How to Rollover Your Health Savings Account

Health savings accounts (HSAs) are powerful financial tools that make planning for future medical expenses much easier. With personal and employer HSA contributions, this account can grow substantially throughout your life. The result is a sizeable nest egg with several tax advantages.

The great thing about an HSA is that it sticks with you. Unlike a flexible spending account (FSA), it's not tied to your employer. Therefore, you can roll over your HSA from one provider to the next. But how do you do it?

HSA Rollover Basics

To roll over an HSA is to move your funds between providers. There are many reasons to consider doing this.

One of the most common is to take advantage of lower expense ratios and maintenance fees. Expense ratios refer to the operating costs paid to invest your contributions. A higher expense ratio means you pay more fees for your HSA to grow. These fees are outside of additional custodial fees you might pay.

Many people also roll over their HSA to consolidate several accounts into one to simplify management. Whatever the case, you can do a rollover once every 12 months. However, there are some rules to follow.

How to Rollover Your HSA

Rolling over an HSA requires communicating with your new and existing HSA.

Contact your existing HSA and request a check or direct deposit of the funds in your HSA. After this request, your old provider will send you a lump sum including all your contributions, your employer HSA contributions and any growth up to that point. Then, you must set up another HSA with a new provider.

Here's something important to remember: You only have 60 days to deposit the funds you receive from your old HSA provider into your new HSA. If you go beyond the 60-day limit, you will face steep penalties. The IRS will levy income tax on the amount you roll over and charge a 20 percent penalty!

Fortunately, those penalties don't apply if you roll over the money within 60 days.

Another option is to request a trustee-to-trustee transfer. Many HSA providers allow you to do that online. With a trustee-to-trustee transfer, you don't have to worry about receiving a deposit or check.

Read a similar article about use HSA toward family planning here at this page.

Tips on How to Get the Most Out of Your FSA

Do you have the option to open a flexible spending account (FSA) at your job? If so, take full advantage of it! These accounts are a valuable employer-offered benefit that can help you save on qualified medical expenses. But how does a FSA work? There are many ways to take advantage of an FSA, but few know how to get the most out of these accounts. Here's what you need to know about FSAs.

How Does a FSA Work?

FSAs are accounts that you can put pre-tax dollars into. Your employer can also fund the FSA, but those details vary from one company to the next. You don't pay taxes on your contributions; If you use that money on qualified medical expenses, you won't pay taxes on withdrawals.

You can only use an FSA on certain medical expenses. That includes doctor's visits, medical procedures, prescriptions, insurance deductibles, etc.

Know Your Deadlines

One of the most important things you should know to use your FSA to its full potential is the expiration deadlines. Unlike health savings accounts (HSAs), FSAs don't roll over into the next year. That means you only have a certain period to use the funds in your FSA. After that point, you're out of luck!

Some plans have grace periods and carryover policies. Familiarize yourself with those details to know when to use your FSA.

Understand the Eligible Expenses

The IRS dictates what counts as an eligible expense. That list of qualifying expenses is bigger than you think! In addition to obvious healthcare costs, you can use your FSA to pay for things like family planning products, menstrual care, acne medications and more.

Read up on what you can use your FSA for. Many drugstores have specific FSA sections or shelf labels to help you understand what products are eligible for FSA coverage and what isn't. Use that information to your advantage. There's a good chance that you can pay for the care and comfort products you use every day with your FSA.

Read a similar article about FSA here at this page.