HSA Rollover: Do Health Savings Accounts Roll Over?
Moving funds from one health savings account (HSA) to another can be done in two ways. Each method has its own rules and potential risks. The process matters for those using HSAs as long-term savings, including for retirement.
The first option is a trustee-to-trustee transfer. Here, the current HSA provider sends the money directly to the new one at the account holder’s request. This method avoids penalties because the funds never pass through the individual’s hands.
A second approach is an HSA rollover. In this case, the provider issues a check to the account holder, who must then deposit it into a new HSA within 60 days. Missing the deadline triggers income taxes and a 20% penalty. Rollovers are also limited to once every 12 months. HSA funds belong to the account holder, even after leaving a job. The money rolls over yearly and can be used for future medical costs or saved for retirement. One provider, HealthEquity, reported 175,000 new accounts in a recent quarter, bringing its total to 10.1 million.
Choosing between a rollover and a transfer affects how smoothly HSA funds move. Trustee-to-trustee transfers remove the risk of penalties, while rollovers require strict timing. The flexibility of HSAs also makes them useful for long-term financial planning.
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