       United States Bankruptcy Appellate Panel
                        For the Eighth Circuit
                    ___________________________

                            No. 13-6009
                    ___________________________

                        In re: Kirk Patrick Leitch

                          lllllllllllllllllllllDebtor

                         ------------------------------

                            Kirk Patrick Leitch

                    lllllllllllllllllllllDebtor - Appellant

                                      v.

                             Julia A. Christians

                    lllllllllllllllllllllTrustee - Appellee
                                 ____________

               Appeal from United States Bankruptcy Court
                for the District of Minnesota - Minneapolis
                               ____________

                         Submitted: June 26, 2013
                           Filed: July 16, 2013
                             ____________

Before FEDERMAN, Chief Judge, SALADINO and NAIL, Bankruptcy Judges.
                            ____________

SALADINO, Bankruptcy Judge
      Debtor, Kirk Patrick Leitch, appeals an order of the bankruptcy court1 dated
March 6, 2013, holding that the funds in his health savings account (“HSA”) are not
excluded from the bankruptcy estate pursuant to 11 U.S.C. § 541(b)(7)(A)(ii) and are
not exempt. For the reasons that follow, we affirm.

                                 BACKGROUND

       This appeal concerns $3,310.012 held in an HSA owned by Mr. Leitch at the
time he filed his voluntary Chapter 7 petition on November 24, 2012. Mr. Leitch is
employed as a police officer with the City of Mounds View, Minnesota. He and his
family are insured through a high-deductible health insurance policy offered through
his employer. Mr. Leitch also has an HSA, which he uses to pay his family’s medical
expenses up to the amount of the deductible under his health insurance policy. Mr.
Leitch listed the funds in his HSA on the date of bankruptcy filing as an asset on
Schedule B of his bankruptcy petition and asserted that the funds were excluded from
the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2). He subsequently amended
Schedule C, which amendment continued to assert that the funds were excluded from
the estate, but also provided the alternative assertion that the funds were exempt
pursuant to 11 U.S.C. § 522(d)(10)(C) and (11)(E).

       The Chapter 7 trustee objected to Mr. Leitch’s exclusion arguments and
exemption claims. For the first time, in Mr. Leitch’s response he argued his primary
position on appeal – that the HSA was excluded from the estate pursuant to 11 U.S.C.

      1
       The Honorable Kathleen Hvass Sanberg, United States Bankruptcy Court for
the District of Minnesota.
      2
       The HSA actually contained $8,686.13. Mr. Leitch also asserted his maximum
available wildcard exemption in the amount of $5,376.12, which was allowed by the
bankruptcy court and was not appealed by the trustee. Therefore, at issue in this
appeal are the remaining funds in the account, after application of the allowed
wildcard exemption.

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§ 541(b)(7)(A)(ii). The bankruptcy court held a hearing on March 6, 2013, and
issued an oral ruling rejecting Mr. Leitch’s arguments. This appeal followed.

                             STANDARD OF REVIEW

       The bankruptcy court’s findings of fact are reviewed for clear error and its
conclusions of law are reviewed de novo. First Nat’l Bank of Olathe v. Pontow, 111
F.3d 604, 609 (8th Cir. 1997). The bankruptcy court’s construction of a statute is a
question of law, subject to de novo review. In re Graven, 936 F.2d 378, 384-85 (8th
Cir. 1991).

                                   DISCUSSION

          Health savings accounts were created by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003. Pursuant to that Act, an HSA is “a
trust created or organized in the United States as a health savings account exclusively
for the purpose of paying the qualified medical expenses of the account beneficiary
. . . [.]” 26 U.S.C. § 223(d)(1). An individual can make contributions to an HSA only
if that individual is separately covered by a “high deductible health plan.” 26 U.S.C.
§ 223(c)(1)(A). A “high deductible health plan” is a health plan that requires
beneficiaries to pay a certain amount of out-of-pocket expenses before the insurance
plan begins picking up the tab. See 26 U.S.C. § 223(c)(2)(A).

      The beneficiary of an HSA has liberal access to the funds – indeed, the
beneficiary is entitled to distributions from the account for any purpose. See Treasury
Notice 2004-50, 2004 WL 1636921 at Q-79. However, the beneficiary will incur tax
penalties unless the funds are used for “qualified medical expenses,” which are
essentially costs of health care “not compensated for by insurance or otherwise.” 26
U.S.C. § 223(d)(2)(A).



                                         -3-
      In this appeal, Mr. Leitch first asserts that his “clearest and most concise
argument” is that the funds in his HSA are excluded from the bankruptcy estate
pursuant to 11 U.S.C. § 541(b)(7)(A)(ii), which provides in pertinent part as follows:

             (b) Property of the estate does not include –
                    ...
                    (7) any amount –
                          (A) withheld by an employer from the wages
                    of employees for payment as contributions –
                                   ...
                                   (ii) to a health insurance plan regulated
                          by State law whether or not subject to such
                          title[.]

      Mr. Leitch asserts that the HSA is excluded from the estate by 11 U.S.C. §
541(b)(7)(A)(ii) because the HSA is “a health insurance plan regulated by State law.”
He points to Minnesota statute 47.75 for state regulation, which statute provides in
pertinent part:

                   (a) A commercial bank, savings bank, savings
             association, credit union, or industrial loan and thrift
             company may act as trustee or custodian:
                           ...
                           (3) of a health savings account under the
                   Medicare Prescription Drug, Improvement, and
                   Modernization Act of 2003, as amended;
                           ...
                   (b) The trustee or custodian may accept the trust
             funds if the funds are invested only in savings accounts or
             time deposits . . ., except that health savings accounts may
             also be invested in transaction accounts. . . .

       That statute is found in the Financial Corporations portion of the Minnesota
statutes under a section entitled “Limited trusteeship.” The bankruptcy court held

                                          -4-
that Mr. Leitch failed to show that the HSA constitutes a health insurance plan
regulated by state law in accordance with the exclusion statute. In particular, the
bankruptcy court held that the state statute cited by Mr. Leitch, Minn. Stat. § 47.75,
simply identified which institutions can act as a trustee of certain types of accounts,
including health savings accounts, and identified how the funds could be invested.
We agree.

      An HSA is simply a trust account. The account beneficiary has unrestricted
access to the funds. The account beneficiary may receive certain tax benefits if the
beneficiary uses the funds for medical expenses, but that beneficial taxation does not
make the account a health insurance plan regulated by state law. An HSA is not
insurance. As the trustee aptly pointed out, an HSA is just a tax-preferred place to
park money for use in paying health care expenses that are not covered by insurance.

       Further, Congress added § 541(b)(7) (which specified certain exclusions from
property of the bankruptcy estate) to the Bankruptcy Code as part of the 2005
BAPCPA amendments. Health savings accounts were created in 2003, two years
before the BAPCPA amendments became law. Accordingly, we agree with the
bankruptcy court’s conclusion that had Congress intended for HSAs to be excluded
it would have said so. Since Congress did not specifically mention HSAs in its
amendments, and since the funds in the HSA can be used by the beneficiary for any
purpose,3 we hold that an HSA is not a health insurance plan regulated by state law
and, therefore, the HSA is not excluded from the bankruptcy estate by 11 U.S.C. §
541(b)(7)(A)(ii).

      Mr. Leitch further argues that even if the HSA is not excluded from the
bankruptcy estate, he should be able to exempt the funds in the account pursuant to
11 U.S.C. § 522(d)(10)(C) or (11)(D). In the bankruptcy case, Mr. Leitch elected to


      3
          Subject to tax if not used for health care expenses.

                                            -5-
use the federal exemptions, rather than the state exemptions, as permitted by 11
U.S.C. § 522(b)(1) and (2). Subsection (d) of 11 U.S.C. § 522 lists the property that
may be exempted, including subsection (d)(10)(C), which allows a debtor to exempt
“[t]he debtor’s right to receive – . . . a disability, illness, or unemployment benefit[,]”
and (d)(11)(D), which allows a debtor to exempt “a payment . . . on account of
personal bodily injury, not including pain and suffering or compensation for actual
pecuniary loss, of the debtor or an individual of whom the debtor is a dependent
. . . [.]”

       The bankruptcy court denied the exemptions because the funds in the HSA
could be used for purposes other than “disability, illness, or unemployment” (and in
fact, could be used for anything) and also could be used for purposes other than
“personal bodily injury.” We agree. In addition, the exemptions under 11 U.S.C. §
522(d)(10)(C) and (11)(D) apply only to a debtor’s “right to receive” the stated
benefits. Here, Mr. Leitch has already received the money from his employer. The
employer has paid the money to the HSA, and Mr. Leitch is the account
owner/beneficiary with unrestricted access to the funds. Thus, there is no longer a
“right to receive” the funds that are already in the account.

                                    CONCLUSION

       For the foregoing reasons, we affirm the bankruptcy court.
                       ______________________________




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