Can Two Spouses Who Both Own HSAs Reimburse Each Other's Expenses?

This column is an excerpt (Question 103) from a book to be published later this year to help guide account owners, employers, benefits managers, and administrators understand Health Savings Account compliance issues. The format consists of a common question, an explanation in easy-to-understand English (often with an appropriate example), and a citation from government documents to support the answer. The book is designed to inform. It is not a legal document, and the contents should not be construed as legal advice.

Question: My wife and I both own Health Savings Accounts. Are we required to reimburse our own qualified expenses from our own accounts?

 Answer: No. You are not required to reimburse your expenses from your own account. If you’re married, you can reimburse your own or your spouse’s qualified expenses tax-free (see Question 102), and your spouse can do the same. But make sure that you don’t reimburse the same expense from both accounts.

 Example: Bob and Mary are married. Both own Health Savings Accounts. Bob uses the debit card attached to his account to pay for his own and Mary’s prescriptions. Mary, who pays the family bills, writes her Health Savings Account card number on the bill from Bob’s primary-care physician to pay his expense. These transactions are qualified because the account owners are married and thus can reimburse each other’s qualified expenses tax-free from their respective accounts.

 Tips

• Owning two Health Savings Accounts may require paying two sets of fees. If you (not your respective employers) pay those fees, be sure to keep an adequate balance in each account to avoid monthly administrative fees (if your account providers waive fees with certain balances, as many do). And if the balance in one account falls below that level and the owner is no longer eligible to make additional contributions, consider spending that balance and closing the account to avoid paying ongoing fees.

• Don’t forget that a Health Savings Account owner can’t reimburse her own or her spouse’s Medicare premiums until the owner herself turns age 65 (see Question 83). If the younger spouse has the higher Health Savings Account balance, you want to make sure that the account owned by the older spouse has sufficient balances to pay Medicare premiums until the younger spouse turns age 65. To preserve funds, it may make sense for the younger spouse to reimburse all the older spouse’s qualified expenses other than Medicare premiums from her Health Savings Account. That way, the older spouse can preserve his balances to reimburse his Medicare premiums tax-free until the younger spouse turns age 65 and can reimburse both spouses’ Medicare premiums tax-free.

 IRS Notice 2004-50:

 Q-38. If both spouses have HSAs and one spouse uses distributions from his or her HSA to pay or reimburse the section 213(d) qualified medical expenses of the other spouse, are the distributions excluded from the account beneficiary’s gross income under section 223(f)?

A-38. Yes. However, both HSAs may not reimburse the same expense amounts.

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The content of this column is informational only. It is not intended, nor should the reader construe the content, as legal advice. Please consult your personal legal, tax, or financial counsel for information about how this information applies to you or your entity.

HSA Question of the Week is published every week, alternating every other Wednesday with HSA Wednesday Wisdom and every other Monday with HSA Monday Mythbuster.