On our HSA 60-day Rollover, which Amount to Rollover?

[neworchid]

My husband's HSA was charged a $25 closing fee when he closed the account with an old HSA provider.  Now that he wants to rollover the HSA amount, he called the old HSA provider to double-check what amount they'll be reporting as gross distribution and they said it will be the amount before the closing fee.  Is that correct?

Should we rollover the amount NET of the closing fee - which is the exact amount we received?

Thanks in advance!

[dmertz]

If the Form 1099-SA will report as the gross amount the amount before subtracting the $25 fee, your husband needs to add $25 from another source to make up the difference and roll over the entire distribution, otherwise the $25 will be treated as distributed but not rolled over.  Alternatively he could roll over the net amount and apply the $25 to any unreimbursed medical expense incurred after the date on which the original HSA was established.  If the $25 is not rolled over and is not applied to a qualified medical expense, the $25 will be subject to tax and, if your husband was under age 65 at the time of the distribution, to a 20% ($5) additional tax.

[neworchid]

Thanks for the quick reply.

Is there no IRS rule governing what the HSA provider should report as distribution - gross vs net of closing fees?

[Critter]

That fee should NOT have been withheld from  the distribution ... it should have been paid out of pocket ... by adding the $25 that will make it a complete rollover ... then none of the $25 will be taxed or penalized. 

[neworchid]

We asked this question of the old HSA provider and we're told there's no way to add to his account other than as a contribution.  If you think about it, that seems to be how most/all retirement account custodians handle our accounts - they have to deduct any fees (maintenance, closing, etc) from the retirement accounts themselves - which I agree, is not fair.

Anyway, the problem is we won't know what the old HSA provider will declare on the 1099-SA as distribution until next year.  So we'll just have to rollover the NET, and if they declare the GROSS, we'll have to apply the $25 to an older expense.  Can we apply it to my medical expense, even though it's my husband's HSA?

[rjs]

In your original question you said "he called the old HSA provider to double-check what amount they'll be reporting as gross distribution and they said it will be the amount before the closing fee."

But in your last post you said "we won't know what the old HSA provider will declare on the 1099-SA as distribution until next year."

If the HSA provider told your husband that they will report the gross distribution, without subtracting the fee, why do you say that you don't know what they will report?

Your husband can use his HSA to pay medical expenses for himself, his spouse (you), and his dependents. So yes, he can apply the $25 to your medical expense if that's the way he wants to handle it.

[neworchid]

Thank you for your response.

The people who answer the phones are not the ones who cut the 1099-SA forms and based on our experience with them, we get different responses, depending on who we speak with.  Specifically, when my husband called them they were not sure - they simply said they may.