The Account People Forget to Roll Over

It’s early in the year. Many employees are changing jobs or looking for greener employment pastures.

They may need to roll over their employer-sponsored accounts, such as their 401(k) plan accounts and health savings accounts.

While rolling over an HSA may be the last thing on a client’s mind, leaving an HSA with a former employer’s provider can cost your clients money and cause them to miss out on valuable investment opportunities.

As your clients look to you to help them navigate economic volatility, and shore up strategies for savings for retirement and health care expenses, rolling over an HSA can help them get a leg up on saving for long term health care costs and help differentiate you as a savvy advisor.

HSA Basics and Why They Matter

HSAs are triple tax-advantaged accounts that enable account holders to save pre-tax dollars, which they can withdraw tax free for qualified health care expenses.

The funds in HSAs never expire and can be invested tax-free.

Once account holders turn 65, they can continue to use funds in their HSA tax-free and can withdraw funds for non-medical expenses at their regular tax rate.

When discussing HSAs with your clients, keep in mind that:

• To open and contribute to an HSA, the account holder must be enrolled in a high -deductible health plan (HDHP), the parameters of which are set annually by the IRS. For 2023, these plans must have a minimum deductible of $1,500 for individual coverage, and $3,000 for family coverage, and an out-of-pocket maximum of $7,500 for individual coverage and $15,000 for family coverage.
• HSAs have annual contribution limits. In 2023, these are $3,850 for individual coverage and $7,750 for family coverage.
• Those 55 years or older are eligible to contribute an extra $1,000 “catch-up” contribution.

Even if clients are not currently enrolled in an HSA-eligible health plan, they can still use their HSAs for health-related expenses, and continue to invest their HSA funds.

Why Roll Over an Old, Employer-Sponsored HSA?

It pays to be proactive with your clients’ HSA money: Leaving their funds in an old, mismanaged HSA can forfeit the compounding value of time and cause the clients to miss out on important opportunities to build wealth and save for health care expenses in retirement.

These accounts may incur additional expenses, such as account maintenance fees, and restrictions or heavy fees on investing.

In addition, many providers use outdated technology that makes it difficult for account holders to access and manage their accounts.

Moving your clients’ HSAs over may offer them better investment options, lower investment thresholds, and reduced expenses.

Switching to a provider that invests in technology and user-friendly features can empower your clients to use their HSA to its full potential.

Provider Quality

Not all HSA providers are created equal.

You want to find a provider that makes it as easy as possible to transfer funds and provides support through every step of the process.

There are two ways to transfer funds to a new HSA: a trustee-to-trustee transfer or direct rollover.

A trustee-to-trustee transfer is one of the more popular, and fastest, ways to transfer funds between HSA accounts.