HSA "rollover" question

[njhowie]

DW has HSA account at her employer via PayFlex. There is a nice sum of money there. They offer investing through BNY Mellon, but they are proprietary funds, PayFlex charges a monthly fee for the privilege, and so on. DW also has HSA account at Fidelity.

My question is, can we just make a withdrawal from her employer HSA without closing it, they cut us a check, and within 60 days deposit into her Fidelity HSA as a rollover contribution? She is still employed and will continue HSA contributions through PayFlex, so we don't want to close the account to do rollover, and it doesn't look like there is any mechanism to do a trustee to trustee partial rollover. The money with PayFlex is all cash earning nothing at this time, so the desire to move what we can to Fidelity.

I would (try to) have PayFlex cut the check to "Fidelity FBO DW" so it would be clear this was a rollover contribution from both sides. I've read that you are allowed to use the check rollover method once every 12 months, but the articles are assuming withdrawal and closure of the originating HSA.

Would this work? Has anyone done it?

[MichaelB]

Yes, you can roll over the HSA by taking the withdrawal and depositing the funds in a new HSA within 60 days.

[njhowie]

Just wanting to be certain that I can simply do it by withdrawing any amount I want without closing the originating HSA.

Thanks.

[mrfeh]

Quote:

Originally Posted by MichaelB Yes, you can roll over the HSA by taking the withdrawal and depositing the funds in a new HSA within 60 days.

+1

We did this many times.

[njhowie]

Quote:

Originally Posted by mrfeh +1 We did this many times.

Thanks!

[big-papa]

You can also do this hands-off via a trustee-to-trustee transfer instead of a rollover. The 60 day limit doesn't apply then and you can do this as many times per year as you like vs. a rollover which you can do only once every 12 months. https://www.fool.com/retirement/plans/hsa/rollover/

I do this all the time by transferring from the HSA associated with my employer (HealthEquity) to my Fidelity HSA. Note you can't do an "in kind" transfer with Fidelity, only cash. And the transfer for me takes, on average, about 3 weeks, sometimes a little shorter, sometimes a little longer.

After opening an HSA at Fidelity, you can initiate a transfer from their side and they'll take care of the rest for you. Alternatively you may also have the ability to initiate the transfer from your existing HSA side.

I do these regularly, whenever the cash balance at HealthEquity is close to about $1K.

At least with HealthEquity, the transfer isn't electronic. They literally cut a check and send it directly to Fidelity.

Cheers,
Big-Papa

[njhowie]

Quote:

Originally Posted by big-papa After opening an HSA at Fidelity, you can initiate a transfer from their side and they'll take care of the rest for you. Alternatively you may also have the ability to initiate the transfer from your existing HSA side. I do these regularly, whenever the cash balance at HealthEquity is close to about $1K.

That's great...will go to Fidelity account and start this now.

[big-papa]

Quote:

Originally Posted by njhowie That's great...will go to Fidelity account and start this now.

Cool. Make sure you understand how much you have to keep in your original HSA to keep it open. At HealthEquity, it's $25. You probably don't want to have it automatically closed and have to go through the hassle of getting it reopened.

Cheers

[njhowie]

Quote:

Originally Posted by big-papa Cool. Make sure you understand how much you have to keep in your original HSA to keep it open. At HealthEquity, it's $25. You probably don't want to have it automatically closed and have to go through the hassle of getting it reopened. Cheers

Yes, thanks again. Just went through the rollover screens and saw it provides for partial rollover, so easy peasy. She's already had a 2023 contribution made from first paycheck, so moved just under what balance was on the Dec 31 statement.

Thanks again.

[big-papa]

Quote:

Originally Posted by njhowie Yes, thanks again. Just went through the rollover screens and saw it provides for partial rollover, so easy peasy. She's already had a 2023 contribution made from first paycheck, so moved just under what balance was on the Dec 31 statement. Thanks again.

Glad to help! I am curious, though. Why did you decide on a partial rollover instead of a trustee to trustee transfer, given the restrictions on rollovers?

Cheers!

[njhowie]

Quote:

Originally Posted by big-papa Glad to help! I am curious, though. Why did you decide on a partial rollover instead of a trustee to trustee transfer, given the restrictions on rollovers? Cheers!

Based on my understanding, I believe in this case that there is no real difference in that both the originating account and destination account are of the exact same HSA type, and it is a trustee-to-trustee direct rollover where there is no limit to how many times it can be done in a year as there is in the indirect route if I were to have the check withdrawn and then I hand it over to Fidelity (max of once per year).

If my understanding is not right, please correct.

Thanks again.

[Phroig]

Quote:

Originally Posted by njhowie That's great...will go to Fidelity account and start this now.

+1
I have also done partial transfers to Fidelity.

[big-papa]

Quote:

Originally Posted by njhowie Based on my understanding, I believe in this case that there is no real difference in that both the originating account and destination account are of the exact same HSA type, and it is a trustee-to-trustee direct rollover where there is no limit to how many times it can be done in a year as there is in the indirect route if I were to have the check withdrawn and then I hand it over to Fidelity (max of once per year). If my understanding is not right, please correct. Thanks again.

The terms "rollover" and "trustee to trustee transfers" have two different meanings. Take another look at the article I linked in my earlier posting, though it sounds like you're doing a "trustee to trustee transfer" from your description. I think that's definitely the better choice!

Cheers.

[Phroig]

I forgot to add, there's also a fee for a transfer. If you get a check, and do a rollover, that's obviously going to be free. You probably know that you can only do one rollover per year.

[big-papa]

Quote:

Originally Posted by Phroig I forgot to add, there's also a fee for a transfer. If you get a check, and do a rollover, that's obviously going to be free. You probably know that you can only do one rollover per year.

I do transfers from HealthEquity to Fidelity about every 3 months like clock work. Never a fee from either side.

Cheers.

[Phroig]

Quote:

Originally Posted by big-papa I do transfers from HealthEquity to Fidelity about every 3 months like clock work. Never a fee from either side. Cheers.

Nice. Mine charged $25 last time. (Still worth it to move the money to Fidelity.) Best to check the custodian’s fee schedule then.

[njhowie]

Quote:

Originally Posted by big-papa The terms "rollover" and "trustee to trustee transfers" have two different meanings. Take another look at the article I linked in my earlier posting, though it sounds like you're doing a "trustee to trustee transfer" from your description. I think that's definitely the better choice! Cheers.

Yes, it is a "transfer".

[njhowie]

So just FYI to bring this to conclusion - yesterday the HSA transfer was completed to Fidelity and funds were available for investment. Yes, it was a "transfer" and not "rollover" of assets.

PayFlex issued the check to Fidelity on 1/19, and it was sent by US Mail. A nominal amount remains in the PayFlex account, it is still active, and contributions from DW's paychecks will continue...and I'll likely do future transfers every 6 to 12 months as the funds rebuild and are earning next to nothing in the PayFlex non-investment account.

Thanks again for all the inputs and direction - much appreciated.

[FLSUnFIRE]

PayFlex was awful. I was so happy to be out of there once I FIREd and was off my otherwise very good employer HI plan... of course they stole their last $50 bucks to process the transfer. Glad you were able to get most of your funds out. IIRC, I didn't have that option or perhaps didn't want to pay the fees to do so periodically.

[SunGuy]

Switch to Fidelity asap, I work there, it is so simple to do. I work in a high level client service role, but they have the best training for the lower tier CRA positions in the industry.

They are all super smart people, with a huge disparity of backgrounds.