How to Transfer HSA Funds: Direct vs. Indirect, Fees, and IRS Reporting

To transfer HSA funds, open an account with the new custodian and ask them to run a direct trustee-to-trustee transfer from your old HSA. The money moves between institutions without passing through your hands, there is no limit on how often you can do it, and the IRS does not treat it as a distribution, rollover, or contribution.¹ The other option, an indirect rollover, sends the money to you first and puts a 60-day clock and a once-per-year cap on the move. For most people, the direct transfer is the right choice.

Why the Direct Transfer Is the Default

A direct trustee-to-trustee transfer is the cleanest way to move an HSA. Because the funds never land in your personal bank account, the IRS treats the movement as a non-event: no tax forms, no deadline, no reporting on your return.¹

Direct transfers are unlimited. You can move money between HSAs as many times as you want in a single year, which makes this the right tool if you want to consolidate several HSAs, sweep an employer-designated HSA into an account with better options, or periodically shift funds to a lower-fee custodian.¹

You can request a full transfer, which closes the old account, or a partial transfer of a specific dollar amount, which keeps it open. Some custodians require a minimum cash balance to remain after a partial transfer, so ask your current provider before you submit the request.

Steps to Complete a Direct Transfer

The process starts at the new HSA provider, not the old one. Open the new account first, then gather the information the transfer form will ask for:

From the old custodian: your current HSA account number, the custodian’s full legal name, and their mailing address.
From the new custodian: the new account number, the routing number, and any department-specific mailing address for incoming transfers.

The new provider supplies the transfer request form, usually as a downloadable PDF or through their online portal. Specify whether you want a full or partial transfer, and confirm that the form designates the transaction as a trustee-to-trustee transfer, not a rollover and not a contribution. If the receiving institution miscodes the incoming funds as a new contribution, you could inadvertently exceed the annual contribution limit ($4,400 for self-only coverage or $8,750 for family coverage in 2026), which triggers a 6 percent excise tax on the excess for every year it remains in the account.¹

Submit the completed form to the new custodian through their preferred channel, usually a secure upload or physical mail. They then contact your old custodian to request the funds. The full process typically takes two to five weeks, and sometimes longer.² Watch both account balances during the window to confirm the funds arrive.

What Happens if Your HSA Is Invested

A cash-only HSA transfers easily: the old custodian sends the balance electronically or by check. An invested HSA is more complicated.

Many custodians require you to sell all investments before transferring the proceeds as cash. Liquidation takes you out of the market during the transfer window, and some custodians charge a transaction fee for each sale.

A smaller number of providers support in-kind transfers, which move your securities to the new custodian without selling them. In-kind transfers use the Automated Customer Account Transfer Service (ACATS) and can complete in three to five business days when both custodians participate. Without ACATS, an in-kind transfer can take up to two months. Proprietary funds, meaning investment products that belong exclusively to your current custodian, generally cannot transfer in kind and must be liquidated.³

Ask both providers whether an in-kind transfer is available for your holdings before you initiate. If it isn’t, you may want to time the liquidation to limit market exposure during the transition.

Fees to Expect

Closing or transferring out of an HSA can involve several charges from the old custodian:

Account closure fee: often around $25, though some providers charge nothing.
Transfer-out fee: a separate charge some custodians apply to outgoing transfers, sometimes combined with the closure fee.
Investment liquidation fee: a per-sale transaction fee if holdings must be sold before transfer.

These are typically deducted from the HSA balance before the remainder is sent. Review the fee schedule before you start so you know the total cost. Even with fees, switching can pay for itself over time through lower maintenance fees or better investment options.

Transferring While You’re Still Employed

You do not need to leave your job to move HSA money. Your HSA belongs to you, not your employer, and you can transfer the balance to a different custodian at any time, including while you’re enrolled in your company’s high-deductible health plan.¹

One practical limit: if your employer runs pre-tax payroll contributions or a match into your HSA, those deposits will keep going to the employer’s designated provider. You cannot redirect payroll deductions to a different custodian on your own. The workaround is to let contributions accumulate at the employer’s HSA and then run periodic direct transfers into your preferred account. Because direct transfers are unlimited, you can do this as often as you like.

When You Might Use an Indirect Rollover

An indirect rollover works differently. Your current custodian sends the funds to you, by check or electronic deposit into your personal bank account, and you deposit them into a new HSA yourself. Two strict rules apply:

60-day deadline. You must deposit the funds into the new HSA within 60 days of receiving them. Miss the window and the entire amount counts as taxable income.⁴
Once per year. You can complete only one indirect rollover across all your HSAs during any 12-month period. A second within that window is treated as a taxable distribution.⁴

If you miss the deadline or exceed the annual cap, the distribution is included in your gross income and hit with an additional 20 percent tax on top of your regular income tax rate.⁴

Returning a Mistaken Distribution

If you withdrew HSA money by mistake, you may be able to return it without owing tax or the 20 percent penalty. The mistake must have resulted from reasonable cause, and you must repay the amount no later than the due date of your tax return (not including extensions) for the year you discovered the error.⁵ Your custodian is not required to accept the repayment, so confirm before relying on it.

How Each Method Is Reported to the IRS

The reporting difference is one of the strongest reasons to pick a direct transfer whenever you can.

A direct trustee-to-trustee transfer generates no tax forms and requires nothing on your return. The IRS instructs custodians not to issue Form 1099-SA or Form 5498-SA for these transfers.⁵ You also do not report the amount on Form 8889, as income, deduction, or distribution.⁶

An indirect rollover creates a paper trail. Your old custodian issues Form 1099-SA reporting the distribution.⁷ Your new custodian issues Form 5498-SA reporting the rollover contribution it received.⁸ You must report both on Form 8889: the distribution on line 14a and the rollover amount on line 14b, which tells the IRS the money went back into an HSA and should not be taxed.⁶ A missed or incorrect Form 8889 can trigger automated IRS notices even when the rollover was completed on time. Keep copies of all the forms and any transfer confirmation letters with your tax records.

1
Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
2
Fidelity Investments. Transfer Your HSA – Health Savings Account
3
HSA Bank. Transfer or Rollover HSA Funds
4
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
5
Internal Revenue Service. Instructions for Forms 1099-SA and 5498-SA
6
Internal Revenue Service. Instructions for Form 8889
7
Internal Revenue Service. About Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
8
Internal Revenue Service. Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information