Health savings accounts (HSAs) are a great way to save and invest money for qualified medical expenses. They offer many tax advantages and can grow with you throughout your life. Unlike flexible spending accounts (FSAs), HSAs don't expire or remain exclusive to one employer. You carry them with you throughout your career.
That said, you may want to consider doing an HSA transfer at some point. A transfer is when you switch from one HSA provider to another.
Why transfer your HSA? There are many reasons why you might consider it. If you start your HSA with a specific employer, you might want to transfer it when you change jobs. You can also move your funds to a different administrator because you prefer their investment options and fee schedule.
Whatever the case, transferring your HSA is easy. However, there are specific rules to follow.
How to Transfer Your HSA
The most important thing to know is that you can only move your HSA to a different provider once per year. There are also IRA regulations you must understand to remain compliant and avoid a surprise tax bill.
One way to move to a different HSA provider is to perform an HSA rollover. This process involves informing your current HSA administrator of your desire to close your account and move to another provider. Your original provider will then cut you a check, and it's up to you to reinvest that money with another company.
You only have 60 days to open another HSA account and transfer funds. If you don't do it within that window, the IRS will consider the move a full distribution. The amount will become taxable income, and you'll face a 20 percent penalty.
To avoid the risks of an HSA rollover, consider doing a trustee-to-trustee HSA transfer. With this method, you instruct your original HSA provider to transfer for you. The money moves from one HSA to another. You won't get a check. That's a good thing! It means there's zero risk that your transfer turns into a taxable event.
Read a similar article about HSA here at this page.
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