Can I transfer my HSA to another financial institution?

I have a HSA through my company. I don’t like their services and investing options. Can I transfer some of the funds I have to a new account at another financial institution?

Submitted by Sudawan K.

Take a moment and pat yourself on the back for planning ahead for your medical expenses. Not everyone does, so I want to acknowledge that you are doing it. Congratulations! I was talking about your question with my #MoneyBuddy Brandy Baxter, and being the money nerd she is, she got all excited and started rattling off ideas. So here we go!

Tax Benefits of an HSA

First, the money you contribute to your HSA is a tax-planning power play. You contribute money with pre-tax dollars, which lowers your tax liability. Plus, the money earns interest tax-free, and is tax-free when you use it for qualifying medical expenses. This is a great benefit if you or your family tend to have lots of medical expenses not covered by insurance. Another benefit is the balance of your account rolls over year after year, so you don’t lose any of the money you’re saving.

Finding a New Bank

My first question for you: have you found another bank that has better investment options? If you haven’t, that’s okay. But be sure to do that before making any moves. When you decide to move your funds to another account, they can easily be transferred to another bank as long as the new bank also offers HSA accounts.

Funds Rollover Versus Trustee to Trustee Transfer

This next point is important, so take notes. There are two types of transfers you can do with your HSA: a funds rollover and a trustee to trustee transfer.

We went straight to the IRS website to get the lowdown on this topic. A funds rollover occurs when your current HSA account holder sends you a check and you deposit the amount into your new account. Failure to make the deposit into a qualifying HSA account within 60 days of receiving the check will result in a penalty. Yikes! Please don’t make this mistake.

A trustee to trustee transfer is when you authorize your HSA provider to transfer the funds directly to your new HSA provider. This is important, because the money never comes to you in this type of transaction. This means no penalties (or the danger of missing a deadline). Simply ask your new provider to give you a trustee to trustee form. After completing, you’re all set and on your way to earn more money on your investment!


Recommended Articles

Do I need to file a tax return if my only income is Social Security?

Submitted by anonymous. That’s a great question, as many Americans’ only source of income is Social Security. Social Security income is taxed for federal and state income tax purposes. If your earned income exceeds IRS 2019 filing guidelines, you are required to file a tax return with the IRS and in most states. Do I… Read more

How can I get started with low-risk investments?

How do I begin with low risk investments? For example CD’s, money market accounts, etc. Submitted by Deirel M. First of all, way to go! Investing is all about preparing for your future and the fact that you’re clear that you want low risk is an appropriate first step. Are you ready to start investing?… Read more

Can I file taxes if my income was only SS and SSI?

Submitted by Veronica C. Living on only social security income tells me that you are resourceful and doing a good job managing your money. (SS is the benefit that you pay into during your working years and SSI is supplemental income designed to provide additional support for specific situations.) This question is tricky because I’m… Read more