IRA – HSA Rollover

Submitted by ShipsnGiggles on Tue, 2016-08-02 18:49

Can an eligible investor > 70.5 rollover their IRA to an HSA? assuming they qualify
Assuming they can, must the RMD be distributed prior to the rollover?

Thank you



Submitted by Alan - IRA critic on Tue, 2016-08-02 21:49

Once enrolled in Medicare, HSA contributions are not permitted. Those collecting SS at 65 are automatically enrolled in Part A, and SS cannot be delayed beyond 70. Perhaps this is why the HSA guidelines do not mention RMDS in  relation to qualified funding distributions.  Notice 2008-51 indicates that a funding distribution from a beneficiary RMD can be applied to the RMD amount, but no specific mention of owned IRA funding distributions. A funding distribution, although done by direct transfer, is actually a distribution and if someone was somehow eligible to make HSA contributions by avoiding Medicare, it would probably count toward the RMD since these are reported on the 1099R as distributions, and the first distribution in an RMD year applies to the RMD.

Submitted by David Mertz on Wed, 2016-08-03 00:16

  • An IRA cannot be “rolled over” to an HSA.  An HSA funding distribution is a distribution from the IRA, reported by the IRA custodian the same as any regular distribution, and a direct contribution to the HSA.  (I suspect that that is what you meant, but referring to it as a “rollover” is a misnomer.)  As a distribution from the IRA, I see no reason that it could not be used to satisfy an RMD.
  • Since the IRA distribution to someone over age 59½ is not subject to an early-distribution penalty, generally there is no benefit to someone over age 59½ making an HSA funding distribution instead of receiving distribution (paid to the IRA owner) from an IRA and using that money to make an HSA contribution.  The resulting AGI would generally be the same.  The exception would be if the IRA owner had basis in nondeductible traditional IRA contributions; an HSA funding distribution comes first from the before-tax money, so it is not subject to prorating on Form 8606.

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