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!
Saundra Davis is a nationally recognized financial coach and educator. Her experience in the U.S. Navy, where she made every money mistake possible, and her 20 years serving community-based organizations led her to the reality that the best way to help people find a path out of poverty is to help them become their own financial expert.