Tax break on an IRA-to-HSA rollover may have little impact on enrollment

Employee Benefit Adviser, September, 2008 by Lydell C. Bridgeford

In an effort to spur funding of health savings accounts, the Internal Revenue Service recently issued guidance on boosting HSA balances with money from individual retirement accounts.

Individuals covered by a high-deducible health plan that also own a traditional or Roth IRA can make a one-time IRA-to-HSA funding transfer without facing federal income taxes or penalties. The transfer amount, however, cannot exceed the individual's maximum HSA contribution limit.

In Notice 2008-51, which implements provisions under the Health Opportunity Patient Empowerment Act of 2006, the IRS outlines 10 scenarios on how the rules would apply.

For example, a 57-year-old worker with a maximum annual HSA contribution of $3,800 and an IRA account balance of $13,550 could...

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