How To Rollover an HSA On Your Own and Avoid Trustee Transfer Fee
My employer changed the HSA provider for 2013. Although it was verbally communicated to me that the new provider will pick up the $25 trustee-to-trustee transfer fee charged by the old provider ACS|Mellon, there was no mention of it when they sent me the transfer form.
I didn’t want to trust the verbal communication and then have to spend time fighting it in case they changed their mind about reimbursing the fee or if the rep miscommunicated during open enrollment. Rolling over an HSA on your own is very easy. Plus I want the money at a place I prefer anyway.
Here’s how I did it. Hopefully it will be helpful to others looking to do the same.
1. After I received my last paycheck for 2012, I went on to the old HSA provider’s web site and confirmed that the last deposit was credited. I also waited until the interest posted for December. Not that I care about the few cents, I just didn’t want to have a small balance lingering after the rollover. I wrote down the balance in the account.
2. I then opened a new HSA account with Alliant Credit Union. I already have my checking account there. My HSA balance is small enough I don’t care much about investing it. Alliant’s HSA pays 1.25% with no monthly fee. Pacific Community Credit Union in California pays 3.25% with a $3 monthly fee (everyone can join by becoming a member of Friends of the Fullerton Arboretum). Look for other banks and credit unions that provide HSAs on depositaccounts.com. If you have a large balance and you want to invest it, HSA Bank has a linked TD Ameritrade brokerage account with free trades for Vanguard ETFs.
3. I wrote a check for my ending balance using the checkbook from the old HSA provider ACS|Mellon. I mailed the check with a HSA rollover form to Alliant Credit Union.
4. A few days later, after I saw the check cleared from ACS|Mellon, I called and asked them to close the account (now with $0.00 balance). There was no fee for closing a zero balance account.
That was it.
You can only do this DIY-style rollover once a year (date-to-date, not calendar year). That’s enough for me. Trustee-to-trustee transfers aren’t limited in frequency but providers usually charge a fee to the tune of $25 to $30. It’s not worth it. Just do the rollover on your own.
My payroll deductions in 2013 and my employer’s contributions are going to the new provider chosen by my employer. I’m going to rollover the balance in the account again in February 2014, to make sure that I clear the 1-year mark from this rollover.
[Photo credit: Flickr user 401(K) 2013]
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Comments
14 Comments on How To Rollover an HSA On Your Own and Avoid Trustee Transfer Fee
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Matt on January 16, 2013
Harry,
Thank you very much for sharing this information. Is there a reason you chose this route vs. using the “Transfer HSA to Alliant HSA” form? Trustee-to-trustee transfers are exempt from the once-per-year rollover rule. I just completed one moving some cash from my Alliant HSA to my new employer-provided HSA to get some fee-free investments started with this money.
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Harry on January 16, 2013
As the title says, if I used the transfer form the old provider ACS Mellon would charge me $25 for transferring out.
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Matt on January 16, 2013
Note to self – engage brain before turning fingers free.
I feel foolish.
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Harry on January 16, 2013
No worries. It happens to me too.
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Michael on January 16, 2013
Won’t the previous custodian report that check simply as a distribution on the relevant tax form, when actually it was a rollover?
I guess you can account for that correctly when doing your taxes?
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Steve on January 16, 2013
What if I never received a checkbook for the old HSA account? (though I admit the possibity that I received one and promptly lost, er, filed it)
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Harry on January 16, 2013
Michael – I suppose so. Because I did it in January 2013, I won’t see the tax form until 2014. You report the amount you rolled over on Form 8889, line 14b. Then it’s subtracted from the distribution. Very easy.
Steve – I heard some HSA providers don’t issue a checkbook but they will send a check to you for self-reimbursement upon request. If you can’t find the checkbook which you may never had, ask the provider about self-reimbursement. You can deposit the self-reimbursement check to your personal account and then write a personal check to the new HSA provider for the rollover. The fee for a self-reimbursement check may be less than the fee for a trustee-to-trustee transfer.
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Harry @ PF Pro on January 16, 2013
Very timely article as my employer just switched HSA providers to from Fidelity to Chase. I don’t like the investment options/fees with Chase so I think I’m going to do a trustee to trustee transfer of old funds from Fidelity to HSA Bank and then again at the end of 2013 from Chase to HSA Bank. I know Fidelity won’t charge me a fee for this so I should be good to go with this method for Fidelity -> HSA Bank. But for Chase -> HSA Bank, I don’t know if Chase will charge a fee or not. If they do, I’ll use your method and rollover $3,250 at the beginning of 2014.
When I talked to HSA Bank though they did say that a rollover is considered a contribution to your account but it sounds like it’s easy to correct that on your taxes?
Thanks TFB!
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Harry on January 16, 2013
It would be a “rollover contribution.” The provider reports it on Form 5498-SA, box 4, separately from regular contributions. You don’t include it on your tax return.
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Brett Buyack on January 16, 2013
One downside to this that I can see is that by using the Employer’s designated HSA account they take out the money PRE-Tax. I can designate a different bank to put money towards, but that will be POST tax. Does your employer let you designate any bank you want with PRE tax dollars for your HSA?
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Harry on January 16, 2013
Brett – No, I must use the employer’s chosen provider if I want to save on FICA taxes. I’m only rolling over old money. New money still goes to the provider picked by my employer.
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Harry @ PF Pro on January 17, 2013
I’m thinking of how I’m going to rollover my funds from Chase at the end of this year to my HSA Bank account. I don’t want to buy checks from chase and they said they won’t write me a check so my options are to withdraw money for free from a chase ATM or there is also the other option to transfer to a personal bank account(Chase told me this would be free but not sure I believe them until I see it in writing).
Once I get the money, i can write a check from my personal account to HSA bank as a rollover. Either of these two methods would be the same as yours right?
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Harry on January 17, 2013
Yes. Also see if you can withdraw cash at a Chase branch via a teller.
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White Coat Investor on February 1, 2013
Great post! I’m including it in my monthly newsletter.
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