Distributions from your HSA used exclusively to pay for qualified medical expenses for you, your spouse, or dependents are excluded from your gross income. Your HSA funds can be used for qualified expenses and will continue to be free from federal taxes and states taxes (for most states) even if you are not currently eligible to make contributions to your HSA. If you take a non-qualified distribution, you are subject to ordinary income tax and a 20 percent penalty tax. If you are age 65 or older, disabled, or for the year in which you die, the 20 percent penalty may not apply.

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Can an Employee Drop a DCAP Election Midyear If Free Childcare Becomes Available?

Can an Employee Drop a DCAP Election Midyear If Free Childcare Becomes Available?

Question: One of our employees would like to drop his DCAP election under our calendar-year cafeteria plan because a neighbor ...

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