Can You Rollover an HSA to Another HSA?

You can move funds from one Health Savings Account (HSA) to another. An HSA is a tax-advantaged savings account used for healthcare expenses, available to those with a high-deductible health plan. The money you contribute is yours to keep, even if you change jobs or health insurance. People often move their HSA funds to find an account with lower administrative fees, better investment options, or to consolidate multiple accounts.

Methods for Moving HSA Funds

The most common method for moving HSA funds is the trustee-to-trustee transfer, where the financial institution holding your current HSA sends the money directly to your new HSA provider. You never personally receive the funds, which eliminates the risk of missed deadlines or tax consequences from mishandling the money. The IRS does not limit the number of trustee-to-trustee transfers you can perform in a year.

An alternative is the 60-day rollover, an indirect method of moving your funds. With a rollover, you request a distribution from your current HSA provider, and they will send you a check for the account balance. You then have a 60-day period to deposit the entire amount into your new HSA. This method is subject to the IRS’s one-rollover-per-year rule, which applies to all of your IRAs and HSAs in aggregate, meaning you can only perform one such rollover across all these accounts in a 12-month period.

Failing to deposit the full amount within the 60-day window has financial repercussions. The IRS would consider the withdrawal a non-qualified distribution, making the entire amount taxable as ordinary income. If you are under age 65, the amount would also be subject to a 20% penalty.

Information and Decisions Before Initiating

Before starting the process, you must select a new HSA provider. When comparing options, evaluate the following:

• The fee structure, including monthly maintenance fees, per-transaction fees, and any account closing fees from the old provider.
• The investment options available, as some providers offer a wider range of mutual funds or other securities.
• The quality of the online portal.
• The availability of a debit card.

Once you have chosen a new provider, you will need to gather specific information to complete the necessary paperwork. For your current HSA, you will need the account number and the full name and mailing address of the financial institution that serves as the custodian. You will also need the account number for your newly opened HSA.

The movement of funds is initiated by filling out an HSA Transfer Request Form provided by your new HSA custodian. This form can usually be found on the provider’s website and may be submittable online, by mail, or via fax. On this form, you will enter the details you gathered and specify whether it’s a partial or full account balance to be moved.

Step-by-Step Guide to the HSA Movement Process

To initiate a trustee-to-trustee transfer, complete and submit the Transfer Request Form to your new HSA provider. This gives the new custodian authority to contact your old provider and request the funds. The new provider manages the transfer, which can take two to six weeks to appear in your new account.

For a 60-day rollover, first contact your old HSA provider to request a full distribution, stating your intent to roll over the funds. The provider will then liquidate any investments and mail you a check. The 60-day period begins on the distribution date, not when you receive the check, so it is important to act promptly.

When depositing the check with your new provider, you must specify that it is a “rollover contribution.” This ensures the deposit is coded correctly and not counted toward your annual HSA contribution limit for the year.

Tax Reporting for HSA Rollovers and Transfers

After you have moved your HSA funds, you will need to report the transaction to the IRS on your federal tax return. In the following tax season, your old HSA custodian will send you Form 1099-SA, which reports the total amount that was taken out of your account.

Your new HSA custodian will send you Form 5498-SA. This form shows all contributions made to your new account during the year, and it will specifically report the amount that was received as a rollover.

When you file your taxes, you will use IRS Form 8889 to report the activity. You will report the gross distribution from your Form 1099-SA on Line 14a and enter the amount that was rolled over on Line 14b. If the entire amount was rolled over, the result on Line 14c will be zero, which demonstrates to the IRS that the distribution was a tax-free rollover.