Author Topic: Investing HSA Funds?  (Read 803 times)

ColonelPotter

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Investing HSA Funds?
« on: March 11, 2017, 06:07:50 PM »
I've been looking into whether or not to invest HSA funds, and was wondering how you all felt about it.  My husband and I are not on the same insurance, so we each have a work-sponsored HSA.

My HSA matches up to $250 quarterly, and they disperse $500 over the year each paycheck (in total they contribute $1,500 - half my deductible - if I contribute $1,000).  I looked at my investment options, and there are quite a few Vanguard options to choose from.  Also, since I'm kind of a noob at all this, under what conditions could I take distributions from the invested HSA funds?  Are they held to the same distribution rules as the non-invested HSA funds (QMEs only until 65, then taxable)?

My husband's HSA through work simply sits in a bank with no investment options.  His employer puts in $250 per month (!!!) without him having to contribute anything.  Can/should he open another HSA account with investment options and have the funds transfer over?  How does that work with taxes, since the HSA funds aren't taxed yet?

THANK YOU ALL!  Any and all input appreciated.  Hoping to learn more and more as I lurk, and to not be afraid to ask noob questions.
« Last Edit: March 11, 2017, 06:32:10 PM by ColonelPotter »

Nothlit

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Re: Investing HSA Funds?
« Reply #1 on: March 11, 2017, 06:29:44 PM »
Funds invested within an HSA are subject to all the same rules as non-invested funds in an HSA. Simply think of it as just another bucket within the HSA where you can put the money.

As for your husband's HSA, he can simply open a second HSA at another bank which allows investment, and transfer the money over from his original HSA. He will need to keep the original HSA open, since that's where his employer deposits their contributions, but there is no rule against having more than one HSA. There are two ways to transfer the money: rollover, or trustee-to-trustee transfer. A rollover is a kind of do-it-yourself technique where you withdraw the money from one account and deposit it in the other, and then indicate on your taxes that this was what you were doing (to avoid penalties). However, the IRS limits you to one rollover every 12 months. Trustee-to-trustee transfers are unlimited (though the banks involved may charge a fee) - basically the first bank just sends a check directly to the second bank, so the money never passes through your hands, and you don't report it on your taxes as it's essentially invisible to the IRS.

Keep asking questions! :)