How to Fund Your HSA Using an IRA

Opening a health savings account can be a good way to save money on your taxes while also guarding against unexpected medical expenses. An HSA allows you to put money aside on a tax-deferred basis and use those funds to cover medical costs not covered by your health plan. If you need to jump-start your HSA account, you can transfer money from your IRA without a tax penalty, but it is important to understand the rules before you get started.

Things You'll Need

• IRA statement
• HSA statement

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Instructions

• 1

  Review your IRA statement to see how much you have to work with. The maximum you can roll from your IRA to your HSA is the allowable HSA contribution for the year, and such as transfer can only be done once. For 2010, the maximum HSA contribution is $3,150 for an individual and $6,150 for family coverage. Any contributions you have already made count against this maximum, so an individual who has already contributed $500 to an HSA can only roll over $2,650 from an IRA.

• 2

  Contact your health insurer or insurance broker and make sure your plan is HSA-eligible. Your plan must meet very specific requirements to be considered a high-deductible health plan, or HDHP. You must have an HDHP plan in place before you can open or contribute to an HSA.

• 3

  Check your HSA statement and find your account number. To roll money from an IRA to an HSA, you must already have an HSA established.

• 4

  Contact the administrator of your IRA and let them know you want to roll part of the money into an HSA. The IRA custodian will provide you with the transfer form and other paperwork you need to complete the rollover.

• 5

  Fill the form out in its entirety and submit it to the address listed. Include copies of your IRA and HSA statements with the appropriate account numbers circled. Be sure to make copies of all paperwork and keep them with your tax records.