3.__Payment of eligible medical expenses.__The account administrator may use the funds in an account solely to pay eligible medical expenses of the account holder and members of the account holder's household that are not otherwise covered under the account holder's existing medical coverage. Funds held in an account may not be used to cover medical expenses of the account holder or members of the account holder's household that are otherwise covered, including, but not limited to, medical expenses covered pursuant to an automobile insurance policy, a workers' compensation insurance policy or a self-insured plan.__If the account holder submits appropriate documentation to the account administrator, the account administrator may reimburse the account holder from account funds for eligible medical expenses paid directly by the account holder during the taxable year.

4.__Withdrawals for other purposes.__The account holder may withdraw funds from the account for purposes other than those expenses allowed under subsection 3 on the last business day of

the calendar year without incurring a withdrawal penalty.__If an account holder withdraws funds at any other time, other than for those purposes allowed under subsection 3, the account holder must pay a penalty equal to 10% of the amount withdrawn.__The penalty must be paid to the Bureau of Revenue Services at the time the account holder files an income tax return under this Title for the taxable year in which the funds were withdrawn.__The State Tax Assessor shall credit all penalties received to the General Fund.

5.__Employer accounts.__Upon agreement between an employer and an employee, an employer may:

A.__Contribute to the employee's individual medical savings account;

B.__Make or continue to make contributions to the employee's medical coverage; or

C.__Contribute to both the employee's individual medical savings account and the employee's medical coverage.

6.__No limit.__In each taxable year, there is no limit to the total deposits that may be made to an account by or on behalf of an account holder.