A. Notwithstanding paragraphs C, D, E, and F of this section, an eligible individual may withdraw money from their health savings account for any purpose other than a purpose described in Section 6060.17 of this title.

B. If the eligible individual withdraws money for any purpose other than a purpose described in Section 6060.17 of this title, at any other time, all of the following shall apply:

1. The amount of the withdrawal is income for the purposes of the Oklahoma Income Tax Act in the tax year of the withdrawal; and

2. The tax imposed on the withdrawal which is includable in income shall be increased by ten percent (10%) of the amount which is so includable.

C. The amount of disbursement of any assets of a health savings account pursuant to a filing for protection under Section 101 of Title 11 of the United States Code by an eligible individual or person for whose benefit the account was established is not considered a withdrawal for purposes of this section. The amount of a disbursement is not subject to taxation under the Oklahoma Income Tax Act and subsection B of this section does not apply.

D. The transfer of an eligible individual's interest in a health savings account to an eligible individual's spouse or former spouse under a divorce or separation instrument shall not be considered a taxable transfer made by such eligible individual, notwithstanding any other provision of this title, and the interest shall, after the transfer, be treated as a health savings account with respect to which the spouse is the eligible individual.

E. Upon the death of the eligible individual, the trustee or custodian shall distribute the principal and accumulated interest of the health savings account to the estate of the deceased.

F. If an employee becomes employed with a different employer that participates in a health savings account program, the employee may transfer their health savings account to that new employer's trustee or custodian, or to an individually purchased account program.

Added by Laws 2005, c. 306, § 5, eff. Nov. 1, 2005. Amended by Laws 2007, c. 269, § 4, emerg. eff. June 4, 2007.