Refund from HSA Overpayment

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Topic Author
bene1
Posts: 93
Joined: Mon Jul 13, 2015 12:44 pm

Refund from HSA Overpayment

Post by bene1 » Wed Sep 11, 2019 11:15 am

Hello. I pay current medical expenses from my HSA. My usual process is to receive medical services, then the provider submits a claim to insurance, insurer sends me an EOB, provider sends me a bill for my portion, and I pay it via my HSA debit card.

During wife's pregnancy, she was referred to a specialist for a possible complication (everything ended up OK). The specialist required pre-payment for services (several hundred dollars). That kind of irked me, thinking "how do they know what we'll eventually be responsible for?" but we paid it with the HSA.

Many months later, now that the insurance claims have been reconciled, we got a refund check of $5.84 from the provider, for overpayment. As HSA distributions are supposed to go to medical expenses, what do we do?

1) Cash the check, but use it to offset some other, non-reimbursed medical expense. For example, buy some HSA-eligible prenatal vitamins for $15. Pay cash, save the receipt, and consider it partially reimbursed.
2) Cash it and at tax time, report that $5.84 of distributions were use for non-qualified expenses and pay a tiny penalty.
3) Deposit it back to HSA and somehow get custodian to NOT credit it as a new contribution.
4) Just cash it and don't worry about it.
5) Something else...

Number 1 seems the best. Any potential issues to consider? Thanks.
Last edited by bene1 on Wed Sep 11, 2019 11:48 am, edited 1 time in total.

HomeStretch
Posts: 1497
Joined: Thu Dec 27, 2018 3:06 pm

Re: Refund from HSA Overpayment

Post by HomeStretch » Wed Sep 11, 2019 11:31 am

Agree, #1. You are the HSA record keeper so just keep good notes of qualified expenses in your HSA support file in case of IRS audit.

Spirit Rider
Posts: 11216
Joined: Fri Mar 02, 2007 2:39 pm

Re: Refund from HSA Overpayment

Post by Spirit Rider » Wed Sep 11, 2019 12:55 pm

bene1 wrote:
Wed Sep 11, 2019 11:15 am
3) Deposit it back to HSA and somehow get custodian to NOT credit it as a new contribution.
For future reference. It is called a return of mistaken distribution. However, I wouldn't do it for $5.84.
5) Something else...
Surely you are going to have a >= $5.84 qualified medical expense before the end of the year. Reimburse that expense less $5.84 from the HSA. Problem solved

Topic Author
bene1
Posts: 93
Joined: Mon Jul 13, 2015 12:44 pm

Re: Refund from HSA Overpayment

Post by bene1 » Thu Sep 12, 2019 10:44 am

Spirit Rider wrote:
Wed Sep 11, 2019 12:55 pm
For future reference. It is called a return of mistaken distribution. However, I wouldn't do it for $5.84.
Thanks. I hadn't come across that before.

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