HSA Rollovers: A Step-By-Step Guide

If you’re considering moving your health savings account (HSA) to a new provider, the good news is that the rollover process is relatively straightforward. The IRS permits transfers from one HSA to another, and under certain conditions, even from an IRA or 401(k). We’ll review each method step by step and explain the relevant IRS rules so you can aim to maximize your HSA’s tax benefits while working to avoid costly mistakes or penalties.

Consider working with a financial advisor as you put together a retirement plan and make adjustments.

Ways to Rollover an HSA

Rolling over a health savings account can be a smart move, especially if you’re changing providers, switching jobs or looking for better investment options. Fortunately, the IRS allows several types of HSA rollovers, including transfers from other HSAs, IRAs and even indirectly from 401(k)s. Each method comes with specific rules, timelines and potential tax implications.

HSA Rollover: Trustee-to-Trustee Transfer

The easiest and most secure way to start an HSA rollover is by contacting your current HSA provider. This might be a bank, mutual fund company or another financial institution. If your HSA was set up through your employer, the benefits department can direct you to the right contact.

Next, ask your provider to initiate a “trustee-to-trustee transfer” to move your funds to a new HSA account. Many providers let you complete this process online. If not, you can call and request a transfer form, fill it out, and return it. Your provider will handle the rest.

You may have heard that the IRS limits HSA rollovers to once every 12 months. That rule only applies to official rollovers, where the account holder receives the funds and deposits them into a new HSA. In contrast, trustee-to-trustee transfers are unlimited and are not treated as rollovers by the IRS.

With an official rollover, your provider sends you a check or deposit. You then have 60 days to place those funds into your new HSA. Missing the deadline means paying income tax on the full amount, plus a 20% penalty.

Trustee-to-trustee transfers help you avoid those risks and are generally easier to complete. If you follow the rules for either method, your transfer won’t be taxed and won’t count toward your annual HSA contribution limit.

Note that these steps apply to standard HSAs. If your funds are invested in securities like mutual funds or stocks, the process may differ slightly.

HSA Rollover: In-Kind Transfer

Many HSA providers, including mutual fund companies, offer accounts that function like investment portfolios. This means your HSA contributions can be invested in securities such as stocks, bonds and exchange-traded funds (ETFs).

If you want to move these types of investments to another provider, you’ll need to request an in-kind transfer. This allows you to transfer the investments as-is, without selling them first. However, not all providers support in-kind transfers. If yours doesn’t, you’ll need to sell the investments, transfer the cash and reinvest with the new provider.

Keep in mind, this approach may involve tax risks. While federal law exempts official HSA rollovers from income tax, not all states follow those rules. Over 35 states align with federal guidelines, but others don’t. For example, New Hampshire doesn’t tax regular income, but does tax interest, dividends and capital gains.

To avoid unexpected tax issues, it’s a good idea to consult a tax professional or financial advisor. They can guide you through the rollover process and help you avoid costly mistakes.

HSA Rollover: Employer to Employer

An employee reviews their retirement and HSA rollover options upon changing employers.

If you opened your HSA through your employer and are changing jobs, the account is yours to keep. However, your new employer might use a different HSA provider, or you may prefer to switch to one of your own choosing.

In either case, follow the rollover steps outlined above. You can contact your current HSA provider and request a trustee-to-trustee transfer, or ask for a check and complete the rollover yourself. If you choose the latter, be sure to deposit the funds into your new HSA within 60 days to avoid taxes and penalties.

HSA Rollover: HSA to IRA

To roll over IRA funds into your HSA, start by contacting your IRA provider. Most allow you to request the transfer online, by phone or by mail. The process is similar to moving money between two HSA accounts.

However, the IRS only allows one IRA-to-HSA rollover in your lifetime. There is a rare exception. Here are the key rules to avoid tax penalties:

Both the IRA and HSA must be in your name.
Only traditional and Roth IRAs are eligible. SEP and SIMPLE IRAs don’t qualify.
The rollover counts toward your HSA contribution limit for the year, so it’s best to do it when you have room to contribute.

Most importantly, you must pass the testing period. This means staying enrolled in a high-deductible health plan (HDHP) for 12 months after the transfer. The testing period begins the month you make the rollover and ends on the last day of the 12th month. For example, if you complete the rollover on April 13, 2025, the testing period ends April 30, 2026.

Failing to meet this requirement results in tax consequences. You’ll owe federal income tax on the transferred amount, plus a 10% penalty. The only exceptions are death or disability.

Why all the restrictions? Because an IRA-to-HSA transfer turns tax-deferred money into tax-free money, if it’s used for qualified medical expenses.

You can make a second IRA-to-HSA rollover in the same year if you change your coverage from individual to family. In that case, you can contribute up to the higher family limit. If you’re 55 or older, don’t forget to include the additional $1,000 catch-up contribution.

401(k) to HSA Rollover

Technically, the IRS doesn’t allow you to roll over funds directly from a 401(k) into an HSA. However, you can always set up a 401(k)-to-IRA rollover. Afterward, you can transfer the funds from the IRA into your HSA. But remember to follow the rules.

How to File an HSA Rollover

HSA rollovers are reported on IRS Form 8889. On line 14b, fill out the total amount you rolled over or transferred from any eligible account into an HSA account. You should also record the total amount of distributions you made during the tax year, including the HSA rollover, on line 14a.

Of course these days, the best tax software can make this process seamless.

Reasons for an HSA Rollover

There are a few key reasons to consider an HSA rollover. One common reason is to consolidate multiple HSAs into a single account, making it easier to manage your funds. Another reason is to reduce costs, as rolling over to a new provider may offer lower fees than your current HSA.

Here are two of the fees you may be able to reduce with a rollover:

Operating Expense Ratio

A fund’s expense ratio, the internal operating costs paid by investors, is an important component to keep in mind. Expressed as a percentage, an expense ratio is the portion of your total account value removed annually in fees. The difference between small percentages often appears inconsequential, so we rarely take action to move our money to investments with lower expense ratios. But here’s a huge wake-up call: Those built-in fees could be costing you thousands of dollars in the long run.

Maintenance Fees

Some firms charge maintenance or custodial fees for managing investment accounts. These charges can either be flat fees or a certain percentage. These fees goes toward things like recordkeeping and account reporting.

Bottom Line

A man fills out Form 8889 to report an HSA rollover.

Don’t let hesitation keep you from rolling over your HSA funds into a better account. You can contact your original HSA provider and request a trustee-to-trustee transfer. This process bypasses the “rollover once every 12 months” rule. Plus, it doesn’t reduce your HSA maximum contribution limit for the year.

In addition, you can roll over funds from your IRA to an HSA utilizing the same process. This, however, will reduce your annual contribution limit. Nonetheless, it’s like turning tax-deferred money into tax-free money for eligible medical expenses.

Tips on Conducting an HSA Rollover

A financial advisor can help guide you through the complexities of conducting an HSA rollover. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Not sure where to roll over your HSA funds? As long as you keep your HSA-eligible HDHP coverage, you can open one at almost any bank. But the choice can be difficult with so many options. To help you out, we published our report on the best banks in America.