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How to Transfer or Roll Over Your HSA Accounts

If you have multiple funded health savings accounts (HSAs), consolidating your funds into one HSA can save you time and money. To do this, you can either transfer or roll over your funds.

In general, transfers are the simpler and easier way to move money between HSAs. Rollovers require tax reporting and can subject you to tax penalties if you don’t deposit your funds within 60 days.

 

How Do Transfers Work?

 

  • Transfers are a direct custodian-to-custodian movement of money from one of your HSAs to another (you must be the owner of both HSAs).
  • In a transfer, you never take possession of the funds transferred.
  • You can do an unlimited number of HSA transfers within any given tax year.
  • Transfers require no tax reporting by you or by your custodian.
  • You can make a one-time transfer from your IRA or Roth IRA into your HSA, but you can’t transfer any other retirement account into your HSA. However, you can roll 401(k) funds into an IRA, then transfer that IRA over to your HSA.
  • Transfers only count against your annual contribution limit if you transfer an IRA or Roth IRA.

 

How Do Rollovers Work?

 

  • In a rollover, your custodian sends a check or automated clearing house transfer (ACH) to you, and you then deposit that check into a second HSA (you must own both HSAs).
  • You must deposit the funds within 60 days of receiving them. If you don’t, the rollover is considered a distribution, and you’ll have to include it as taxable income and pay an additional 20% penalty on it.
  • If you don’t deposit your rollover funds in time and have eligible expenses you haven’t reimbursed, you can apply those unreimbursed expenses to lessen your financial burden.
  • For example, if you roll over $1,000 and don’t deposit it in 60 days (which makes it a distribution) but have $600 in unreimbursed eligible expenses, you only need to report the difference of $400 ($1000 – $600) as taxable income. That way, you’d only pay a penalty of $80 (20% of $400).
  • Rollovers never count against your annual contribution limit.
  • Once you complete a rollover (when the custodian of your second HSA has received the funds), you can’t do another for a one-year period starting on the date the first rollover was completed.
  • You must report the rollover on your tax return.

 

If you’d like to transfer or roll over your funds, fill out this form.

After submitting the form, please allow 4-6 weeks for your transfer request to be completed, as it may take several weeks for your original financial institution to release the funds and/or settle any outstanding debits.

Author: James Denison