Move 403B to HSA
It is my understanding to fund our HSA. We can move money from the 403B to an IRA and then move it to the HSA.The 403B is no longer contributed to by us or the company my wife works for. It has been just sitting there collecting some interest for the last several years.
My question is do we pay a penalty for the part we want to move to the HSA from the IRA if we are not 59 1/2 or older?
From what I have read I don’t think we will. We would just transfer the amount it would take to get the HSA up to the max contribution we can put in there for this year. My wife talked to the lady at the bank that has our HSA. She seemed to think we would pay taxes and penalty if we are not at least 59 1/2.
My understanding is we are moving it from one tax sheltered fund to another. As long as we meet the testing period and only withdraw for covered health expenses. I don’t think we would pay tax on that money.
Permalink Submitted by Alan - IRA critic on Wed, 2017-01-18 16:36
There is no penalty for the funding distribution. While the transfer must be made directly between the IRA and HSA custodians, it is still reported on a 1099R. You would show the distribution on line 15a and nothing on 15b with “HFD” entered next to 15b. You are correct that the HFD will replace the HSA contribution you otherwise could have made with new money. The bank rep was totally incorrect as there is no tax or penalty, you are just moving funds from your IRA to HSA in a manner that is reported like a rollover.