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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Planning IRA to HSA transfer

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I have read many opinions concerning the one time transfer allowed in 2007 for IRA funds to an HSA and most say it is not a good idea. However, it is my understanding that the funds are transferred directly from trustee to trustee and are not taxed and are deductible as an HSA contribution thus making it possible to take a tax-free withdrawal from an IRA. Would an IRA to HSA transfer be beneficial to someone who is not presently taking distributions from a taxable IRA to take money out tax free and also get a deduction for the HSA contribution if that person expects to be in a high tax bracket when she must begin taking distributions? Or am I missing something?

A: You correctly point out that all of this discussion is just a matter of personal opinion since no official procedures have been established yet. IRA to HSA transfers are not actually available now even though this is authorized under federal law. It may be a matter of months before we know the details. For those who have both an IRA and an HSA, it is difficult to image a scenario where taking advantage of this one time IRA to HSA transfer would not be beneficial. Of course their might be some unique personal circumstances where an IRA to HSA transfer would not be attractive, but this would be the exception rather than the rule. If you can think of such a scenario or read about a specific example, please pass it on. For now, the only thing to do it to wait until your HSA administrator announces the availability of this feature. The real concern about IRA to HSA transfers is that the current pattern of inefficient use of the funds in HSA accounts will erode the value for many owners. That is an inherent weakness of HSAs in general that is entirely separate from the tax issues of planning an account transfer.


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