Insurance premiums as a qualified medical expense

[DexEA]

Taxpayer wants to take funds from a HSA to pay for health insurance. She took early retirement and is only 57, so unless it is under COBRA or a continuation coverage plan, the fact that she is unemployed does not make this a qualified distribution because she is not receiving unemployment compensation under Federal or State law.

She was told by the plan administrator that she could, so has purposely saved years worth of her HSA funds for this purpose. Is the plan administrator incorrect, or possibly she heard only the word "unemployed" and just figured early retirement would leave her "unemployed".

Or am I missing something?

[mactoolsix]

She can pay health insurance premiums while receiving Federal or State unemployment compensation, L/T care premiums & COBRA (or continuation coverage) premiums from an HSA account. Obliviously these would not be deductible as a medical expense on Sch. A.

Since she is not receiving unemployment compensation, she can not use HSA funds to pay health insurance premiums unless it is continuation insurance. If she did use the funds for this purpose she has deemed distributions subject to an additional 20% tax.
Pub 569 page 8 http://www.irs.gov/pub/irs-pdf/p969.pdf

Mike

[DexEA]

That's what I thought

She can pay health insurance premiums while receiving Federal or State unemployment compensation, L/T care premiums & COBRA (or continuation coverage) premiums from an HSA account. Obliviously these would not be deductible as a medical expense on Sch. A.

Since she is not receiving unemployment compensation, she can not use HSA funds to pay health insurance premiums unless it is continuation insurance. If she did use the funds for this purpose she has deemed distributions subject to an additional 20% tax.
Pub 569 page 8 http://www.irs.gov/pub/irs-pdf/p969.pdf

Mike

Thanks Mike!