Over age 59½ it makes no sense to do an HSA funding distribution (HFD) from an IRA because the only purpose of doing an HDF it to avoid an early-distribution penalty on the distribution from the IRA, and those over age 59½ are not subject to early-distribution penalties. Simply taking a taxable distribution from the IRA and making a deductible contribution to the HSA avoids the testing period associated with an HFD.
Each individual qualified to make an HSA contribution can make a personal contribution to their own HSA using funds from any source and can take a deduction for that contribution. If the funds com from a taxable distribution from an IRA, the deduction for the HSA contribution will offset the taxable income from the IRA, resulting in no net change it tax liability.
