Open an HSA even if ineligible to contribute?

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jlmitnick
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Joined: Thu Oct 22, 2009 11:39 am

Open an HSA even if ineligible to contribute?

Post by jlmitnick »

I'm trying to transfer my HSA from Optum to Fidelity. In this process Fidelity wants me to open an HSA. I'm not eligible to contribute to the HSA, and haven't been for a few years, since my new job doesn't offer a High deductible health plan. However, there is still money in there at Optum, so really it's just a transfer. When opening the account at Fidelity though it's making it seem like you need to be eligible to even open one, which I'm not sure that I would be. Am I overthinking this, and in fact I am eligible to open it, and then do transfer from Optum to Fidelity, so long as I don't make any new contributions?
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anon_investor
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Re: Open an HSA even if ineligible to contribute?

Post by anon_investor »

jlmitnick wrote: Mon Apr 20, 2020 12:30 pm I'm trying to transfer my HSA from Optum to Fidelity. In this process Fidelity wants me to open an HSA. I'm not eligible to contribute to the HSA, and haven't been for a few years, since my new job doesn't offer a High deductible health plan. However, there is still money in there at Optum, so really it's just a transfer. When opening the account at Fidelity though it's making it seem like you need to be eligible to even open one, which I'm not sure that I would be. Am I overthinking this, and in fact I am eligible to open it, and then do transfer from Optum to Fidelity, so long as I don't make any new contributions?
You should be able to open one, no issues with that. You are correct, you cannot make no contributions to it, but you can rollover existing balances.
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rterickson
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Re: Open an HSA even if ineligible to contribute?

Post by rterickson »

This is from Fidelity's HSA Terms & Conditions:

By selecting “I Agree” on the previous page, you:

Represent that, unless this account is used solely to make transfers or rollover contributions, you are eligible to
contribute to this HSA — specifically that you (1) are covered under a high-deductible health plan (HDHP), (2)
are not covered by any other health plan that is not an HDHP (with certain exceptions for plans providing
preventive care and limited types of permitted insurance and permitted coverage), (3) are not currently
enrolled in Medicare; and (4) cannot be claimed as a dependent on another person’s tax return.
Topic Author
jlmitnick
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Joined: Thu Oct 22, 2009 11:39 am

Re: Open an HSA even if ineligible to contribute?

Post by jlmitnick »

rterickson wrote: Mon Apr 20, 2020 12:46 pm This is from Fidelity's HSA Terms & Conditions:

By selecting “I Agree” on the previous page, you:

Represent that, unless this account is used solely to make transfers or rollover contributions, you are eligible to
contribute to this HSA — specifically that you (1) are covered under a high-deductible health plan (HDHP), (2)
are not covered by any other health plan that is not an HDHP (with certain exceptions for plans providing
preventive care and limited types of permitted insurance and permitted coverage), (3) are not currently
enrolled in Medicare; and (4) cannot be claimed as a dependent on another person’s tax return.
Awesome thanks!
BrownEyedGirl_27
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Re: Open an HSA even if ineligible to contribute?

Post by BrownEyedGirl_27 »

jlmitnick wrote: Mon Apr 20, 2020 12:30 pm I'm trying to transfer my HSA from Optum to Fidelity. In this process Fidelity wants me to open an HSA. I'm not eligible to contribute to the HSA, and haven't been for a few years, since my new job doesn't offer a High deductible health plan. However, there is still money in there at Optum, so really it's just a transfer. When opening the account at Fidelity though it's making it seem like you need to be eligible to even open one, which I'm not sure that I would be. Am I overthinking this, and in fact I am eligible to open it, and then do transfer from Optum to Fidelity, so long as I don't make any new contributions?
Yes just go in and start the transfer process. You need to create an account with Fidelity first and while you're applying make sure that you click "transfer assets". They will give you multiple options for transferring assets, so pick the one that makes the most sense for you. I wasn't charged a fee. They moved mine over very quickly and it was a simple process. As long as you don't add new money to the account from a separate source you should be fine.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
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Re: Open an HSA even if ineligible to contribute?

Post by Vanguard Fan 1367 »

Thanks to my wise Boglehead friends I just this morning completed the form transferring my assets in brand x HSA to Fidelity. It is like fantasy island to me how much better Fidelity is than brand X.

I also am not eligible to contribute any more but still have 10K. I know that if I can invest that 10k into the S & P 500 and have it grow at 6% a year that wouldn't be a terrible thing to do in most Boglehead's eyes. Some folks say that the best account you can have is an HSA. I am sorry now that I actually paid medical expenses from it. I wish it were bigger and that I could let that bigger amount grow with Fidelity.

I wasn't comfortable jumping through the hoops and paying the expenses to invest at brand X. It earned about 2 dollars a month there in interest. Fidelity seems pretty straightforward and easy and quite reasonable.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
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grabiner
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Re: Open an HSA even if ineligible to contribute?

Post by grabiner »

Vanguard Fan 1367 wrote: Mon Apr 20, 2020 1:27 pm I also am not eligible to contribute any more but still have 10K. I know that if I can invest that 10k into the S & P 500 and have it grow at 6% a year that wouldn't be a terrible thing to do in most Boglehead's eyes. Some folks say that the best account you can have is an HSA. I am sorry now that I actually paid medical expenses from it. I wish it were bigger and that I could let that bigger amount grow with Fidelity.
Contributing to the HSA is the best investment you can make (other than a 401(k) with an employer match). However, once you have made the contribution, a dollar there is no better than a dollar in a Roth IRA; both grow tax-free. Thus, if you aren't maxing out your other retirement accounts, it makes sense to withdraw money from the HSA for medical expenses, rather than paying out of pocket and having less money to invest in your IRA or 401(k).
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Re: Open an HSA even if ineligible to contribute?

Post by Vanguard Fan 1367 »

grabiner wrote: Mon Apr 20, 2020 10:04 pm
Vanguard Fan 1367 wrote: Mon Apr 20, 2020 1:27 pm I also am not eligible to contribute any more but still have 10K. I know that if I can invest that 10k into the S & P 500 and have it grow at 6% a year that wouldn't be a terrible thing to do in most Boglehead's eyes. Some folks say that the best account you can have is an HSA. I am sorry now that I actually paid medical expenses from it. I wish it were bigger and that I could let that bigger amount grow with Fidelity.
Contributing to the HSA is the best investment you can make (other than a 401(k) with an employer match). However, once you have made the contribution, a dollar there is no better than a dollar in a Roth IRA; both grow tax-free. Thus, if you aren't maxing out your other retirement accounts, it makes sense to withdraw money from the HSA for medical expenses, rather than paying out of pocket and having less money to invest in your IRA or 401(k).
Thanks for the advice. Also thanks to Bogleheads I am discovering the magic of Roth IRAs. For about a month I have had a small amount in a Roth, due to converting part of a TIRA. With Boglehead and other help I am trying to figure out how to increase my Roth amount with sensible TIRA conversions. I no longer have "earned" income so I guess you could say that I am maxing out my other retirement accounts with zero contributions!

So that quote that got stuck in my head about the HSA being the best place is wrong. It is tied with the Roth for the best place to have a dollar!
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
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