Can I still make qualified distributions from an HSA (Health Savings Account) if I am no longer eligible to contribute? Otherwise, what happens to any remaining balance in the HSA?

Example: Say I sign up for an HSA when I am eligible (covered under an eligible HDHP and whatnot), make a number of eligible contributions, and then a few years down the road (or even the next year) switch to a non-eligible healthcare plan (non-HDHP). I now (hypothetically) have money sitting in an HSA but I am no longer eligible to contribute. Can I still receive qualified, tax-free distributions from the HSA?


This is a question I asked myself while considering an HSA, and I couldn't find any answers, so now that I have one, I'm answering it myself.

I asked a family-friend/investment-banker about it, and he suggested you could only make distributions when on an eligible HDHP, but wasn't completely sure. I was about to post the question here to confirm or contradict his statement when I ran across IRS Publication 969 referenced in another SE question. In it, I found this statement under the 'Distributions From an HSA' heading:

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If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses.

Which indicates that you can still make qualified, tax-free distributions even when you are no longer eligible to contribute. (Unless someone else has evidence to the contrary)

  • 5
    The ability to use the funds months or years after the end of the calendar year, or even after retirement, is one of the strengths of the HSA. – mhoran_psprep Feb 11 '13 at 20:51
  • I can confirm I used one for distributions after changing to a ineligible non-HDHP, and though I'm not a tax expert, no conflicts arose in TurboTax when I filed my taxes this way (I did some basic research, too.). – Nicole Feb 12 '13 at 4:44

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