Can You Combine HSA Accounts? What You Need to Know

It is possible to combine multiple Health Savings Accounts (HSAs), a process known as consolidation. Many individuals accumulate several HSAs over their careers, often from different employers. Consolidating these accounts into a single HSA can simplify financial management, reduce administrative costs, and provide better investment opportunities.

Methods for Combining Accounts

There are two distinct methods for consolidating HSA funds: the trustee-to-trustee transfer and the 60-day rollover. A trustee-to-trustee transfer is a direct movement of funds from your old HSA administrator to your new one. You never take possession of the money, as the financial institutions handle the entire transaction. This method is preferred for its simplicity and because there is no limit on the number of transfers you can perform in a year.

The second method is the 60-day rollover. With a rollover, the administrator of your old HSA sends you a check for the account balance. You then have a 60-day window from the date you receive the funds to deposit them into your new HSA. Failing to deposit the money within this timeframe can result in the withdrawn amount being treated as a taxable distribution, subject to income tax plus a 20% penalty if you are under age 65.

A significant restriction applies to rollovers that does not affect transfers. The IRS permits only one HSA rollover in any 12-month period. This rule applies across all of your HSAs, meaning you cannot roll over funds from one HSA in March and another in September of the same year.

Information and Decisions for Consolidation

Before initiating a consolidation, you must first select a destination HSA. Evaluate the fee structure, looking for monthly maintenance fees, paper statement fees, or account closure fees that can erode your savings. Also, examine the investment options available, as some providers offer a wider range of mutual funds or other investment vehicles. Some HSAs require a minimum balance, often between $500 and $1,000, before you can begin investing.

Once you have selected your new HSA administrator, you will need to collect specific information to complete the consolidation paperwork. You will need the account number for your old HSA and the name and mailing address of the institution that holds it. You will also need the account number for your new, destination HSA.

Completing the transfer form requires you to provide details for both the sending and receiving accounts. The form will also require the account number of your new HSA where the funds will be deposited. This single form authorizes your new administrator to contact your old one and initiate the direct transfer of funds on your behalf.

The Consolidation Process

After you have selected your new HSA provider and completed the necessary transfer request form, the next step is to submit it to the new administrator. Most administrators provide several submission options, including uploading the completed form directly to their secure online portal, mailing it to a specified address, or in some cases, faxing it. Once submitted, the new administrator takes over and manages the communication with your old provider to move the funds.

The timeline for a trustee-to-trustee transfer can vary but typically takes between two and six weeks to complete. During this period, the funds will be withdrawn from your old account and deposited into your new one. Monitor both accounts during this time, and you can confirm the consolidation is complete by logging into your new HSA’s online portal and seeing the transferred balance appear.

If you have opted for a 60-day rollover, the process is more hands-on. After your old administrator processes your withdrawal request, they will mail a check directly to you. Upon receipt of the check, you are responsible for depositing it into your new HSA. It is important to complete this deposit well within the 60-day deadline to avoid any tax penalties. You can typically make the deposit via mobile check deposit through the new administrator’s app, by mail, or at a physical branch if one is available.

Tax Reporting for HSA Consolidation

The tax reporting requirements for HSA consolidation depend entirely on the method used. A trustee-to-trustee transfer is considered a non-reportable event. Because the funds move directly between financial institutions without you ever taking control of them, the IRS does not classify this as a distribution or a contribution. You do not need to report a trustee-to-trustee transfer on your annual tax return.

In contrast, a 60-day rollover requires specific reporting on IRS Form 8889, Health Savings Account (HSA). When you receive the funds from your old HSA, the administrator will report this as a distribution to the IRS and will send you Form 1099-SA. You must report this total distribution on Form 8889.

To avoid taxes and penalties, you must also report the amount that you deposited into the new HSA as a rollover contribution on a separate line on the same form. When completed correctly, the amount of the distribution is offset by the rollover contribution. This ensures the transaction is treated as a tax-free rollover. Careful record-keeping is important to accurately complete Form 8889.