When does the 1-year HSA rollover clock start and end?

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terran
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When does the 1-year HSA rollover clock start and end?

Post by terran » Wed Mar 07, 2018 12:58 am

If I perform an indirect, not trustee-to-trustee, rollover from one HSA to another by taking a distribution from an HSA and sending a deposit to the other HSA, when does the clock start and end to make sure I only make one rollover per rolling 12 month period? Options that would make sense to me:
  • When I initiate the distribution with the "from" HSA?
  • When I receive the distribution from the "from" HSA (either receive the check or receive the ACH transfer in my personal, non-HSA, bank account)?
  • When I initiate the rollover contribution with the "to" HSA?
  • When the rollover contribution posts to the "to" HSA account (either the the check or ACH transfer from my personal, non-HSA, bank account posts)?
Put another way, when is the soonest I can I initiate another rollover (indirect through me, not trustee-to-trustee) next year given a timeline this year that looks like this: 3/1 - initiated withdrawal from the "from" HSA; 3/2 - check sent made out to me; 3/5 - check received; 3/6 - check deposited/posted to personal account; 3/8 - check cleared personal account and rollover contribution initiated with "to" HSA; 3/9 - ACH withdrawal from personal account; 3/14 - ACH transfer posted to "to" HSA?

Am I good as long as I wait at least one year from when the rollover was initiated (3/2/2019 or later), or do I need to wait until one year after the entire rollover was completed (3/15/2019 or later)?

Thanks!

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tfb
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Re: When does the 1-year HSA rollover clock start and end?

Post by tfb » Wed Mar 07, 2018 1:48 am

terran wrote:
Wed Mar 07, 2018 12:58 am
Put another way, when is the soonest I can I initiate another rollover (indirect through me, not trustee-to-trustee) next year given a timeline this year that looks like this: 3/1 - initiated withdrawal from the "from" HSA; 3/2 - check sent made out to me; 3/5 - check received; 3/6 - check deposited/posted to personal account; 3/8 - check cleared personal account and rollover contribution initiated with "to" HSA; 3/9 - ACH withdrawal from personal account; 3/14 - ACH transfer posted to "to" HSA?

Am I good as long as I wait at least one year from when the rollover was initiated (3/2/2019 or later), or do I need to wait until one year after the entire rollover was completed (3/15/2019 or later)?
When in doubt don't cut it too close. If you make the gap longer than 12 months no matter what, you sidestep the entire calculation. Initiate your next distribution 12 months plus a few days after the previous rollover posted guarantees you don't violate the rule. An unnecessary delay of 15 days won't kill you. This way there is no chance you will remember it wrong. Now, if you really want to know, it's in 223(f)(5):
This paragraph shall not apply to any amount described in subparagraph (A) received by an individual from a health savings account if, at any time during the 1-year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from a health savings account which was not includible in the individual’s gross income because of the application of this paragraph.
Harry Sit, taking a break from the forums.

terran
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Re: When does the 1-year HSA rollover clock start and end?

Post by terran » Wed Mar 07, 2018 2:02 am

tfb wrote:
Wed Mar 07, 2018 1:48 am
terran wrote:
Wed Mar 07, 2018 12:58 am
Put another way, when is the soonest I can I initiate another rollover (indirect through me, not trustee-to-trustee) next year given a timeline this year that looks like this: 3/1 - initiated withdrawal from the "from" HSA; 3/2 - check sent made out to me; 3/5 - check received; 3/6 - check deposited/posted to personal account; 3/8 - check cleared personal account and rollover contribution initiated with "to" HSA; 3/9 - ACH withdrawal from personal account; 3/14 - ACH transfer posted to "to" HSA?

Am I good as long as I wait at least one year from when the rollover was initiated (3/2/2019 or later), or do I need to wait until one year after the entire rollover was completed (3/15/2019 or later)?
When in doubt don't cut it too close. If you make the gap longer than 12 months no matter what, you sidestep the entire calculation. Initiate your next distribution 12 months plus a few days after the previous rollover posted guarantees you don't violate the rule. An unnecessary delay of 15 days won't kill you. This way there is no chance you will remember it wrong. Now, if you really want to know, it's in 223(f)(5):
This paragraph shall not apply to any amount described in subparagraph (A) received by an individual from a health savings account if, at any time during the 1-year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from a health savings account which was not includible in the individual’s gross income because of the application of this paragraph.
Thanks, tfb! You're right, of course, there is such a thing as over optimization with such things. I should probably just play it safe and let things drift by half a month every year.

So it sounds like the technically "right" answer is the date I received the check/ACH transfer -- in this case 3/5, so as long as I receive the next check/transfer 3/6/2019 or later I would be compliant?

PS - I used your blog post on the topic for guidance in this process, so thanks for that too!

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tfb
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Re: When does the 1-year HSA rollover clock start and end?

Post by tfb » Wed Mar 07, 2018 6:51 pm

terran wrote:
Wed Mar 07, 2018 2:02 am
So it sounds like the technically "right" answer is the date I received the check/ACH transfer -- in this case 3/5, so as long as I receive the next check/transfer 3/6/2019 or later I would be compliant?
I don't know whether the fund leaving the HSA counts as my receiving it. I can't trust I will remember it correctly so I just use the drift method. One less thing to worry about.
Harry Sit, taking a break from the forums.

TropikThunder
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Re: When does the 1-year HSA rollover clock start and end?

Post by TropikThunder » Wed Mar 07, 2018 8:53 pm

tfb wrote:
Wed Mar 07, 2018 6:51 pm
terran wrote:
Wed Mar 07, 2018 2:02 am
So it sounds like the technically "right" answer is the date I received the check/ACH transfer -- in this case 3/5, so as long as I receive the next check/transfer 3/6/2019 or later I would be compliant?
I don't know whether the fund leaving the HSA counts as my receiving it. I can't trust I will remember it correctly so I just use the drift method. One less thing to worry about.
Just curious why you're choosing to use the indirect rollover method rather than a trustee-to-trustee transfer?

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whodidntante
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Re: When does the 1-year HSA rollover clock start and end?

Post by whodidntante » Wed Mar 07, 2018 9:06 pm

TropikThunder wrote:
Wed Mar 07, 2018 8:53 pm
tfb wrote:
Wed Mar 07, 2018 6:51 pm
terran wrote:
Wed Mar 07, 2018 2:02 am
So it sounds like the technically "right" answer is the date I received the check/ACH transfer -- in this case 3/5, so as long as I receive the next check/transfer 3/6/2019 or later I would be compliant?
I don't know whether the fund leaving the HSA counts as my receiving it. I can't trust I will remember it correctly so I just use the drift method. One less thing to worry about.
Just curious why you're choosing to use the indirect rollover method rather than a trustee-to-trustee transfer?
Fees are the usual reason. Or sometimes you need to keep the account open for employer contributions.

terran
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Re: When does the 1-year HSA rollover clock start and end?

Post by terran » Wed Mar 07, 2018 10:49 pm

whodidntante wrote:
Wed Mar 07, 2018 9:06 pm
TropikThunder wrote:
Wed Mar 07, 2018 8:53 pm
tfb wrote:
Wed Mar 07, 2018 6:51 pm
terran wrote:
Wed Mar 07, 2018 2:02 am
So it sounds like the technically "right" answer is the date I received the check/ACH transfer -- in this case 3/5, so as long as I receive the next check/transfer 3/6/2019 or later I would be compliant?
I don't know whether the fund leaving the HSA counts as my receiving it. I can't trust I will remember it correctly so I just use the drift method. One less thing to worry about.
Just curious why you're choosing to use the indirect rollover method rather than a trustee-to-trustee transfer?
Fees are the usual reason. Or sometimes you need to keep the account open for employer contributions.
Right. Old employer used HSA bank which charges fees. New employer uses Optum Bank which charges fees. Moving the HSA Bank funds to Lively this year, and plan to move the Optum Bank funds to lively once a year going forward.

TropikThunder
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Re: When does the 1-year HSA rollover clock start and end?

Post by TropikThunder » Thu Mar 08, 2018 12:17 am

terran wrote:
Wed Mar 07, 2018 10:49 pm
whodidntante wrote:
Wed Mar 07, 2018 9:06 pm
TropikThunder wrote:
Wed Mar 07, 2018 8:53 pm
tfb wrote:
Wed Mar 07, 2018 6:51 pm
terran wrote:
Wed Mar 07, 2018 2:02 am
So it sounds like the technically "right" answer is the date I received the check/ACH transfer -- in this case 3/5, so as long as I receive the next check/transfer 3/6/2019 or later I would be compliant?
I don't know whether the fund leaving the HSA counts as my receiving it. I can't trust I will remember it correctly so I just use the drift method. One less thing to worry about.
Just curious why you're choosing to use the indirect rollover method rather than a trustee-to-trustee transfer?
Fees are the usual reason. Or sometimes you need to keep the account open for employer contributions.
Right. Old employer used HSA bank which charges fees. New employer uses Optum Bank which charges fees. Moving the HSA Bank funds to Lively this year, and plan to move the Optum Bank funds to lively once a year going forward.
You can do all of those moves via trustee-to-trustee transfer. In this case you're not intending to keep the HSA Bank account open anyway, and you could just leave a token amount in the Optum Bank account to keep it open for now contributions from your employer.

Well, actually, you can still move 100% of the money from Optum to Lively once a year and mark the "keep account open" box on the transfer form. None of this requires an indirect rollover. I still don't see why this is the preferred method here.

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jhfenton
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Re: When does the 1-year HSA rollover clock start and end?

Post by jhfenton » Thu Mar 08, 2018 8:27 am

TropikThunder wrote:
Thu Mar 08, 2018 12:17 am
Well, actually, you can still move 100% of the money from Optum to Lively once a year and mark the "keep account open" box on the transfer form. None of this requires an indirect rollover. I still don't see why this is the preferred method here.
There's no guarantee the "Keep Account Open" box will be respected by the sending HSA custodian. Mine didn't, even though I spoke with them in advance and checked the box on the form. They automatically closed the account and charged the $25 account closure fee. They ultimately refunded the fee and suggested I leave a few dollars in the account for future transfers.

My employer-sponsored HSA custodian does not charge a fee for transfers, so I'm doing quarterly transfers. But if they did, I might use the annual rollover option too.

terran
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Re: When does the 1-year HSA rollover clock start and end?

Post by terran » Thu Mar 08, 2018 8:38 am

TropikThunder wrote:
Thu Mar 08, 2018 12:17 am
terran wrote:
Wed Mar 07, 2018 10:49 pm
whodidntante wrote:
Wed Mar 07, 2018 9:06 pm
TropikThunder wrote:
Wed Mar 07, 2018 8:53 pm
tfb wrote:
Wed Mar 07, 2018 6:51 pm

I don't know whether the fund leaving the HSA counts as my receiving it. I can't trust I will remember it correctly so I just use the drift method. One less thing to worry about.
Just curious why you're choosing to use the indirect rollover method rather than a trustee-to-trustee transfer?
Fees are the usual reason. Or sometimes you need to keep the account open for employer contributions.
Right. Old employer used HSA bank which charges fees. New employer uses Optum Bank which charges fees. Moving the HSA Bank funds to Lively this year, and plan to move the Optum Bank funds to lively once a year going forward.
You can do all of those moves via trustee-to-trustee transfer. In this case you're not intending to keep the HSA Bank account open anyway, and you could just leave a token amount in the Optum Bank account to keep it open for now contributions from your employer.

Well, actually, you can still move 100% of the money from Optum to Lively once a year and mark the "keep account open" box on the transfer form. None of this requires an indirect rollover. I still don't see why this is the preferred method here.
Right, but I'm pretty sure I ran across a fee that HSA Bank charges to do a trustee to trustee transfer. I've already done that withdrawal, so I didn't check again, so I could be wrong.

Optum has a "$20.00 charge to transfer your HSA to another bank or custodian (outbound transfer of your entire HSA or a portion)"

terran
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Re: When does the 1-year HSA rollover clock start and end?

Post by terran » Thu Mar 08, 2018 8:39 am

jhfenton wrote:
Thu Mar 08, 2018 8:27 am
TropikThunder wrote:
Thu Mar 08, 2018 12:17 am
Well, actually, you can still move 100% of the money from Optum to Lively once a year and mark the "keep account open" box on the transfer form. None of this requires an indirect rollover. I still don't see why this is the preferred method here.
There's no guarantee the "Keep Account Open" box will be respected by the sending HSA custodian. Mine didn't, even though I spoke with them in advance and checked the box on the form. They automatically closed the account and charged the $25 account closure fee. They ultimately refunded the fee and suggested I leave a few dollars in the account for future transfers.

My employer-sponsored HSA custodian does not charge a fee for transfers, so I'm doing quarterly transfers. But if they did, I might use the annual rollover option too.
Thanks, that's a good tip. I'll make sure I leave a small amount in Optum for future transfers.

SuzBanyan
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Re: When does the 1-year HSA rollover clock start and end?

Post by SuzBanyan » Thu Mar 08, 2018 9:48 am

Can I ask how indirect rollovers are reported on 1099s?

I have been doing an annual indirect rollover for years to avoid a $25 trustee to trustee transfer fee, but the transferee just reports the amount as a distribution on the 1099. Should I be doing something other than keeping a copy of the check from one HSA account to another in case I receive a question about the 1099?

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tfb
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Re: When does the 1-year HSA rollover clock start and end?

Post by tfb » Thu Mar 08, 2018 10:21 am

SuzBanyan wrote:
Thu Mar 08, 2018 9:48 am
Can I ask how indirect rollovers are reported on 1099s?

I have been doing an annual indirect rollover for years to avoid a $25 trustee to trustee transfer fee, but the transferee just reports the amount as a distribution on the 1099. Should I be doing something other than keeping a copy of the check from one HSA account to another in case I receive a question about the 1099?
The paying custodian correctly reports it as a distribution. They don't know what you did with the money. You report on Form 8889 the amount of the distribution and how much of it you rolled over to another HSA.
Harry Sit, taking a break from the forums.

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