Rollover Contributions

Generally, a rollover is a tax-free distribution to the taxpayer of cash or other assets from one HSA that the taxpayer contributes to another HSA. The contribution to the second HSA is called a rollover contribution; these contributions:

• Are not included in taxpayers' income
• Are not deductible
• Do not reduce taxpayers' contribution limit

Taxpayers can also roll over amounts from Archer MSAs into an HSA. They do not have to be eligible individuals to make a rollover contribution from their existing HSA to a new HSA.

Rollovers are not subject to annual contribution limits and a rollover contribution is not always cash; for example, it could be a Certificate of Deposit (CD). The taxpayer must roll over the amount within 60 days after the date of receipt, and may only make one rollover contribution to an HSA during a one-year period.

See Publication 969 for more information on rollover contributions.

Mary became unemployed in 2011. She was required by her previous employer to move her HSA. She rolled over the amount within 60 days to a new HSA.

If the taxpayers have their HSA funds transferred directly into another HSA in a trustee-to-trustee transfer, this is not considered a rollover. There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution or include it as a distribution on Form 8889, line 14a.

Remember, Archer MSAs are out of scope for VITA/TCE. Refer taxpayers who have issues that involve Archer MSA to a professional tax preparer. The following are also out of scope:

• Qualified HSA funding distributions made from traditional IRAs or Roth IRAs
• Qualified HSA distributions from a health FSA or HRA that is transferred to an HSA