How To Rollover an HSA On Your Own and Avoid Trustee Transfer Fee

Health Care Costs

The HSA provider my employer chose isn’t very good. The interest rate is very low if I leave the money in cash. The investment options are very expensive, with no index funds. I still use it because contributions through the employer are exempt from Social Security and Medicare taxes.

I take the money out once a year and put it into the HSA account I prefer for better interest rate and better investment options. Here’s how I did it. Hopefully it will be helpful to others looking to do the same.

1. I logged on to the website of my employer’s HSA provider. I requested a transfer of the entire balance to my personal checking account. This does not close the account. If you don’t want this account any more, you can call and close the account after the rollover is done.

2. I mailed a personal check together with a rollover contribution form to my preferred HSA provider. Ask the receiving HSA provider for the rollover contribution form if you can’t find it on its website.

That was it. If you have a checkbook for the current HSA, you can also write a check and send it to the new HSA together with the rollover contribution form.

You can only do this DIY-style rollover once every rolling one-year period. The one-year clock starts on the date you take the money out of an HSA, not January 1. You have 60 days to deposit it to a new HSA. That’s enough for me. Trustee-to-trustee transfers aren’t limited in frequency but providers usually charge a fee to the tune of $20 to $30. It’s not worth it. Just do the rollover on your own.

My payroll deductions and my employer’s contributions are still going to the provider chosen by my employer. I’m going to rollover the balance in the account again next year after I clear the one-year mark from this rollover.

[Photo credit: Flickr user 401(K) 2013]

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Comments

  1. Matt says

    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.

  2. Michael says

    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?

  3. Steve says

    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)

  4. says

    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.

  5. says

    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!

  6. Brett Buyack says

    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?

  7. says

    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.

  8. says

    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?

  9. Adam says

    Following up on this… I, too, performed a rollover from my employer’s chosen HSA (Aetna/JP Morgan Chase) to Alliant Credit Union in January of 2013.

    I performed the rollover by doing an EFT withdrawal from the Chase HSA into my personal checking account (not at Alliant), then doing an EFT of that amount to my Alliant checking account, and finally notifying Alliant to do a transfer from my Alliant checking account into my Alliant HSA and coding it as a rollover contribution. No problems there. The initial distribution from my Chase HSA occurred on Jan. 24, but the rollover contribution was not credited to my Alliant HSA until Jan. 31. My understanding according to IRS rules is that I cannot make another rollover contribution until Feb. 1, 2014, but since that is a Saturday, the actual transaction won’t take place until Feb. 3, 2014. This means my 2015 rollover can’t occur until Feb. 4, 2015. This is kind of annoying, because it means if I continue to do rollovers every year, they would get later and later every year. I would much prefer them to be as close to Jan. 1 as possible.

    What’s not clear is how many rollovers are allowed in one year. The only definitive statement I’ve seen from the IRS says, “You can make only one rollover contribution to an HSA during a 1-year period.” But this is a little ambiguous: can I make one rollover contribution per HSA per year, or one rollover contribution per year, period, regardless of how many HSAs I have? For example, I’m thinking about opening an HSA this year with ELFCU, to make use of their investment options. From my reading of the IRS rules, I understand that I would not be able to rollover from Chase to ELFCU and also from Alliant to ELFCU in the same year (that would be two rollovers into a single HSA in the same year, which is clearly prohibited). But am I allowed to roll over funds from Chase to Alliant, and then from Alliant to ELFCU in the same year? In that case, each HSA would only receive a single rollover contribution.

    If anyone knows of a more detailed explanation of the rules from the IRS, I would welcome a link.

    • says

      The 1-year rule is tracked to the date when you received the distribution, not when you deposited it as a rollover. Still, if you keep doing this, the date will be pushed later and later, especially when you wait after you already passed the 1-year mark.

      The one-per-year rule is across the board, not per custodian or per account. The exact language of the law is IRC section 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.”

      See if you can *transfer* from Alliant to ELFCU for free.

  10. Jamie says

    Can someone comment on why for a Rollover it is necessary to write a check from one’s HSA checking account to a personal account; THEN write a personal check to the new HSA (i.e. ELFCU)? Why can’t you just write a check from the current HSA checking account to ELFCU to do a self rollover?

    • says

      If you have a checkbook from your current HSA, you can just write a check and send it to the new HSA. It’s not necessary to put the money in your personal account first. Not all HSA providers give a checkbook, but most allow you to link a personal checking account for electronic funds transfer. In that case you transfer to your personal account and then write a check from there.

  11. KL Cooley says

    I found this thread a little too late. I initiated a transfer from HealthEquity HSA (my employer’s) to HSA Administrators (low cost Vanguard funds). This was pretty easy as I just faxed the form. Then it got weird.

    I don’t know if my employer’s HSA will charge me a fee as their website is incredibly opaque about it. What do know is that while the transfer is in process they have frozen ALL the money in my account. So I can’t use the debit card they gave me or get any claims paid. I can understand the 3-6 weeks delay but freezing my account is like the bank putting a hold on my entire balance each time I write a check. Bizarre.

    That being said I will use the above technique next year. I didn’t realize that I was avoiding SS and Medicare by having payroll deduction. That’s huge.

    Double Whammy Savings. Thanks.

  12. KL Cooley says

    In reply to myself. My employer’s HSA didn’t see the large Bold lettering that said DO NOT CLOSE ACCOUNT on the transfer form and attempted to close my account.
    The only thing that kept them from doing just that was that I hadn’t transferred the entire balance. Whew.

    All good now. Live and learn.

  13. Andy says

    I have an HSA through my previous employer. I was laid off by that firm at the end of January, 2014. Their HSA administrator is Chase and while I was employed Chase did not charge a monthly maintenance fee.

    I received a letter from Chase yesterday that since I am no longer employed, they are “transferring” my HSA account to a “new” Chase HSA account, which will now require a monthly maintenance fee.

    I have slowly been dumping Chase due to all their fees, having closed my Savings account and closed/moved my IRA. (Chase initially said they would have to charge me a $40.00 fee to transfer my IRA to my new bank, but after complaining that all their fees were the reason I was closing my accounts, they relented).

    I’m going to turn 65 in several months and do not plan to seek additional employment as I will go on Medicare at that time and will not be in a HDHP.

    Now I want to move my current HSA funds from Chase to another HSA account. I’ve done a fair amount of “investigating” and have identified a number of reasonable alternatives.

    (I also just read that after reaching age 65 I can withdraw funds from my HSA with no tax penalty – for ANY purpose – not that I would. )

    My issue now is that I contacted one of the potential HSA banks yesterday to get information about transferring my existing HSA balance. The person I spoke with who was an HSA account representative, asked if I had an existing HDHP and I said no. His response was then I couldn’t transfer my current balance since I don’t now have an HDHP. After much discussion, I gave up.

    I subsequently went online and found an article on the Kiplinger web site that said I could in fact transfer my existing HSA balance to a new HSA bank even though I’m not currently in an HDHP. However, since I don’t currently have an HDHP I can’t make any “new” contributions to the HSA, which makes total sense since any “new” funds I would add would be after tax as opposed to pre-tax when enrolled in an HDHP.

    My question is this – is there any specific wording in the law spelling out the ability to transfer an existing balance to a new account without being currently enrolled in an HDHP that I can provide to a potential new HSA account representative? (The Kiplinger article didn’t identify any specific wording in the legislation.)

    Even though HSA’s have been around for some time, it appears there is still a lack of understanding regarding the rules that apply to these accounts – even by the account administrators.

    If I can finally get definitive guidance, I will make a cash withdrawal from Chase and then either write a check to the new account or do an EFT.

    Thanks for any help you can provide!

    • says

      Andy – Although the law allows rollovers, the bank doesn’t have to support it. It’s possible this bank only takes new contributions. It’s also possible the person you spoke to is just misinformed. Find the HSA contribution form on the bank’s website or ask a rep to send a blank contribution form to you. See if the form has a “rollover” box.

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