Unnecessary mess with HSA

LearnMS

Level 2 Member
I kept HSA account (call it 1st HSA) from previous employer because it had Vanguard options. I have HSA option (2nd HSA) with my current employer and had contributed to max in 2018.

Now just last month, I noticed there was maintenance fee on old HSA acct (1st HSA) because I used up the funds on investments and kept the min of 2k in the account. But later, I was told the min must be 5k, not 2k to waive the maintenance fee. The agent I spoke to - said to transfer 3k from external account and keep it fee free.

So I transferred 3k in HSA account from Ally. Today, I received tax info that I contributed 3k of HSA funds from previous employer. This is in addition to my regular contributions on 2nd HSA through current employer. Definitely, it means that I overcontributed my HSA by 3k for 2018.

Wondering how I should fix that before filing taxes....is paying 6% penalty the only option? Should I just close my first HSA to avoid the mess? Thanks.
 

LearnMS

Level 2 Member
You should be able to fill out a form to remove the excess HSA contributions. You must remove the amount contributed (plus any earnings/interest on that amount) and pay/file taxes by April 15th.

If you had HSA Bank, for example, here is what that form looks like: http://www.hsabank.com/hsabank/~/media/Files/excess_contributions
Your HSA provider should have something similar.
Thank you. Yes, I was on phone with my 1st HSA bank agent. I was asked to fill out excess contribution form. Meanwhile, I downgraded my account over there to avoid the maintenance fee and no need to maintain 5k min balance. However, they do take $1 per month out just to have that account active. Now I need to figure out to either let go of dollar a month fee or just close it. Moving the investments to 2nd HSA is not an option as they are 2 different banks.
 

ILikePoints

New Member
Moving the investments to 2nd HSA is not an option as they are 2 different banks.
I'm not sure what this means but you can usually sell your investments to a cash position in one HSA and transfer it over to another HSA, then reinvest.

Fidelity has a fee-free HSA you might want to look into.
 

LearnMS

Level 2 Member
I'm not sure what this means but you can usually sell your investments to a cash position in one HSA and transfer it over to another HSA, then reinvest.

Fidelity has a fee-free HSA you might want to look into.
Thank you. I am planning to transfer (not rollover) HSA funds from previous employer to Fidelity. Looks like I need to create a new HSA account in Fidelity to do the transfer? Also, is there any tax implications I need to be aware of when I do this transfer? So far, I haven't heard a downside.

Thank you.
 

BuddyFunJet

Level 2 Member
Depending on your HSA withdrawal plans, another approach is to make medical withdrawals from the old HSA for you and eligible family members to spend the account to zero. Then you have no transfer, new account or tax issues.

BTW, be sure to include the applicable earnings on your excess contribution on the form and as income on your tax return.
 

LearnMS

Level 2 Member
Depending on your HSA withdrawal plans, another approach is to make medical withdrawals from the old HSA for you and eligible family members to spend the account to zero. Then you have no transfer, new account or tax issues.

BTW, be sure to include the applicable earnings on your excess contribution on the form and as income on your tax return.
Thank you. I just reached out to former HSA agent. I am incurring $4 per month just to maintain the account. I am planning to transfer to a Fidelity fee free HSA account. But before that, I need to sell my Vanguard investments and some cash in HSA account. I gathered that my former HSA bank won't initiate the initial transfer, and there's a $20 transfer fee. Another option is ask for a check and it won't incur any fee.

Just figuring out what's the cleanest way to make the transition seamless. Note that I am already contributing to max through my current employer in a different HSA account. Issue is with the former employer HSA.
 

BuddyFunJet

Level 2 Member
That's good to know! Did you first contact Fidelity and have them initiate the transfer? How long did the transfer take?
My wording was poorly chosen. I decided to go the withdraw from HSAbank for medical and re-establish at Fidelity as fresh. However, to do the institution to institution, you would fill out the application saying that you want to fund from existing HSA

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/hsa-application-only.pdf

You would also fill out the transfer of asset form and list the account type as Other-HSA

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/customer-service/transfer-assets-to-fidelity.pdf

While I do not regret the move to Fidelity HSA, it is nowhere near as polished a website as HSABank. For example, to make a withdrawal, you have to fill out a PDF and send it in. No online option.

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/customer-service/hsa-single-withdrawal-request.pdf

While free is good, it comes at a price.
 

Matt

Administrator
Staff member
Just figuring out what's the cleanest way to make the transition seamless. Note that I am already contributing to max through my current employer in a different HSA account. Issue is with the former employer HSA.
The cleanest would seem to be to transfer into the current employer HSA. Is that an option? Would make it easier in terms of brainpower plus eliminate the required cash position on the second account.

Also.. not use them personally but Lively https://livelyme.com/pricing/ seem cheap.. I think they use TD as a custodian.
 
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