I don't see how that matters. What happens is, he asked for the money back, and the Gross would need to be treated as taxable, even if the Gross is no longer available. The medical is treated as "not reimbursed" and would now be available for deductibility (if it qualifies), since this will be paid with what became post-tax dollars. And this year, the parents would no longer pay his medical from their own HSA, once he qualifies under his own.