Frequently Asked Questions

How is the rollover of an Archer Medical Savings Account (MSA) into a Health Savings Account (HSA) treated by the federal government for tax purposes?

Funds from an Archer MSA may be rolled-over into an HSA within 60 days of withdrawing the funds from the Archer MSA. There are 2 different types of rollovers and the differences are critical in terms of tax implications: Trustee-to-Trustee: this involves a direct transfer of funds from the old MSA trustee to the new HSA trustee, and there is no money or checks that the individual receives directly. This is technically not a rollover, because a rollover means that the funds were first distributed to the individual participant. This trustee-to-trustee method does not trigger a taxable event since the participant never touches the money. Trustee-to-trustee transfers are not subject to any tax withholding and are exempt from the one per 60 day rollover rule. Actual Rollover: a rollover occurs when the trustee distributes the MSA assets directly to the individual participant (the participant receives the check). In this case, the individual must transfer the assets to the new trustee within calendar 60 days after the receipt of the distribution. An IRS reporting requirement and potential tax penalties are imposed if the person misses the 60 day deadline. *One rollover per 12 month rule: individuals are allowed one MSA-to-HSA rollover per 12-month period. In addition, assets rolled-over during the previous 12 months (e.g. MSA to MSA) are not eligible for rollover. If a rollover is made from the MSA that does not meet the criteria described above, the action will be considered a non-qualified distribution that should be included in the account beneficiary's gross income and also subject to an additional 10 percent tax.

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