Rollovers: Amounts that would otherwise be taxable distributions are not taxable if rolled over into another HAS within 60 days, with certain exceptions.  IRC § 223(f)(5).

PORTABILITY/CARRYOVER OF FUNDS

An HSA belongs to the individual owner and is portable between jobs.  IRC § 223(f)(5).

Amounts not distributed by the end of a taxable year may be carried over into the next year.  IRC § 223(d)(1)(E).

HEALTH SAVINGS ACCOUNTS

HSA’s

DEATH/DIVORCE

Death:  If the account holder’s spouse is the designated beneficiary, following the death of the account holder and the transfer of interest, the account continues to be treated as an HSA with the spouse as the account holder.  IRC § 223(f)(8)(A).

If, by reason of death, a spouse who is not named as the beneficiary, or any other individual, acquires an interest in an HSA, then the account is no longer an HSA, and an amount equal to the fair market value of the account assets is includable in such person’s income.  IRC § 223(f)(8)(B).

Divorce: The transfer of all or part of an individual’s interest in an HSA, which is incident to divorce, is not considered a taxable transfer, and the transferred interest is thereafter treated as an HSA.  IRC § 223(f)(7).

Note: An HSA is not subject to the COBRA rules.

ADMINISTRATION GENERAL

HSA assets are held by a qualified trustee or custodian, but an individual owner may direct distributions and, where applicable, investments.

The trustee or custodian of an HSA can be different from the HD plan provider.  The trustee or custodian may require proof or certification of the HSA owner’s eligibility to contribute to the account.  Notice 2004-2, Q & A 10.

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