NJ HSA Bank Question

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Topic Author
marathonfi
Posts: 146
Joined: Thu Dec 05, 2019 7:34 am

NJ HSA Bank Question

Post by marathonfi »

Hey Bogleheads,

I am in NJ. I currently have HSA Bank with $1000 in cash, and $38K invested with Devenir, which is HSA Bank's investment platform. Of the 38k, 12k are gains. Since I'm in NJ, which doesn't recognize HSA's, I am stuck with the 38k at Devenir since I can't transfer it without liquidating, thereby triggering a taxable event in the process for NJ. I am looking to transfer the $1000 cash to Fidelity, where my new contributions are deposited. Is this a fairly straight forward process? There is some new monthly fee ($3) for the cash account, so I'm trying to avoid that. Having $0 in HSA Bank wouldn't affect my ability to invest in Devenir right?

Alternatively, I could just reimburse myself for $1000 medical expenses in the past few years, which I don't mind doing.
retiringwhen
Posts: 4743
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: NJ HSA Bank Question

Post by retiringwhen »

marathonfi wrote: Thu Mar 30, 2023 9:31 pm Hey Bogleheads,

I am in NJ. I currently have HSA Bank with $1000 in cash, and $38K invested with Devenir, which is HSA Bank's investment platform. Of the 38k, 12k are gains. Since I'm in NJ, which doesn't recognize HSA's, I am stuck with the 38k at Devenir since I can't transfer it without liquidating, thereby triggering a taxable event in the process for NJ. I am looking to transfer the $1000 cash to Fidelity, where my new contributions are deposited. Is this a fairly straight forward process? There is some new monthly fee ($3) for the cash account, so I'm trying to avoid that. Having $0 in HSA Bank wouldn't affect my ability to invest in Devenir right?

Alternatively, I could just reimburse myself for $1000 medical expenses in the past few years, which I don't mind doing.
I have no idea about HSA Bank/Devenir, never used them.

I recently looked at Fidelity's transfer and it seemed pretty straightforward, but my source was HealthEquity.

Have you been paying taxes on the dividends and interest in the two accounts? If so, maybe the basis is not so bad?

I personally would liquidate and rip the bandaid off now and move everything to Fidelity so you aren't forever stuck, the gains will likely only increase hopefully!

Of course, if this a very high tax year, wait a year or until you marginal rates drop again.

BTW, one other trick is to tax loss harvest your way out of NJ taxes. Do you have investment losses in non-HSA accounts that you could sell? Sell the HSA in the same year and they negate each other on NJ in the current year and you get the carry over losses on federal in the future.
Topic Author
marathonfi
Posts: 146
Joined: Thu Dec 05, 2019 7:34 am

Re: NJ HSA Bank Question

Post by marathonfi »

retiringwhen wrote: Thu Mar 30, 2023 9:40 pm
marathonfi wrote: Thu Mar 30, 2023 9:31 pm Hey Bogleheads,

I am in NJ. I currently have HSA Bank with $1000 in cash, and $38K invested with Devenir, which is HSA Bank's investment platform. Of the 38k, 12k are gains. Since I'm in NJ, which doesn't recognize HSA's, I am stuck with the 38k at Devenir since I can't transfer it without liquidating, thereby triggering a taxable event in the process for NJ. I am looking to transfer the $1000 cash to Fidelity, where my new contributions are deposited. Is this a fairly straight forward process? There is some new monthly fee ($3) for the cash account, so I'm trying to avoid that. Having $0 in HSA Bank wouldn't affect my ability to invest in Devenir right?

Alternatively, I could just reimburse myself for $1000 medical expenses in the past few years, which I don't mind doing.
I have no idea about HSA Bank/Devenir, never used them.

I recently looked at Fidelity's transfer and it seemed pretty straightforward, but my source was HealthEquity.

Have you been paying taxes on the dividends and interest in the two accounts? If so, maybe the basis is not so bad?

I personally would liquidate and rip the bandaid off now and move everything to Fidelity so you aren't forever stuck, the gains will likely only increase hopefully!

Of course, if this a very high tax year, wait a year or until you marginal rates drop again.

BTW, one other trick is to tax loss harvest your way out of NJ taxes. Do you have investment losses in non-HSA accounts that you could sell? Sell the HSA in the same year and they negate each other on NJ in the current year and you get the carry over losses on federal in the future.
Thank you for the suggestions! I just realized it's only $600 in taxes, and yes I do have losses I can offset it with. Band-aid is ripped! I just submitted paperwork at Fidelity to start the transfer. I was paying $100 in fees per year also at HSA Bank, so this is a very good move. Thank you!
retiringwhen
Posts: 4743
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: NJ HSA Bank Question

Post by retiringwhen »

Excellent! :sharebeer
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