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HSA rollover guide

Key takeaways

  • HSAs are portable, meaning you can carry them with you from company to company and health plan to health plan through a process called an HSA rollover.
  • Rolling over an HSA can help you centralize your health savings, minimize fees, and get access to investments that align with your goals.

It’s easy to focus on the most obvious advantages of health savings accounts (HSAs), such as their tax benefits. But don’t overlook another key trait: portability. Once you’ve had an HSA-eligible health plan and opened an HSA, the money in it is yours to keep and do with as you please (within plan and IRS rules), including transferring it to a new HSA at a different provider through what’s called an HSA rollover.

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What is an HSA rollover?

An HSA rollover is when you transfer your HSA from one provider to another. This could be an HSA that you open on your own at a financial institution or one that you get access to through a new employer.

The ability to carry your funds with you—across many jobs and different calendar years—makes HSAs a unique way to save for health costs. You may be able to choose preferred providers even while tied to employer-sponsored plans. Money held in a flexible spending account (FSA), which similarly allows you to save pre-tax dollars for health expenses, is typically forfeited if it’s unused when you leave a job or when the calendar year ends. (For more on the differences between the 2 main types of health savings accounts, check out our guide to FSAs vs. HSAs.)

Taxes and HSAs

Typically, HSA consolidation is tax-free. You do not owe taxes for rolling over cash or securities. If investments are potentially sold, however, state taxes may be owed on capital gains (depending on where you live).

Specifically, for residents of California and New Jersey, HSAs do not receive special state tax treatment. In these states, HSAs are viewed like typical brokerage accounts, and state taxes may be owed on dividends, interest, and capital gains.

In New Hampshire and Tennessee, HSAs don’t receive any state tax benefits on the sale of investments, but capital gains are not taxed in these states. That means consolidating accounts won’t result in additional taxes (although dividends and interest earned remain taxable in New Hampshire, Tennessee does not tax dividends and interest).

Benefits of HSA rollovers

You can consolidate your health savings in one place.

Because each job change typically means a new health plan, you may accumulate quite a few HSAs by retirement. Keeping up with all of those details, logins, and investments could be a chore. If you value centrality, it may be worthwhile to consolidate your HSAs.

You may minimize account fees.

Even if you didn’t have to pay fees while working for the employer that sponsored your HSA, that company may charge fees once you part ways—taking a bite out of your savings over time.

To show the potential benefit of rolling over an HSA with fees to a no-fee HSA provider, take this hypothetical example. Consider a 35-year-old with $50,000 saved between 2 HSAs. She holds $20,000 in a no-fee HSA and $30,000 in another with a 0.50% annual fee. If she consolidated her HSAs into the no-fee account, she might have almost $40,000 more over 30 years.

The illustration above shows the difference in savings potential from consolidating versus not consolidating HSAs. The analysis is based on the following hypothetical scenario: Mary is a 35-year-old woman living in California with a household income of $100,000 and filing income taxes jointly with her spouse, subjecting them to an 8% state marginal tax rate. Mary has 2 HSA accounts. HSA 1 has a balance of $30,000 at a provider charging a 0.50% annual fee. HSA 2 has a balance of $20,000 at a provider charging a 0% annual fee. To take advantage of the lower cost HSA provider, Mary decides to consolidate her HSAs by transferring the balance of HSA 1 to HSA 2 at the beginning of the year. HSA 1 is comprised of $25,000 in total contributions she and her employer have made plus $5,000 in asset growth. Upon liquidating and transferring the proceeds to HSA 2, Mary will recognize $5,000 in capital gains in California and owe state taxes of $400 at her 8% state marginal tax rate. She makes annual contributions in excess of her HSA spending of $1,000 until age 65 and gets a 7% rate of return. The analysis assumes that Mary receives no dividends or interest over the period. It also assumes that applicable account state taxes due to consolidation, fees, and contributions are applied at the end of each year, as applicable, and in proportion to initial assumed hypothetical HSA balances.

You can get access to investments that suit you.

The ability to invest HSA money and potentially benefit from compounding returns over time is a significant benefit of HSAs. However, when you open an HSA through your employer, you’re limited to the investments available in that plan. If those investment options don’t meet your needs or line up with your goals, it may make sense to move your HSA to a provider that offers investments you do like.

Your current provider may also have requirements regarding how much money you need in the HSA before you can start investing, such as a minimum balance of $2,000. Rolling over your HSA may allow you to find a different provider without similar barriers.

How to perform an HSA rollover

  1. Find a new HSA provider.

    Make sure to evaluate investment options and any investment or account fees at new HSA providers. If you recently moved to a new employer and are enrolled in an HSA-eligible health plan, look into your employer-sponsored HSA. Even if you decide to roll over old HSAs to a different provider, it may be worth also opening an HSA through work if your company makes employer contributions on your behalf.

  2. Request that your old HSA provider rolls over the cash to your new provider.

    HSA rollovers can be performed in a few different ways:

    • Your old provider may directly transfer your funds and any investments to your new provider.
    • Your old provider may ask you to sell off your investments and then transfer only cash to your new provider.
    • Your old provider may ask you to sell your investments and then send a check or electronic transfer with your HSA funds directly to you.

    If you receive a check or electronic transfer, you must deposit the funds yourself with the new provider within 60 days. If you don’t, the IRS considers this a taxable withdrawal, which means you may owe taxes and a 20% penalty. Also, be aware that if you use the check-based method for your rollover, you can only perform one rollover per 12 months if the check is sent directly to you. If you wish to roll over multiple accounts, it could take longer than a year to move them all if the check is addressed to you.

  3. Keep contributing to and investing through your HSA.

    As long as you remain in an HSA-eligible health plan, you can contribute to an HSA, even if your new employer doesn’t offer one. If you are no longer in an HSA-eligible health plan, you still maintain ownership of your HSA and can manage any investments in it, though you won’t be able to add new dollars until you’re back in an HSA-eligible plan. If you had to sell your investments as part of the rollover process, make sure to reinvest the proceeds to avoid missing out on potential investment growth over time.

Consider a health savings account (HSA)

With an HSA, you can pay for qualified medical expenses in a tax-advantaged way.

More to explore

Investing involves risk, including risk of loss.

Past performance is no guarantee of future results.

The information provided here is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, customers should be strongly encouraged to consult their tax advisor before opening an HSA. Customers are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS Web site at They can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses (including the Health Coverage Tax Credit),online, or you can call the IRS to request a copy of each at 800.829.3676.

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