Health Savings Accounts
Can money be rolled over from an employee's Health Flexible Spending Account (HCFSA) or Healthcare Reimbursement Account (HRA) into an HSA?
Yes. Effective January 1, 2007 an employer can allow participants to rollover their Health Reimbursement Account (HRA) and/or Health Care Flexible Spending Account (HCFSA) balance to an HSA. (Please note that there are certain steps an employer must take if they wish to permit rollovers including amending the cafeteria plan document.) These rollover amounts are over and above the amounts allowed for annual contributions and are limited to: the lesser of the current HRA/HCFSA account balance, or the HRA/HCFSA account balance as of September 21, 2006. The rollover is further limited to one rollover for each of the participant’s HRA and Health HCFSA. The rollover amounts are excludable from gross income and wages for employment tax purposes, and are not deductible.
Once the rollover is made, the participant must remain an HSA eligible individual (i.e., be enrolled in a qualified HDHP) for 12 months following the month in which the rollover occurred, or the rollover amount will be taxable and subject to a 10% penalty. An exception is provided in cases where the individual became ineligible due to death or disability.
This feature expires in 2011.
View additional questions:
- What is a Health Savings Account (HSA)?
- How do employees qualify to open an HSA?
- When can contributions be made to an HSA?
- Can employer's still offer their regular Health Care Flexible Spending Account (HCFSA) Plan to HSA participants?
- Do employers have to amend the Cafeteria Plan to allow for pre-tax contributions to the HSA?
- How much can be contributed to an HSA?
- Can money be rolled over from an employee's Health Flexible Spending Account (HCFSA) or Healthcare Reimbursement Account (HRA) into an HSA?
- Can a participant transfer money from his or her Individual Retirement Account (IRA) into an HSA?
- Who can contribute to an HSA?
- What can the participant use the HSA money for?
- How are withdrawals from an HSA treated if they are not used for qualified medical expenses?
- Are contributions to and distributions from an HSA reported to the IRS?