HSA contribution question

[Notmuchlonger]

If I understand correctly a HSA can be funded with pre-tax or after tax money? If so can 403b/401k monies be transfered to fund your HSA? Pardon if it is a blatantly obvious answer. I want to confirm that I am understanding it correctly.

 

[kaneohe]

I think you are correct that it can be funded pretax or after tax (after tax can be deducted (an adjustment actually) even tho you don't itemize. Here's something to read
http://www.ustreas.gov/press/releases/hp209.htm

I scanned it briefly---saw something about transfers from FSAs and also IRA but
not 403b/401K tho. They are changes for 2007----I assume they are effective starting in 2007 and not only for 2007 but I'm not sure.

 

[Zoocat]

Check out the Treasury Dept. FAQ. There may an answer somewhere in there.
U.S. Treasury - HSA Frequently Asked Questions - Employer Participation in HSAs

 

[Notmuchlonger]

Appreciate the help. I have trouble believing that I could move tax deferred money into something that I can eventually spend tax free. So Im double and triple checking to make sure Im understanding it right

 

[kaneohe]

There may be others but I don't know of any other things that are triply advantaged like the HSA: deduction going in, tax deferred while in the plan, nd tax free coming out. Btw....why would you want to move the 401K type funds into an HSA instead of just funding it separately to get more tax advantaged funds working for you (unless there were no other funds available)?

 

[Midpack]

Appreciate the help. I have trouble believing that I could move tax deferred money into something that I can eventually spend tax free. So Im double and triple checking to make sure Im understanding it right

That's my understanding too, so I'm putting in at the limit of pre-tax or tax-deferred...

 

[Notmuchlonger]

There may be others but I don't know of any other things that are triply advantaged like the HSA: deduction going in, tax deferred while in the plan, nd tax free coming out. Btw....why would you want to move the 401K type funds into an HSA instead of just funding it separately to get more tax advantaged funds working for you (unless there were no other funds available)?

Maybe I am not understanding something correctly. If I was retired wouldn't it be better to move 401k money that has avoided taxes into my HSA. That way when I spend it on healthcare it would be truly tax free. When I am retired I will have 3 sources of income a small pension/SS and my 401k. I dont mean to be slow on the uptake just trying to understand this all.

 

[kaneohe]

Maybe I am not understanding something correctly. If I was retired wouldn't it be better to move 401k money that has avoided taxes into my HSA. That way when I spend it on healthcare it would be truly tax free. When I am retired I will have 3 sources of income a small pension/SS and my 401k. I dont mean to be slow on the uptake just trying to understand this all.

Interesting question......I guess I'll have to sleep on it.
I guess my initial thought was that the more tax advantaged money you had working for you, the better. If you transfer the 401K money (assume it was all of it),then all you have is the HSA. If you put in new money, you have the HSA as well as the 401K. You get a "deduction" for the new after tax money but I don't think you would with the 401K transfer since you already "took it" when you contributed to the 401K (you might want to verify that at
fairmark.com ).

Btw, I guess even tho the link I provided did not talk about 401K transfers specifically, I suppose you could indirectly do it by rolling the 401K money into an IRA first if you had to. Again would be good to verify that and also think about advantages/disadvantages of 401K vs IRA.