What Is the Difference Between an HSA Transfer and Rollover?

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What Is the Difference Between an HSA Transfer and Rollover?

Posted By Daniel Stewart     July 5, 2021    

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One of the biggest benefits of having an HSA is that it’s fairly easy to either transfer or roll over your HSA funds if you switch to a new provider. But, if you are getting a new provider, is a transfer or a rollover a better option for you? In this blog, we’ll explain some of the HSA transfer rules so you can make the right decision.

HSA Transfer Rules and Rollovers

Here are the various HSA transfer rules and rollover rules:

HSA Transfer

Perhaps the easiest way to move your funds to a new HSA provider is through a trustee- to-trustee transfer. In a trustee-to-trustee transfer, your current HSA provider will simply make a direct payment to your new account. You don’t have to take the money out at all; it’s in your new account and ready to go. This is definitely the fastest method of transfer, and it helps you avoid any tax penalties.

HSA Rollover

Doing an HSA rollover is another viable option. In this method, your original HSA will write you a check for the full balance of your account. You then have 60 days after withdrawal to deposit the funds in your new HSA account. In this scenario, the onus is on you to deposit your check in the time you’re given. If you don’t, then you’ll be subject to a 20% penalty along with income taxes owed on what you’ve taken out. This is a bit riskier and slower than the transfer, since it’s up to you to make sure the money gets there. You are able to do a rollover once per year.

In-Kind Transfer

Many HSA providers will require you to cash out your investments before moving funds. Some providers, however, will give you the opportunity to make an in-kind transfer. This allows you to transfer all of your invested funds, transfer your same shares and transfer cash assets.

Making the Right Decision

If you’re switching HSA providers, make sure you review the HSA transfer rules with your current and new provider, so you can make the best possible decision for your funds.

Read a similar blog about health investment here at this page.

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