Can funds be transferred from an IRA to a HSA?
Yes. Under the Tax Relief and Health Care Act of 2006, an HSA eligible individual may make an irrevocable once-in-a-lifetime, tax-free “qualified HSA Funding distribution” from an IRA to a HSA, excluding SEP or SIMPLE IRAs. There is no deadline to make this transfer. The amount of the distribution must be made in the form of a trustee-to-trustee transfer from the IRA to the HSA. The amount of the transfer cannot exceed the maximum HSA contribution limit for the year that the amount is transferred. Consequently, the transfer counts towards the individual’s total HSA contribution limit for the year depending upon the type of coverage under the HDHP (self-only or family). If the individual has self-only coverage under the HDHP and makes a transfer from an IRA to an HSA, and then changes to family coverage under the HDHP in that same year, an additional transfer can be made to bring the individual up to the amount of the family coverage contribution limit, but must do so in the same year.
