Can funds be transferred from a FSA or HRA to an HSA?
Yes. Under the Tax Relief and Health Care Act of 2006, an HSA eligible individual may make a one-time, tax-free transfer from a FSA or HRA to an HSA, called a “qualified HSA distribution”. The amount transferred is limited to the lesser of (1) the balance in the FSA or HRA on September 21, 2006; or (2) the balance in the FSA or HRA on the date of the transfer. Also, this one-time transfer must be done on or before December 31, 2011. The transferred amount is treated as a rollover contribution to the HSA and thus does not reduce the HSA eligible individual’s HSA contribution limit for the year of the transfer. The amount transferred from the FSA or HRA to the HSA must be made directly by the employer to the trustee or custodian of the HSA. The amount transferred is treated as an employer contribution made to the employee’s HSA, and therefore is not deductible by the employee. The individual must remain HSA eligible during the “testing period”, otherwise, the transferred amount is taxabl
