IRA funds to an HSA
Is it ever possible to move funds from my IRA to my HSA? Is this type of transfer is available when moving funds from a retirement, as in a plan rollover?
Is it ever possible to move funds from my IRA to my HSA? Is this type of transfer is available when moving funds from a retirement, as in a plan rollover?
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-15 03:04
An IRA owner is able to do a one time direct transfer of pre tax TIRA dollars to an HSA account up to the amount of your otherwise qualified HSA contribution. Even though it is a direct transfer, it must be reported on Form 8889 and 1040 similar to a rollover, but noted as an “HFD”.
These are much overhyped since they replace a normal deductible HSA contribution which is done without reducing your IRA balance. You must also meet the HSA testing rules or the HFD will become taxable and subject to penalty. Therefore, for most people just making a normal HSA contribution is preferable.
Permalink Submitted by David Belk on Tue, 2022-03-15 18:51
I cannont determine if this one time option is still available for someone who has already retired and still has an HSA?
Permalink Submitted by David Mertz on Tue, 2022-03-15 19:31
Employment status is not a factor. No compensation is needed to be eligible to make an HSA contribution. Other than the one-per-lifetime limitation one only has to meet the normal HSA eligibility requirements to be able to make an HFD.
If one is over age 59½, it makes no sense to fund an HSA with an HFD. One can simply take a normal distribution from the IRA and make a deductible HSA contribution, thereby avoiding the testing-period requirement for an HFD.
Permalink Submitted by Dan Zaehring on Tue, 2022-03-15 23:29
I don’t know if it applies to the one time conversion, but once someone reaches Medicare age 65 they are no longer eligible to make a contribution to an HSA.
Permalink Submitted by William Tuttle on Wed, 2022-03-16 12:57
As pointed by Alan, an IRA HSA funding distribution may only be up to an individual’s HSA eligible contribution limit. However, it is the effective* Medicare enrollment date and not necessarily age 65 that removes HSA eligiblity.
To amplify Alan’s point it is seldom a good idea to use an IRA HSA funding distribution. Unless the only sources of funds for an HSA contribution would be pre-tax retirement accounts.
Just because you can do something does not mean you should do something.
*Enrollment in Medicare after age 65 results in an automatic retroactive enrollment of up to six (6) months, but not before age 65. This retroactive Medicare enrollment makes an individual retroactively HSA ineligible.