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. If you are looking for a better HSA, see Best HSA Provider for Investing HSA Money.
1. I logged on to the website of my employer’s HSA provider. I requested a withdrawal to my personal checking account. Leave a few dollars behind if you don’t want them to close the account. If you don’t want this account any more, you can withdraw everything and call to 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. If your preferred HSA provider is Fidelity Investments, fill out the, mark the box for “60-Day Rollover” and mail it in to the address on the form.
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.
After the end of the year, the HSA provider that distributed the money will send you a Form 1099-SA showing the distribution. You will report the distribution in your tax software, which puts the rollover amount on IRS Form 8889 line 14b . The amount rolled over isn’t taxable. In May each year, the receiving HSA provider will send you a Form 5498-SA, which confirms the normal contributions and the rollover received in the previous year. Save the 1099-SA and the 5498-SA in your tax files to show that you did a rollover if you are ever asked for proof.
You can do this DIY-style rollover only 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.
Say No To Management Fees
If you are paying an advisor a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice.