HSA Contributions and RMDs: Today’s Slott Report Mailbag

Thursday, December 20, 2018

By Sarah Brenner, JD
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

Hello IRAHelp,

I have a copy of Your Complete Retirement Planning Road Map and find it to be an extremely useful resource.  I have uncertainty regarding optimum means for funding a Health Savings Account (HSA).  I am 61.  In 2018, I made a one-time Qualified HSA Funding Distribution (QHFD).  I’ve utilized high deductible health plans (HDHP) with HSA contributions for a number of years.  I am retired.  In 2019, I will have a HDHP.  I hope to find an optimum means to make HSA contributions until I get to Medicare.  I would like to roll money from a traditional IRA into the HSA without taking taxed distributions.  I welcome any help you might provide in making HSA contributions.

Regards,

John

Answer:

Hi John,

As you noted in your email, a Qualified HSA Funding Distribution (QHFD) can only be done once during your lifetime. Therefore, if you did one in 2018, you cannot do anymore. However, that does not mean that you cannot continue to use your IRA to fund an HSA. It will just be a more complicated process. You can take a distribution from your IRA. It will be taxable, but not subject to penalty because you are in what we call the “sweet spot,” the period between ages 59 ½ and 70 ½ where your IRA distributions are penalty-free but not mandatory. You could then use those funds to make an HSA contribution. That contribution could be deducted on your tax return. There are no income limits for HSA contributions or deductions and you do not have to have taxable compensation. You could do this each year you remain eligible for an HSA contribution.

Question:

In the year of one’s death – and regardless of the length of time a person lives during that year – must they take (by the date of death) their ENTIRE traditional IRA – RMD  for that year?

Please elaborate in your reply.

Thank you

Joseph

Answer:

Hi Joseph,

The rules are clear. If an IRA owner dies without taking their entire RMD in the year of death, the beneficiary of the IRA must take the remaining RMD by December 31 of the year of death. The year-of-death RMD is calculated as if the IRA owner were still alive, even if it is paid to the beneficiary from the inherited IRA.

 

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.