Reimbursing old HSA expenses from new custodian

[slbnoob]

I changed jobs recently and transferred over my HSA assets from my previous employer's custodians (HSA Bank) to my current employer's custodian (UMB). I asked UMB about a way to import/transfer over HSA expenses records from my previous custodian. If that is not possible, at least a way to enter the expenses (manually, aggregated) so that I have the records in 1 place and I can reimburse myself for any eligible expenses.

UMB gets back to me (over 2 responses):
"I can confirm that you are unable to reimburse qualified medical expenses that were incurred prior to the establishment of your current HSA. This means that since your current HSA with UMB Bank was established effective 01/01/2018, eligible medical expenses incurred prior to this would not be eligible for reimbursement from that account. Had you wanted to reimburse your prior eligible expenses you would have needed to do so from those funds you had in your prior HSA before you completed the account transfer."

Does this sound correct? From my understanding, my HSA expenses should be reimbursable from wherever I have my HSA account. I have had an HSA continuously since 2012 and the expenses are eligible for reimbursement.

[jhfenton]

Does this sound correct? From my understanding, my HSA expenses should be reimbursable from wherever I have my HSA account. I have had an HSA continuously since 2012 and the expenses are eligible for reimbursement.

It is not correct from a tax perspective. You are free to reimburse expenses dating back to the original establishment of your HSA.

Their system, though, may have the limitation that it will not pay out for expenses dated before the establishment of the account with them. The only work-around might be to put in an incorrect date (i.e. put 01/01/2018 for all expenses dated before that date). The dates you give the HSA are just for your records. They are not passed on to the IRS.

[mariezzz]

They're incorrect.
I switched to SelectAccount (which is now called Further, a rather stupid name change) and was able to reimburse old expenses. You could email them and tell them to fix their software (I'd email rather than call to create a written trail of your correspondence).

You can reimburse yourself for any expenses incurred after the time the original HSA was initially set up, up to the value of the funds that were deposited into that account plus any new funds you deposit. It's possible they transferred information incorrectly about when the original HSA was set up.

If you do have to use a different date from the date the expense was occurred, be sure to document the real date in the comments field, to help you keep your records straight.

[TropikThunder]

Does this sound correct? From my understanding, my HSA expenses should be reimbursable from wherever I have my HSA account. I have had an HSA continuously since 2012 and the expenses are eligible for reimbursement.

I’ve not had to reimburse myself for prior expenses yet, but since I changed HSA custodians this year, I’m following this thread. What the new custodian might be saying is that their system cannot submit payment to a provider for a charge from before the new HSA was open (software limitation?) but could you just make an ATM withdrawal from the HSA debit card? You don’t have to tell the ATM machine what the money is for.

[Spirit Rider]

"I can confirm that you are unable to reimburse qualified medical expenses that were incurred prior to the establishment of your current HSA. This means that since your current HSA with UMB Bank was established effective 01/01/2018, eligible medical expenses incurred prior to this would not be eligible for reimbursement from that account. Had you wanted to reimburse your prior eligible expenses you would have needed to do so from those funds you had in your prior HSA before you completed the account transfer."

I can confirm that the UMB CSR is absolutely wrong. HSA CSRs are often the worst source of HSA rules and regulations.

As long you do not have a > 18 month period with no balance in any HSA. You can reimburse qualified medical expenses from the establishment date of your first HSA account.

IRS Notice 2008-59, Q&A 41

Q-41. On what date is an HSA established if the account beneficiary had previously established an HSA?
A-41. If an account beneficiary establishes an HSA, and later establishes another HSA, any later HSA is deemed to be established when the first HSA was established if the account beneficiary has an HSA with a balance greater than zero at any time during the 18-month period ending on the date the later HSA is established.

[lstone19]

The responsibility for documenting the expenses lies with the HSA owner, not the custodian. While they might provide a place for you to indicate what a distribution is for, they should not be doing any validation or approval of it - if you ask for a distribution, they should just be sending it to you. If they require more documentation, consider changing custodians.

I keep my own records and intend to just ask for a large amount covering a number of expenses (typically a year's worth). I expect them to just send it. I don't believe their IRS reporting requirements differ depending on what you tell them (it will be reported as code 1 - Normal distribution). It's then up to you to properly report it on your tax return (form 8889).

[Spirit Rider]

While I agree in principle with what @lstone19 said.

Some HSA custodians have gone beyond what the IRS requires of them to implemented standard controls that protect the vast majority of HSA account owners from a 20% penalty on non-qualified distributions. In every HSA platform I have seen that restricts normal distributions based on certain criteria. They all allow you to knowingly make a cash distribution to yourself.

I do not think this is a good reason for changing custodians. They are providing a valuable benefit to their customers.

[lstone19]

Having steps in place to prevent you from making a mistake is fine. I recall a thread from a few months ago that implied (at least to me) that there was some custodian out there requiring documentation of every expense with no ability to just say "send me $1234.56". I forget the details of that post but it was enough to make me go check that I could get money out of my HSA the way I wanted to do it.

[illini]

Having steps in place to prevent you from making a mistake is fine. I recall a thread from a few months ago that implied (at least to me) that there was some custodian out there requiring documentation of every expense with no ability to just say "send me $1234.56". I forget the details of that post but it was enough to make me go check that I could get money out of my HSA the way I wanted to do it.

I just moved over to lively, but as far as I can tell, there's no way to do that, and inputting each transaction is fairly painful. I plan to just put in transactions for each year as I go through and hope they take that (i.e. 2018 - $3483).

[jhfenton]

Having steps in place to prevent you from making a mistake is fine. I recall a thread from a few months ago that implied (at least to me) that there was some custodian out there requiring documentation of every expense with no ability to just say "send me $1234.56". I forget the details of that post but it was enough to make me go check that I could get money out of my HSA the way I wanted to do it.

I just moved over to lively, but as far as I can tell, there's no way to do that, and inputting each transaction is fairly painful. I plan to just put in transactions for each year as I go through and hope they take that (i.e. 2018 - $3483).

There is nothing that stops you on Lively from putting in a single entry for the amount you want reimbursed, listing the medical providers as Various, and putting whatever date you want. All the detailed data you can enter is just for your records.