider a year in which:
- there are no contributions into the Archer MSA account.
- there are some distributions for qualified medical expenses.
For such a year, form 8853 does not ask about one's health
plan or one's work status. The "eligibility" issue appears
to arise only if one makes contributions during the year.

Does this indicate that one is allowed to drain the account
by applying it to qualified medical expenses without penalty
after becoming no longer qualified to make contributions? Is
there any other support for such a conclusion?
Per my MSA trustee, your interpretation is correct: the only
time 'eligibility' matter is when you make a contribution.
Once money is in the account, tax-free distributions can be
made at any time, for qualified medical expenses. Any other
distribution would be subject to tax penalty.

George
 

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