HSA Distributions and Withdrawals: The Rules

Short answer

An HSA distribution is money withdrawn from your health savings account. Unlike FSA money, HSA funds carry over with no spend-by deadline, so you can withdraw at any time. It just has to cover a qualified medical expense, with a letter if it needs one, to stay tax-free.

HSA withdrawals are straightforward because the money is yours. You own the account and the balance. There's no use-it-or-lose-it rule. The only requirement is that the expense qualifies under IRS Publication 502 or is approved with a letter of medical necessity. Your administrator pays you out of the account, and Burst files the claim on your behalf.

The path in five steps

Filing an HSA reimbursement claim follows a predictable sequence once you have the required documentation. Here's what happens from the moment you request a letter to the moment you get paid back. The IRS states it plainly: "Distributions from an HSA that are used to pay qualified medical expenses aren't taxed".

1. Request your letter of medical necessity if the expense needs one, or gather your receipt and any other required paperwork if the expense qualifies outright. Burst requests the letter on your behalf, and a licensed clinician reviews it and decides whether it qualifies.

2. Submit the letter (or documentation) along with your original receipt and a claim form to your HSA administrator. Most administrators let you file online through their portal, by mail, or by email. Burst handles this submission for you. You do not file with your plan yourself.

3. Your administrator checks the claim for completeness. If anything is missing, they send you a request for more information. This is called a documentation request. The clock stops while you provide what they ask for. Once your administrator has everything, the clock restarts.

4. Your administrator reviews the documentation and makes a decision. They compare the letter, receipt, and purchase date to their plan rules and IRS Publication 502. If everything matches, the claim is approved. If something doesn't match, they issue a denial.

5. If approved, your administrator issues payment. The money goes to your bank account by direct deposit or by check, depending on your preference. If denied, Burst writes an appeal on your behalf using the plan's own appeal rights. Your administrator then reviews the appeal and makes a final decision.

What the administrator asks for

Your HSA administrator needs specific documents to process your claim. The exact list depends on the expense and whether a letter is required. The most common documentation is an original receipt, a letter of medical necessity, and a completed claim form.

The original receipt

The receipt has to show the date of the purchase, the amount paid, and what was purchased. Many receipts from pharmacies, medical suppliers, and doctors' offices include all of this. Online receipts from medical retailers work too. If you use a payment card statement instead of a receipt, the statement has to list the merchant name, the date, and the amount. Bank statements without merchant details don't qualify. Email confirmations from online retailers usually work. The receipt or confirmation has to be an original document or a copy from the merchant, not handwritten. If you throw away the receipt and can't get another copy from the merchant, your claim will be denied.

The letter of medical necessity

A letter of medical necessity is required for expenses that do not obviously qualify under IRS Publication 502. Gym memberships need a letter. Vitamins need a letter. Certain medical equipment needs a letter. Prescription medications don't. They qualify on their own because they are on the IRS list. Dental work qualifies on its own. Vision care qualifies on its own. Many treatments do. A clinician reviews the medical evidence and determines whether the expense treats a diagnosed condition. The letter includes the clinician's name, signature, and license number. Your administrator uses it to decide whether to approve the claim.

The claim form

Your HSA administrator provides a claim form (sometimes called a reimbursement form or benefit claim form) on their website or by request. You fill out the form with your personal information, the date of the expense, the amount, and the type of expense. Then you attach the receipt and any letters. Burst fills out the claim form for you and submits everything to your administrator. You do not have to do this yourself.

Other documents

For some claims, your administrator may ask for an explanation of benefits (EOB) from your health insurance. This happens when the expense was also eligible under insurance and the administrator wants to confirm that your claim doesn't duplicate insurance coverage. Some administrators ask for a letter from your doctor or a prescription to confirm that an item is medically necessary. Burst provides these if they are needed.

Direct deposit versus check, and timing

Once your administrator approves your claim, payment is issued to you by direct deposit or check. The method and the timing are set by your administrator and your plan document.

Direct deposit

Most HSA administrators offer direct deposit. You provide your bank account and routing number, and the administrator deposits the approved amount. Direct deposit is faster and more reliable than check. Set up your direct deposit account information in your HSA account portal or on the claim form. Your administrator deposits the money within one to five business days after approval, depending on their process.

Check

If you prefer a check, or direct deposit isn't available, your administrator mails one to you. Checks typically arrive within 5 to 10 business days after approval. The time depends on your location and mail delivery. Checks are slower but still a valid payment method.

Timeline without invented numbers

There's no fixed timeline anyone can promise. The Department of Labor's own guidance on approved claims backs this up: "Plans are required to pay or provide benefits within a reasonable time after a claim is approved, though ERISA does not specify a time limit". The custodian pays the distribution by transfer or check once it approves the claim, and how long that takes depends on the custodian's own process and how complete your documentation is. If your custodian asks for more information, the clock stops while you respond. When a letter of medical necessity is involved, Burst files the claim for you. Your custodian still controls the decision and the payment.

Denials: common reasons and how appeals work

If your administrator denies your claim, the denial notice will state a reason. Understanding the reason tells you whether you can appeal or whether the claim isn't eligible.

Common denial reasons

• The receipt is missing or incomplete. The receipt doesn't show the date, amount, or merchant name. Solution: resubmit with a complete receipt.

• The expense isn't eligible under IRS Publication 502. Cosmetic procedures, general wellness products, and non-medical items are examples. Solution: if you have a diagnosed condition, request a letter of medical necessity and appeal with it.

• The letter of medical necessity was not provided. You submitted the receipt but not the letter. Solution: request the letter and resubmit with the appeal.

• The purchase date is after the letter date. A letter is dated on or before the purchase date, so you can only claim purchases from that date forward. Purchases before the letter date can't be claimed. Solution: the letter has to be dated before the purchase. If you bought before requesting the letter, that purchase can't be claimed.

• The expense exceeds the claim limit set by the plan document. Some plans cap reimbursement for certain items. Solution: check your plan document. If you disagree with the limit, you can appeal, but the limit is set by the plan, not by your administrator.

• Duplicate coverage. Your health insurance already paid for part or all of the expense. Solution: clarify with your insurance which amount was covered and resubmit with an EOB showing the insurance payment.

How appeals work

If your claim is denied, your plan document includes an appeal process. You have the right to appeal, and it's a real window, not a formality: federal guidance puts the minimum at "at least 180 days to file an appeal". An appeal is a written request asking your administrator to reconsider the denial. You submit the appeal to your administrator, usually through their portal or by mail. Burst writes the appeal for you using the plan's formal appeal process. The appeal is your chance to provide more information, correct a mistake, or challenge the denial reason.

Your administrator assigns the appeal to someone different from the person who made the original decision, since federal guidance requires your claim to be "reviewed by someone new who looks at all of the information submitted". This new reviewer looks at your original claim and your appeal. You can include a new letter, an updated receipt, or a written explanation. Your administrator makes a new decision and sends you the result. If they approve the appeal, you get paid. If they deny the appeal again, that's the end of the process under the plan. You can't appeal again. At that point, if you disagree, you can contact the U.S. Department of Labor with a complaint, but that's a separate process.

How Burst handles it for members

Burst files the reimbursement claim with your HSA administrator. You do not file with the plan yourself. Here's what Burst does at each step.

• You request your letter. Burst submits your request to a licensed clinician who reviews the medical evidence and decides whether the expense qualifies.

• Burst compiles your documentation. We gather the letter, your receipt, and any other required paperwork. We fill out your administrator's claim form with your information.

• Burst submits the claim to your administrator. We send everything through your administrator's portal, by mail, or by email, depending on how they accept claims.

• You respond to documentation requests. If your administrator asks for more information, they contact you directly. You respond to them. Burst doesn't stand between you and your administrator on documentation requests.

• Burst monitors the decision. We track the status and let you know when your administrator approves or denies the claim.

• If the claim is denied, Burst writes an appeal. We use your administrator's formal appeal process and submit an appeal letter with additional supporting information. You do not have to write it yourself.

The claim is between you, Burst, and your HSA administrator. Your administrator is the decision maker. Burst handles the submission, the paperwork, and the appeal if needed. You own the account and receive the payment.

Getting it reimbursed with Burst

When the answer is 'with a letter', this is the letter. Request it from Burst in about two minutes, a licensed clinician reviews it, and it's typically in your inbox within 24 hours. $35 once. Burst then files the reimbursement claim with your FSA, HSA or HRA administrator, and the administrator pays you out of your account by deposit or check. If no letter is issued you pay nothing, and if the claim is denied you get the $35 back. One timing rule: the letter has to be dated on or before the purchase it covers, so request it first.

Request my letter for $35

Frequently asked questions

What is an HSA distribution?

An HSA distribution is money withdrawn from your health savings account. You can distribute any amount at any time. To use it tax-free, the amount has to cover a qualified medical expense. Per the Form 8889 instructions, you must file Form 8889 with your Form 1040 if you received HSA distributions during the year.

Can I withdraw money from my HSA at any time?

Yes. HSA money is yours. You own the account and can withdraw it whenever you want. If you use the money for a qualified medical expense, it's tax-free. If you use it for anything else, you pay income tax on the amount and a 20% penalty (unless you're over 65 or disabled). There's no use-it-or-lose-it deadline.

What makes an expense qualify for HSA reimbursement?

An expense qualifies if it's on the IRS list (IRS Publication 502) or if a licensed clinician issues a letter of medical necessity explaining how it treats a diagnosed condition.

How long does it take to get reimbursed?

Your custodian controls the timeline, and there's no fixed number of days to expect. The custodian pays the distribution by transfer or check once it approves the claim. When a letter of medical necessity is involved, Burst files the claim for you. If your custodian asks for more information, the timeline extends.

What happens if my claim is denied?

Your administrator sends you a denial letter stating the reason. You have the right to appeal. Burst writes the appeal for you using your plan's formal appeal process. Your administrator assigns a new reviewer who reconsiders the decision.

Do I have to file the claim myself?

No. Burst files the claim with your administrator. You don't file with your plan. Burst handles the paperwork and submission. Your administrator contacts you directly if they need more information.

Keep reading: What Is an HSA?, HSA vs HRA: The Difference, All About Reimbursement and Claims, How Can I Reimburse Purchases from My HSA?, and all guides on this topic.

Sources

• IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans (HSA distribution rules, tax-free treatment for qualified medical expenses, the additional tax on non-qualified distributions, and confirmation that unspent HSA balances carry over year to year)

• Filing a Claim for Your Health Benefits (U.S. Department of Labor, Employee Benefits Security Administration) (claims procedures, documentation requests and the clock pausing while a plan waits for more information, appeal rights and deadlines, and the independent-reviewer requirement on appeal)

• IRS Instructions for Form 8889, Health Savings Accounts (HSAs) (reporting HSA distributions on your federal tax return)