You have to ask yourself, "is it likely that I will have HDHP coverage in the near future?" Because every year that you do not do anything about the carryover, you will be dinged 6% of the lessor of the carryover amount OR the value in your HSA at the end of the year.
As you can see, it is 6% of the carryover amount or 6% of what is left in your HSA (which, if the HSA goes to zero, the penalty will go to zero).
If you have a lot of money in the HSA and want to stop the 6% per year bleed, then to stop the carryover for good, you do the following.
1. Take a distribution of the excess (i.e., call the HSA custodian and ask for them to send you some money).
2. When you get the 1099-SA, enter it into TurboTax and say that it is NOT for medical expenses.
3. This will add the excess to Other Income, and you will be penalized 20% in addition BUT at least the carryover will be gone.
So, as you can see this stop the carryover process is expensive, so you need to count on your fingers to decide which path is best for you.
@John hates taxes
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