One time transfer from IRA to HSA

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aaronbabu
Posts: 14
Joined: Sun Apr 29, 2018 9:47 pm

One time transfer from IRA to HSA

Post by aaronbabu » Tue May 15, 2018 1:32 pm

Hello,

From 2015 to 2017, i used to be in high deductible health plan (HDHP) and my company offered an HSA account. This year, anticipating pregnancy and child birth, we changed our health care plan to a regular PPO plan. We were funding the HSA during the time period.
Currently, my wife and I are maxing out the 401k from work and individual Roth IRAs. I read online that you can do one time transfer from IRA to HSA - penalty and tax free. I have some money left that i was thinking about transferring to HSA this year.

My questions are:
a) Since i'm not in HDHP plan anymore, can i still do a one time IRA transfer to HSA for 2018?
b) How does this transfer occur? Do I start an IRA account and make the transfer?
c) If i can transfer, is the amount that can be transferred limited to yearly HSA contribution limit. ie $6,850 for family?

Thank you guys. Looking for your valuable feedback.

TropikThunder
Posts: 957
Joined: Sun Apr 03, 2016 5:41 pm

Re: One time transfer from IRA to HSA

Post by TropikThunder » Tue May 15, 2018 1:43 pm

aaronbabu wrote:
Tue May 15, 2018 1:32 pm
Hello,

From 2015 to 2017, i used to be in high deductible health plan (HDHP) and my company offered an HSA account. This year, anticipating pregnancy and child birth, we changed our health care plan to a regular PPO plan. We were funding the HSA during the time period.
Currently, my wife and I are maxing out the 401k from work and individual Roth IRAs. I read online that you can do one time transfer from IRA to HSA - penalty and tax free. I have some money left that i was thinking about transferring to HSA this year.

My questions are:
a) Since i'm not in HDHP plan anymore, can i still do a one time IRA transfer to HSA for 2018?
b) How does this transfer occur? Do I start an IRA account and make the transfer?
c) If i can transfer, is the amount that can be transferred limited to yearly HSA contribution limit. ie $6,850 for family?

Thank you guys. Looking for your valuable feedback.
Short answer, no you can’t do the rollover if you’re no longer in an HDHP plan. You have to be eligible to make a contribution at the time of the rollover, as it would take the place of a regular contribution, rather than supplement it. I don’t think it’s really helpful anyway, since it’s only real value is if you didn’t have the money to fund the HSA through other means.

https://www.irs.gov/publications/p969#e ... 1000204065

Since you can’t, I’m not addressing how it would work. :)

aaronbabu
Posts: 14
Joined: Sun Apr 29, 2018 9:47 pm

Re: One time transfer from IRA to HSA

Post by aaronbabu » Tue May 15, 2018 1:45 pm

TropikThunder wrote:
Tue May 15, 2018 1:43 pm
aaronbabu wrote:
Tue May 15, 2018 1:32 pm
Hello,

From 2015 to 2017, i used to be in high deductible health plan (HDHP) and my company offered an HSA account. This year, anticipating pregnancy and child birth, we changed our health care plan to a regular PPO plan. We were funding the HSA during the time period.
Currently, my wife and I are maxing out the 401k from work and individual Roth IRAs. I read online that you can do one time transfer from IRA to HSA - penalty and tax free. I have some money left that i was thinking about transferring to HSA this year.

My questions are:
a) Since i'm not in HDHP plan anymore, can i still do a one time IRA transfer to HSA for 2018?
b) How does this transfer occur? Do I start an IRA account and make the transfer?
c) If i can transfer, is the amount that can be transferred limited to yearly HSA contribution limit. ie $6,850 for family?

Thank you guys. Looking for your valuable feedback.
Short answer, no you can’t do the rollover if you’re no longer in an HDHP plan. You have to be eligible to make a contribution at the time of the rollover, as it would take the place of a regular contribution, rather than supplement it. I don’t think it’s really helpful anyway, since it’s only real value is if you didn’t have the money to fund the HSA through other means.

https://www.irs.gov/publications/p969#e ... 1000204065

Since you can’t, I’m not addressing how it would work. :)
Thank you for the reply. Question clarified.

Spirit Rider
Posts: 8321
Joined: Fri Mar 02, 2007 2:39 pm

Re: One time transfer from IRA to HSA

Post by Spirit Rider » Tue May 15, 2018 3:19 pm

I would add that even if you were eligible it is almost always a bad idea:
  • You get no deduction from the resulting transfer and you are giving up the opportunity to expand your tax-advantaged space.
  • It has a testing period of the entire next year just like the last month rule.
  • The only time this should even be remotely considered is if your finances are such, that there is no possible other way to fund the HSA account.

aaronbabu
Posts: 14
Joined: Sun Apr 29, 2018 9:47 pm

Re: One time transfer from IRA to HSA

Post by aaronbabu » Tue May 15, 2018 7:40 pm

Spirit Rider wrote:
Tue May 15, 2018 3:19 pm
I would add that even if you were eligible it is almost always a bad idea:
  • You get no deduction from the resulting transfer and you are giving up the opportunity to expand your tax-advantaged space.
  • It has a testing period of the entire next year just like the last month rule.
  • The only time this should even be remotely considered is if your finances are such, that there is no possible other way to fund the HSA account.
Thank you.

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