Under the new unclaimed property law, tax-deferred accounts could be presumed abandoned three years after the date “by which distribution of the property must begin to avoid a tax penalty,” two years after the date “of the required distribution as stated in the plan,” or two years after the date “by which distribution of the property must begin in order to avoid a tax penalty.” How can we calculate those dates for health savings accounts?

Those dates are inapplicable to health savings accounts (HSAs).

HSAs are governed by a section of the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA) that covers a wide range of tax-deferred accounts, including HSAs. It provides for five separate possible abandonment periods for such accounts, but not all of the possible abandonment periods are applicable to HSAs. In fact, only two of the possible abandonment periods could apply to an HSA.

The three abandonment periods referenced in your question are inapplicable to HSAs — because HSAs are not subject to mandatory distributions, there is no “required distribution” date stated in the plan, nor is there any date by which distributions must be made to avoid tax penalties. Consequently, HSAs are subject to only two of the five possible abandonment periods for tax-deferred accounts: the earlier of “30 years after the date the account was opened,” or, in cases where the owner has died, “2 years from . . . the date of the distribution or attempted distribution of the property.”

Note that if an HSA owner has died, the HSA also could be presumed abandoned two years after the owner’s last indication of interest in the account. Additionally, a beneficiary or new owner of the HSA could make indications of interest in the account that would prevent it from being presumed abandoned.

For resources related to our guidance, please see:

Illinois RUUPA, 765 ILCS 1026/15-203 (“When other tax-deferred account presumed abandoned.

(a) Subject to Section 15-210 and except for property described in Section 15-202, property held in an account or plan, including a health savings account, that qualifies for tax deferral under the income-tax laws of the United States is presumed abandoned if it is unclaimed by the apparent owner 3 years after the earlier of:

(1) the date, if determinable by the holder, specified in the income-tax laws and regulations of the United States by which distribution of the property must begin to avoid a tax penalty, with no distribution having been made; or

(2) 30 years after the date the account was opened.

(b) If the owner is deceased, then property subject to this Section is presumed abandoned 2 years from the earliest of:

(1) the date of the distribution or attempted distribution of the property;

(2) the date of the required distribution as stated in the plan or trust agreement governing the plan; or

(3) the date, if determinable by the holder, specified in the income tax laws of the United States by which distribution of the property must begin in order to avoid a tax penalty.”)

Illinois RUUPA, 765 ILCS 1026/15-201 (“Notwithstanding anything to the contrary in this Section 15-201, and subject to Section 15-210, a deceased owner cannot indicate interest in his or her property. If the owner is deceased and the abandonment period for the owner’s property specified in this Section 15-201 is greater than 2 years, then the property, other than an amount owed by an insurance company on a life or endowment insurance policy or an annuity contract that has matured or terminated, shall instead be presumed abandoned 2 years from the date of the owner’s last indication of interest in the property.”)

Illinois RUUPA, 765 ILCS 1026/15-102(21) (“‘Owner’, unless the context otherwise requires, means a person that has a legal, beneficial, or equitable interest in property subject to this Act or the person’s legal representative when acting on behalf of the owner. The term includes: . . . (B) a beneficiary, for a trust other than a deposit in trust; . . .”)