Qualified HSA Distributions

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As explained in the IRS Notice 2007-22, cafeteria plan and HRA plan sponsors may take advantage of the Qualified HSA Distribution provisions in the Health Opportunity Patient Empowerment Act of 2006. The Qualified HSA Distribution allows an employee with a health FSA balance or an HRA balance as of September 21, 2006 to request a direct transfer from the FSA or HRA to his or her HSA. The maximum amount that may be distributed is the lesser of the employee’s balance on September 21, 2006 or his or her balance as of the last day of the plan year in which the Qualified HSA Distribution is requested. The request can only be made once and it must “zero out” the employee’s account. If the employee does not remain HSA eligible for the 12-month period beginning with the month in which the distribution is made, then taxes and penalties apply.

Plan sponsors wishing to make Qualified HSA Distributions of amounts remaining from a 2006 calendar year plan year must amend their plans by March 15, 2007. Thereafter, any plan sponsor wishing to take advantage of Qualified HSA Distributions must amend its plan by the last day of the plan year to which the distributions relate.

The package may be obtained from our Other Resources Web page and contains an amendment, adopting resolution, SMM and election form.