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Trad IRA rollover to HSA
Old 03-15-2014, 10:17 AM   #1
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Trad IRA rollover to HSA

We are for the first time eligible for an HSA as we now have a high deductible health plan. Both retired, ages 58 and 57.

I have a couple questions.

1. I read that you can take a one time, no penalty, no taxes rollover from an IRA (ours are Traditional IRA's) to an HSA. Max family for us this year would be the $6550 plus $1000 catch up. Can we EACH open an HSA and rollover the family max, if DH does one this year, and I do a rollover next year? In other words, is the one time rollover family max of $6550 per family or per account owner?

Alternately, we each would rollover $3300 plus the $1000 catch-up each this year.

This seems like a really good way to tap IRA money tax free for us. Too good to be true?

2. Forgetting about #1 above, do contributions have to be "earned" income?

Thanks!
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Old 03-15-2014, 10:34 AM   #2
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From IRS Publication 969:

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For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. If you have family HDHP coverage you can contribute up to $6,550.
You can find the answer to your other questions under "Qualified HSA funding distribution" in that IRS Pub. It's a fairly easy read compared to many IRS documents...
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Old 03-15-2014, 10:47 AM   #3
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While only somewhat related to your question, I know one thing that was confusing to me was how much we could contribute. DW and I are both over 55 and we each have HSA accounts and are both covered by a joint HDHI plan. We can contribute up to $8,550 between the two of us ($6,550 + $1,000 + $1,000). However, the max that either one of us can contribute is $7,550 ($6,550 + $1,000).

So we can split the $8,550 any way we wish but neither of us can add more than $7,550 to our account. IOW $7,550/$1,000 or $1,000/$7,550 or anything in between would be ok. I use that flexibility to keep our HSAs of about even balances.

You do not need earned income in order to contribute.

To my knowledge, the source of funds (taxable accounts or proceeds from an IRA) makes no difference in how much you can contribute in any given year. I did consider a one-time IRA transfer at one point but didn't see much advantage to it - I can do Roth conversions with the same affect but without the limitation that withdrawals from the HSA be spent on medical expenses.

YMMV.
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Old 03-15-2014, 10:47 AM   #4
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More details in this IRS bulletin:
Internal Revenue Bulletin - June 23, 2008 - Notice 2008-51
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Old 03-15-2014, 11:13 AM   #5
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Can't say that I think the IRS rules are an easy read- at least for me!

We are a family HDHP and I believe we can contribute up to the $6550 PLUS $1000- but not sure yet if that is $1000 each.

Have found nothing that answers whether we can each in separate years rollover the family max (assuming of course the other does not contribute that year). Anyone?? L
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Old 03-15-2014, 11:22 AM   #6
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Quote:
Originally Posted by bizlady View Post
Can't say that I think the IRS rules are an easy read- at least for me!

We are a family HDHP and I believe we can contribute up to the $6550 PLUS $1000- but not sure yet if that is $1000 each.

Have found nothing that answers whether we can each in separate years rollover the family max (assuming of course the other does not contribute that year). Anyone?? L
With a family HDHP you are allowed one single $1000 catch-up contribution. If you each have individual HSA eligible policies you each can make a $1000 catch up contribution.

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Originally Posted by bizlady View Post

2. Forgetting about #1 above, do contributions have to be "earned" income?
Nope. Any income will do.
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Old 03-15-2014, 11:24 AM   #7
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Quote:
Originally Posted by bizlady View Post
Can't say that I think the IRS rules are an easy read- at least for me!
Hey, I qualified it!

Quote:
It's a fairly easy read compared to many IRS documents...
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Old 03-15-2014, 11:28 AM   #8
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With a family HDHP you are allowed one single $1000 catch-up contribution. If you each have individual HSA eligible policies you each can make a $1000 catch up contribution.
That's not what our HSA provider told me. They said as long as we had separate HSAs and were covered by a HSA-eligible policy that we could contribute up to $8,550 ($6,550 + two $1,000 catch-up contributions) but neither of us could contribute more than $7,550. So we could contribute $7,550 to DW's HSA and $1,000 to mine or vice versa or anything in between. I specifically told them that we had a policy for us as a couple.

I recall reading the literature and seeing confusing/conflicting guidance on that question but decided to go with what the HSA provider indicated.
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Old 03-15-2014, 11:32 AM   #9
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the HSAcenter site says this for 2014:

Quote:
HSA holders can choose to save up to $3,300 for an individual and $6,550 for a family (HSA holders 55 and older get to save an extra $1,000 which means $4,300 for an individual and $7,550 for a family)
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Old 03-15-2014, 11:36 AM   #10
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IRS Publication 969, page 6, says this (for 2013, 2014 would be $8,550):

Quote:
If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Each spouse must make the additional contribution to his or her own HSA.
I looked back at my notes and between this and what the HSA provider guided I felt comfortable contributing a total that included two catch-up contributions.
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Old 03-15-2014, 11:43 AM   #11
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For 2014, both over age 55, both in a family HDHP, then $6550 + $1000 + 1000 is allowed subject to no more than $7550 in either account- the extra $1000 would need to be in the spouse account
IRS Courseware - Link & Learn Taxes
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Old 03-15-2014, 11:43 AM   #12
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Originally Posted by pb4uski View Post
IRS Publication 969, page 6, says this (for 2013, 2014 would be $8,550):
It specifies "Each spouse must make the additional contribution to his or her own HSA", and the OP says she has a family, not individual HSA.
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Old 03-15-2014, 11:50 AM   #13
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Quote:
Originally Posted by REWahoo View Post
It specifies "Each spouse must make the additional contribution to his or her own HSA", and the OP says she has a family, not individual HSA.
No, I think she said they have a family HDHP but are wondering if they should have individual HSAs. See OP.

Quote:
We are for the first time eligible for an HSA as we now have a high deductible health plan. Both retired, ages 58 and 57.
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Old 03-15-2014, 11:52 AM   #14
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Quote:
Originally Posted by bizlady View Post
For 2014, both over age 55, both in a family HDHP, then $6550 + $1000 + 1000 is allowed subject to no more than $7550 in either account- the extra $1000 would need to be in the spouse account
IRS Courseware - Link & Learn Taxes
That is my understanding.
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Old 03-15-2014, 12:13 PM   #15
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We are in a family HDHP. And I believe now that $8550 between us is allowed.

My more interesting question however remains: can EACH of us, in separate years, roll from a Traditional IRA to an HSA, $7550- assuming the other does nothing that year.
Can't find anything that says we cannot. Do see several indications that an individual can do a rollover once in their life (sans the exceptions). Also I see references that you can use your HSA to pay your or spouses medical expenses. Lastly, form 8899 line 10 does not seem to have any qualifier......

still digging......
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Old 03-15-2014, 01:21 PM   #16
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Quote:
Originally Posted by bizlady View Post
For 2014, both over age 55, both in a family HDHP, then $6550 + $1000 + 1000 is allowed subject to no more than $7550 in either account- the extra $1000 would need to be in the spouse account
IRS Courseware - Link & Learn Taxes
I tried this with my previous HSA custodian (now defunct) and they said the second $1K was not allowed and recall (faulty memory?) my tax sw rejecting that amount (2 catch-up contributions) as excessive.

What a bummer, that's 5 years of one catch up contributions we missed.
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Old 03-16-2014, 08:30 AM   #17
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On a somewhat related note, Have always viewed the HSA as an "emergency fund" for medical expenses. Up to this point DW and and I been blessed with good health and been able to accumulate enough funds to that we should be able to do long term investing with a portion of the funds. I was looking at the investment options with my HSA provider knowing that Fidelity funds were an option. Looking into details the Fidelity options are with Fidelity Advisors and funds carry a 3.5 % load fee. I am not sure if investing with fees makes sense ? If I have hi-jacked thread will start a new post.
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Old 03-16-2014, 08:43 AM   #18
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I have always viewed our HSAs as simply another opportunity for tax-free savings - similar to a Roth but with the constraint that the withdrawals must be spent on medical expenses. We've never taken a penny out of our HSAs. In the back of my mind I earmark those funds for LTC since we are self insuring for LTC.

I do keep a file of our unreimbursed medical expenses since we have had the HSAs so I know what I could withdraw without penalty if I needed to.
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