IRA to HSA
New client retired, says she can ” transfer” from her IRA to her HSA. She says she is capped at how much annually she can contribute. Also wonders if she can wait until next tax year, that amount would be increased that she can contribute to HSA.
She says that she has one year from termination of her employment to fund, after that she cannot do and it must be a 1 time transfer. Is this based on plan or IRS guidelines?
I cant seem to find a resource that address this specific case.
thanks in advance
Permalink Submitted by Alan - IRA critic on Mon, 2023-06-26 19:54
One time qualifed HSA funding distributions are described on p 15-16 of Pub 590 B linked below. Note that the transfer cannot exceed the amount that client would otherwise have been able to make to the HSA for the year, but that amount will increase about 8% for 2024. To use this higher limit, the transfer must take place in 2024 by year end. Therefore, if she cannot fund a regular HSA contribution, she might consider the one time transfer. Of course, that depletes her IRA balance. Finally, note that transfer does not generate tax or a deduction but a regular HSA contribution would qualify for a deduction.
Permalink Submitted by David Mertz on Mon, 2023-06-26 20:25
Permalink Submitted by John Jawor on Mon, 2023-07-03 20:27
When would she be deemed ineligible for the Ira transfer? She has 750k in Ira so the Ira to hsa would not delplete her Ira. Not sure what that bullet point referred to. She thinks she has a tear after termination to do the one time transfer so if she waits until Jan 24 she can take advantage of the 8% increase. Correct? She is using hsa for cobra payments until 65. (18 months). as usual Ty so much for the guidance!
Permalink Submitted by David Mertz on Mon, 2023-07-03 23:14