Finance: Tap an IRA Tax-Free for an HSA Rollover

By Kimberly Lankford, Kiplinger's Personal Finance | April 26th, 2019

Financial guidance for your financial life


Health Savings Accounts. Image

Q. I’m going to have knee surgery in a few months, and I’d like to roll over money from my traditional IRA to my health savings account so I can take the withdrawal tax-free. How much can I roll over and what are the rules?

A. You can make a one-time rollover from your IRA to the health savings account, as long as you have an HSA-eligible health insurance policy. You can roll over up to your HSA contribution limit for the year, minus any contributions you’ve already made. That means you can contribute or roll over up to $3,500 in 2019 if you have single health insurance coverage, or up to $7,000 if you have family coverage. If you’re 55 or older, you can contribute or roll over an extra $1,000.

Rolling over money from a traditional IRA to an HSA converts it from tax-deferred to tax-free, if you use the HSA money for eligible medical expenses. You can only make an IRA-to-HSA rollover once in your lifetime. And you must transfer the money directly from the IRA to the HSA for the transfer to be tax-free. Ask your HSA administrator for its procedure.

To qualify as an HSA-eligible policy in 2019, the insurance must have a deductible of at least $1,350 for single coverage or $2,700 for family coverage.

Rather than a rollover, it’s usually better to make new contributions to the HSA instead, if you can afford it. That way you can benefit from the tax-deductible contribution to the HSA this year and also withdraw the money tax-free from it, while keeping the other money growing tax-deferred in your IRA.

Q. Is it safe to immediately stop paying medigap premiums for someone who died, or do we need to keep paying premiums until all of the deceased’s outstanding hospital bills have been paid?

A. In most states, when a death is reported, the Medicare supplement policy (medigap) cancels as of the first of the month following the date of death. There are a few states where the policy cancels on the date of the death, and a prorated refund is issued for any premium already paid for the remainder of that month.

Medicare supplement plans will consider all claims for service provided while the policy was in force, even if it’s currently terminated. So even if a hospital or doctor submitted a claim for care after the plan was canceled, medigap will still process and pay those claims, according to UnitedHealthcare Insurance Solutions.

Contact the insurer to let it know about the death and to find out about the specific procedure and requirements for the policy. Your state insurance department can provide more details about your state’s rules. (Find contact information at www.naic.org/map.)


Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more information on this topic, visit Kiplinger.com.

(c) 2019 Kiplinger’s Personal Finance; Distributed by Tribune Content Agency, LLC.

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