Health Savings Accounts
Can a participant transfer money from his or her Individual Retirement Account (IRA) into an HSA?
Yes. Effective January 1, 2007, a participant can make a direct trustee-to-trustee transfer from his or her IRA to an HSA. This transfer is limited to the applicable annual HSA maximum contribution amount and is not tax deductible. The transfer is not subject to tax or penalty. The amount the participant transfers will reduce the amount that the participant could have otherwise contributed to an HSA for the year.
Once the transfer is made the participant must remain an HSA eligible individual (i.e., enrolled in a qualified HDHP for 12 months following the month in which the transfer occurred, or the transfer amount will be taxable and subject to a 10% penalty. An exception to the taxation and penalty is provided in cases where the individual became ineligible due to death or disability. This transfer is generally limited to once in an individual’s lifetime. There is, however, an exception where an eligible individual goes from individual to family coverage in the taxable year in which the initial IRA to HSA transfer occurs.
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?