Okla. Stat. tit. 63, § 63-2623

A. For taxable years beginning after December 31, 1995, an

individual who is a resident of this state or an employer shall be

allowed to deposit contributions to a medical savings account. The

amount of deposit for the first taxable year subsequent to the

effective date of this act shall not exceed:

1. Two Thousand Dollars ($2,000.00) for the account holder;

2. Two Thousand Dollars ($2,000.00) for the spouse of the

account holder; and

3. One Thousand Dollars ($1,000.00) for each dependent child of

the account holder.

B. The maximum allowable amount of deposit for subsequent years

shall be increased annually by a percentage equal to the previous

year's increase in the national Consumer Price Index (CPI).

C. Contributions made to and interest earned on a medical

savings account shall be exempt from taxation as adjusted gross

income in this state as provided for in Section 2358 of Title 68 of

the Oklahoma Statutes.

Oklahoma Statutes - Title 63. Public Health and Safety Page 1414

D. Upon agreement between an employer and employee, an employee

may either have the employer contribute to the employee's medical

savings account under a medical savings account program or continue

to make contributions under the employee's existing health insurance

policy or program, subject to the restrictions in paragraph 1 of

subsection E of this section. For purposes of the Medical Savings

Account Act, an employer shall include a participating employer as

defined in the Oklahoma State Employees Benefits Act.

E. The medical savings account shall be established as a trust

under the laws of this state and placed with a trustee.

1. The trustee shall utilize the funds held in a medical

savings account solely for the purpose of paying the eligible

medical expenses of the account holder or the dependents of the

account holder or to purchase a health benefit plan, certification,

or contract if the account holder does not otherwise have health

insurance coverage. Funds held in a medical savings account shall

not be used to cover medical expenses of the account holder or

dependents of the account holder that are otherwise covered by other

means, including but not limited to medical expenses covered

pursuant to an automobile insurance policy, a workers' compensation

insurance policy or self-insured plan, or another health coverage

policy, certificate, or contract.

2. The account holder may submit prior to the end of the tax

year documentation of medical expenses paid by the account holder

during that tax year to the trustee and the trustee shall reimburse

the account holder for eligible medical expenses from the medical

savings account.

3. Any funds remaining in a medical savings account at the end

of the tax year after all medical expenses have been paid unless

withdrawn as provided for in this section shall remain in the

account and may be used by the account holder for payment of future

medical expenses.

F. An account holder may withdraw money from the medical

savings account of the account holder for any purpose other than a

purpose listed in paragraph 1 of subsection E of this section, only

on the last business day of the trustee's business year. If money

is withdrawn on that date, pursuant to this subsection, it shall be

considered income for income tax purposes and shall not be eligible

for the exemption provided in Section 2358 of Title 68 of the

Oklahoma Statutes.

G. If the account holder withdraws money for any purpose, other

than a purpose described in paragraph 1 of subsection E of this

section, at any time other than on the last business day of the

trustee's business year, all of the following shall apply:

1. The amount of the withdrawal shall be considered income for

income tax purposes and shall not be eligible for the tax exemption

provided in Section 2358 of Title 68 of the Oklahoma Statutes;

Oklahoma Statutes - Title 63. Public Health and Safety Page 1415
on E of this

section, at any time other than on the last business day of the

trustee's business year, all of the following shall apply:

1. The amount of the withdrawal shall be considered income for

income tax purposes and shall not be eligible for the tax exemption

provided in Section 2358 of Title 68 of the Oklahoma Statutes;

Oklahoma Statutes - Title 63. Public Health and Safety Page 1415

2. The trustee shall withhold and shall pay on behalf of the

account holder a penalty to the Oklahoma Tax Commission equal to ten

percent (10%) of the amount of the withdrawal; and

3. All interest earned on the account during the tax year in

which a withdrawal occurs shall be considered income for income tax

purposes.

H. Upon the death of the account holder, the account principal,

as well as any interest accumulated thereon, shall be distributed to

the estate of the account holder and shall be taxed as part of the

estate.

I. If an employee is no longer employed by an employer that

participates in a medical savings account program and the employee,

not more than sixty (60) days after the final day of employment,

transfers the account to a new trustee or requests in writing to the

trustee of the former employer that the account remain with that

trustee and that trustee agrees to retain the account, the money in

the medical savings account may be utilized for the benefit of the

account holder or the dependents of the account holder subject to

this act, and the money shall remain exempt from taxation pursuant

to Section 2358 of Title 68 of the Oklahoma Statutes. Not more than

thirty (30) days after the expiration of the sixty-day transfer

period, if the account holder has not transferred the account or the

trustee has not accepted the account of the former employee, the

employer shall mail a check to the last-known address of the former

employee in an amount equal to the amount in the account on the date

the check is mailed. The amount shall be taxed and subject to

penalty as provided for in subsection G of this section. If an

employee becomes employed with a different employer that

participates in a medical savings account program before the

expiration of the sixty-day transfer period, the employee may

transfer the medical savings account to the trustee of the new

employer without penalty.