How to re-deposit HSA overpayment?

[ArmchairMillionaire]

Dental care is very hard to come by in our area. Most places have over a year backlog for new customers. DW and I have both had to switch dentists lately due to one of ours semi-retiring and the other switching to being out-of-network. (We both have separate insurance providers through our employers) Both of these new providers have the unfortunate policy of making the customer pay when services are rendered. Then the insurance company sends us a paper check for the amount that they cover.

We've always used our HSA accounts to pay for our (always non-cosmetic) dental care. My HSA is through a bank with a local branch. Unfortunately, I'm no longer employed with the company that set up my HSA and my current employer's health plan does not qualify for HSA contributions (deductibles are too high) so I am no longer allowed to contribute to my HSA. DWs HSA is through some corporate entity out of Utah.

So my question is, what are we supposed to do with the re-imbursement checks? So far they've been under $100 but since they reflect an overpayment from our HSA, do we legally have to re-deposit this back into our separate HSA accounts? If we already deposited these into our personal checking accounts, (oops) is this considered a no-no by the IRS?

Any advice would be appreciated. Thank you.

 

[cathy63]

From now on, you should pay for dental care with non-HSA funds and then reimburse yourselves for the portion not covered by insurance by making a withdrawal from the HSA after you receive the insurance payment.

For the current situation, you should talk to the current HSA providers and see what their policy is for returning excess reimbursements to these accounts. It doesn’t matter if you still work there or not. They should have a way to handle this. Having deposited the checks into your own accounts doesn’t matter either.

If it has been less than 60 days you can also open a free HSA at Fidelity and do a rollover of the excess funds into that account. You must make sure that Fido codes it as a rollover, not a contribution. You can only do this once every 12 months so it’s not a repeatable solution, but it might get you out of a bind this time.

Otherwise if you don’t do anything, you have a non-qualified distribution which is taxable income.

 

[Kings over Queens]

as cathy said, check with the HSA for return of funds policy. they should have one. I had to do something similar with 529 distribution. it was a simple resolution to return the money.

at the same time, do you have any other HSA eligible expenses that have been harvested? you could always keep the funds as a reimbursement for those expenses.