(1) The funds held in a medical savings account may be withdrawn by the account holder at any time for eligible medical expenses. Withdrawals for the purpose of paying eligible medical expenses shall not be subject to the 10% penalty.

(2) Requests made by account holders from account administrators for withdrawals to pay for eligible medical expenses must be supported by an itemized statement of expenses that were either paid or charged by the account holder and the signature of the account holder attesting that these expenses are "eligible medical expenses."  An eligible medical expense means any medical expense that is deductible for purposes of section 213(d) of the IRC.

(3) The burden of proving that a withdrawal from a medical savings account was made for an eligible medical expense is upon the account holder and not upon the account administrator.  Each account holder must maintain documentation of eligible medical expenses.

(4) There shall be a penalty for withdrawal of funds by the account holder for purposes other than the payment of eligible medical expenses except upon the death of the account holder.  The penalty shall be 10% of the amount of the withdrawal from the account and, in addition, the amount withdrawn shall be taxed as ordinary income.

(5) The direct transfer of funds from a medical savings account to a medical savings account with a different account administrator shall not be considered a withdrawal for purposes of this rule.  A direct transfer is when monies in an account are transferred to a new account without the beneficiary or account holder receiving any funds.

(6) Withdrawals made on the last weekday in December are not subject to the 10% penalty but shall be taxed as ordinary income.

(7) Except as provided in (8) , all payments made from a medical account must be made payable to the account holder, to the eligible medial provider, or to the estate or to the legal guardian.

(8) If an agreement exists between the account holder, account administrator, and the payee, withdrawals for eligible medical expenses can be done electronically.

(9) All medical records and expenses are to be kept confidential by the account administrator unless the account holder gives authorization.