A health savings account (HSA) allows you to save money for healthcare expenses on a tax-advantaged basis. If you have multiple HSAs, it could make sense to combine them into a single account for easier financial management.
The steps to consolidate HSA accounts are fairly straightforward, though there are some tax considerations to know. Here’s an in-depth look at how to combine HSA accounts and why you might choose to do so.
Key Points
• Consolidating multiple HSA accounts simplifies financial management and may reduce fees.
• The process involves transferring funds to a single HSA, similar to merging bank accounts.
• No tax penalties occur with trustee-to-trustee HSA transfers.
• Consider provider fees, investment options, and transfer paperwork when consolidating.
• Consolidation doesn’t affect HSA contribution limits but requires strategic planning for fund access during transfers.
Understanding HSA Consolidation
When you combine HSA accounts (which are only available to those with high-deductible health plan, or HDHP), you transfer the funds from each account into a single HSA. More specifically, you would typically open a new HSA and then arrange for the money in your existing HSAs to be moved to the new account. It’s similar to merging bank accounts if you’re combining, say, multiple high-yield savings accounts or checking accounts.
You’re not required to withdraw any money when consolidating HSAs, nor do you lose any of the tax benefits of health savings accounts by doing so. And as a refresher, HSAs offer these tax advantages:
• Tax-deductible contributions
• Tax-free earnings
• Tax-free withdrawals when the money is used to pay for qualified healthcare expenses
Once you turn 65, you can use the money for anything you want, even if it’s not healthcare-related, just as you might with funds in a standard savings account. You will, however, have to pay income tax on non-medical withdrawals.
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Benefits of Consolidating HSA Accounts
Here are some reasons why you might want to combine multiple HSA accounts into a single entity.
• You prefer to have fewer accounts to manage.
• You could reduce some or all management fees by moving your HSA funds elsewhere.
• You would like a different range of investment options for your HSA contributions.
• You want to simplify healthcare expense tracking and year-end tax filing.
If you’ve ever struggled with managing multiple bank accounts, then you might see the advantage of combining HSAs.
Here’s one more reason to consolidate. There’s no tax penalty if you combine accounts using what’s known as a trustee-to-trustee transfer. With this arrangement, you direct the company that currently holds your HSA funds to transfer them directly to your new HSA provider.2
If you were to rollover your funds (another possible method of moving HSA money), that would mean you would take a distribution and then deposit it. This can be a taxable and reportable event if you conduct more than one check-based rollover every 12 months, which likely means they’re not a good method for consolidating multiple accounts. Also, if the funds are distributed in this way, they must be deposited in a new HSA account within 60 days of receiving the distribution. Otherwise, again, the transaction could be taxable.
Steps to Consolidate Your HSA Accounts
Combining HSA accounts is similar to completing a 401(k) rollover or combining IRA accounts. If you’ve done either of those before, you should already have an idea of what to expect.
That said, here’s how to consolidate HSA accounts in five simple steps, conducting what you may hear referred to as a trustee-to-trustee transfer. This means the funds involved never pass through your hands but move between financial institutions.
1. Review Your Current HSA Accounts
Before you can initiate a transfer, you need to know what you have. Make a list of your HSAs, including:
• Which custodian or trustee holds them
• Your account number
• Your current balance
You may also want to review the fees you’re paying for each one and the returns your HSA investments are generating. That can help you decide if it makes sense to consolidate all your HSAs or just some of them.
2. Choose a Target HSA Provider
If you know which HSAs you want to consolidate, it’s time to look for a new provider. The options include banks, insurance companies, and brokerages.
As you compare HSA providers, look at:
• Investment options, including the risk profile and historical returns
• Fees, including investment fees such as expense ratios and separate account management fees
• Investment minimums, if any
You may want to read reputable, verified reviews of HSA providers to learn what current or past customers do and don’t like about them. For example, a provider may offer an outstanding range of investment options but fall short when it comes to customer service.
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3. Initiate the Transfer Process
Once you’ve selected a new provider, you’ll need to open an HSA account with them. You’ll use the new account number to direct your current HSA provider on where to send the money.
Once your account is open, you can move on to the next step which is completing a transfer request form. This is one of the key steps to transfer money between banks or brokerages when moving HSA funds.
4. Complete Required Transfer Paperwork
Your new HSA provider should give you a transfer request form that you’ll fill out and send to your current custodians. Each provider’s form may vary, but typically, you’ll need to include your:
• Name
• Employer name, if your plan is sponsored by your employer
• Date of birth
• Social Security number
• Contact information, including your address, phone number, and email address
• Transferring custodian’s name and address
• The account number of the HSA you’re transferring funds from
• The account number of the HSA you’re transferring funds to
In a way, it’s similar to opening a bank account. You’re just providing a little more information.
You’ll also need to specify how much of your HSA balance you want to transfer. You can choose a full or partial amount. Finally, you’ll need to sign and date your form.
You’ll repeat this process using a form for each HSA that you want to transfer funds from. When your current providers receive the forms, they’ll cut a check to your new provider to complete the transfer.
5. Follow Up on the Transfer
How long you’ll wait for your HSAs to be consolidated will depend on the speed at which your current and new HSA providers move. It could take anywhere from two to five weeks or longer for the process to wrap up.
Your new HSA provider should send you a confirmation once the transfer is complete, but you can always reach out to ask for a status update. You’ll also need to follow up with your old custodians to make sure the account is closed and find out whether you owe any account closure fees.
Considerations Before Consolidating
Before you move ahead with consolidation, ask yourself what you hope to gain. Perhaps your goal is to save money on fees (which is also a reason some people switch their traditional bank accounts to online banking). In that case, it’s important to do your research on your new provider to make sure you’ll actually pay less in fees.
Also, consider whether you’ll be able to continue making new contributions to your HSA. If you’re consolidating accounts because you’ve retired, for example, then you can’t make any new contributions to an HSA if you’re no longer enrolled in your high-deductible health plan. So if you’re on Medicare, you will not be able to contribute to your HSA funds.
Potential Challenges in HSA Consolidation
It’s possible you could hit some snags when consolidating HSAs, so it helps to be prepared. Here are some of the main issues to watch out for:
• Transfer fees. Your current HSA provider may charge transfer fees and/or account closure fees to finalize your consolidation. If so, it helps to know what those are beforehand and how you’re expected to pay them.
• Processing times. There’s no set timeline for HSA transfers. You can help minimize the possibility of delays by filling out your transfer request paperwork accurately and following up with your providers to make sure your documents have been received.
• Access limitations. Your new or current custodian may direct you to hold off on tapping into your HSA funds while the transfer is in progress. That could present a logistical challenge in the short term if you need to fill prescriptions or cover other healthcare expenses. It can be wise to ask in advance about these potential access issues so you can prepare as needed.
In a way, the process for HSA consolidation is not that different from what to expect if you switch banks. You might just be waiting a little longer for the change to be finalized.
After Consolidation: Managing Your Single HSA
Once you combine HSA accounts, it should be easier to manage your savings. Here are some tips for staying on top of your newly-consolidated health savings account.
• Keep track of withdrawals, including what you spent the money on, the amount, and the date.
• Track your contributions if you’re still making them so you don’t exceed the annual contribution limit. For 2024, the limits are $4,150 for self-only coverage and $8,300 for family coverage, with those 55 and older being allowed to contribute an additional $1,000. For 2025, the limits are $4,300 for individual coverage and $8,550 for family coverage, with an additional $1,000 contribution being possible for those age 55 and older.
• Review your investments at least once a year to check their performance and the fees that you’re paying.
• Consider talking to a financial advisor about how to make the most of your HSA for maximum tax benefits.
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Tax Implications of HSA Consolidation
If you’re completing a trustee-to-trustee transfer, there’s no immediate tax impact. You would, however, be subject to IRS tax rules when it’s time to make withdrawals from those accounts. Again, withdrawals for qualified medical expenses are always tax-free.
Where you can potentially owe taxes is when consolidating HSA accounts is if you choose an indirect rollover, as noted above. With an indirect rollover, your current HSA provider cuts a check to you. You then have 60 days from the date the check was issued to deposit the check into your new HSA, and you can only do this once a year.
If you don’t follow these guidelines, your funds would likely be considered a distribution, which would be taxable, with an additional penalty for those under 65 if not used for medical purposes.
The Takeaway
Consolidating HSA accounts could make sense if you’d like an easier way to keep track of your healthcare savings or if you’re looking for lower fees and better investments. Understanding what’s required can help you navigate the consolidation process with minimal hiccups.
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FAQ
How long does the HSA consolidation process typically take?
The HSA consolidation process can typically take a few or several weeks, but it may vary depending on how fast your current and new providers operate. You may need to do some strategic planning to make sure you don’t need to withdraw any funds for healthcare expenses while transfers are in progress.
Can I consolidate an HSA from a previous employer?
Yes, you can consolidate HSA accounts from one or more previous employers. It could make sense to do so if you’d like just one account to manage. You’d need to know which custodian holds your old HSAs so you can complete the process, including sending each of them transfer request forms.
Will consolidating my HSAs affect my contribution limits?
Transfers of HSA funds won’t affect your annual contribution limits. The amount you can contribute for 2024 maxes out at $4,150 for individual coverage and $8,300 for family coverage. For 2025, the limits rise to $4,300 and $8,550. Additionally, those 55 and over can contribute an additional $1,000 per year. HSA contribution limits are adjusted annually for inflation.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
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