health savings account question

[astroboy]

Hello all,

I'm getting ready to file a chapter 7 and I have a question about a health savings account I have through my employers health plan. The employer has been contributing $250 a month directly into the HSA. Does this $250 a month have to be reported as income for the means test and schedule I and J? It's not like I can just spend the money on anything, it has to be prescriptions, co-pays, etc.

Thanks.

-Nathan

[tobee43]

section 522 of the bankruptcy code. this means that a debtor with a health savings account or flexible spending account might find the funds liquidated by a chapter 7 trustee.

first it depends on your state, and or if you are filing federally. example..in ny state it's not allowable at all. first are you filing state or fed bk?

[tobee43]

sorry i wasn't done...each state has a list of property that is “exempt” -- meaning it is safe from the reaches of the bankruptcy trustee. there is also a set of federal bankruptcy exemptions. most states require debtors to use the state system of exemptions, but a few states allow bankruptcy filers to use the federal exemptions. you will need to check calif...or maybe if LadyInTheRed sees this she knows california exemptions i'm about certain.

[astroboy]

I'm in CA and CA has a pretty generous wildcard exemption. So I have more than enough exemptions to cover it. What I'm worried about is whether or not the money my employer put into it has to be declared as income on the means test and the schedule I.

[tobee43]

no no, not that type of exemption HSA and or MSA funds may depending on your state be considered an asset. there have been a few cases i believe in some certain states, such as idaho, have "opted out" of the federal exemption rule and do not allow bankruptcy filers to protect their HSAs from inclusion in the bankruptcy estate, although it does exempt payable health insurance benefits. florida, texas, tennessee, indiana, mississippi as well as other states specifically allow the HSA exemption. so you will need to check with california excemptions since i could not find that a HSA is exempt....doesn't mean it's not, just i can't find it. i hope Lady again, will see your thread and her input as she i believe is also in calif.

[tobee43]

i can only find IRAs nothing about HSA and or MSA ...that's why if anyone will know it will be LadyInTheRed. sorry i couldn't provide an exact answer.


in re MacIntyre, 74 F.3d 186 (9th Cir. 1996)

Cal legislature exempted ‘private retirement accounts’ from a debtor’s bankruptcy estate, and defined ‘private retirement accounts’ as (1) private retirement plans, (2) profit-sharing plans designed and used for retirement purposes, and (3) self-employed retirement plans and IRAS....(a)(3) is conditions “to the extent necessary” to provide for the retirement of the debtor and his dependents.
403(b) annuities are neither self-employed retirement plans nor IRAS thus not subject to 704.115(e) ‘extent necessary’ condition and are 704.115(1)(1) and thus fully exempt under 704.115(b)

[LadyInTheRed]

The question of whether the employer's contributions are consided income has nothing to do with property exemptions.

I don't really know the answer, but I suspect it is income for the means test and Schedule I.

[astroboy]

My employer tells me that is not taxable for Feds but is taxable in CA. With regards to exemptions, I should be able to use my wildcard exemption to exempt the account as long as it's within the limits right?

[astroboy]

So one paralegal I talked to says it is considered income, but other people say that it's considered benefits and not income as I wouldn't have a HSA if I weren't paying my health care premiums. Also, I can't just spend it on anything, it has to be for qualified healthcare expenses only.

[tobee43]

i would listen to the paralegal.

[astroboy]

Update. Got some help from the Orange County Public Law Center. Yes, the employers contribution is income as It's my bank account and my money to keep even after I leave the company. Also, money spent out of the HSA will go on schedule J under medical expenses.