What Happens to Your HSA If You Quit or Lose Your Job

With ahealth savings account(HSA), you can receive tax benefits to help you save on medical expenses. But you must be enrolled in a qualifiedhigh-deductible health plan(HDHP) and meet other requirements to contribute money to an HSA. As long as you have money in the account, you can use it to pay for eligible healthcare costs, such as office visitcopaysor emergency medical expenses.

If your HSA is part of your employer's benefits, you may want to know what will happen to it if you leave your job. What makes an HSA unique is its portability, meaning it's yours to keep if you quit your job, retire, or get laid off or fired. But there are important points to keep in mind when managing your HSA after leaving your job.

Do I lose my HSA if I quit my job?

No. You don't lose your HSA if you quit your job. The money in the account is yours even if you change jobs, are laid off or fired, or retire. This includes any contributions made by you or your former employer, along with any investment gains.

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• HSAs offer tax savings to help manage future healthcare expenses.But you can also enjoy otherbenefits if you have an HSA.
• The IRS sets limits on annual HSA contributions.Find outhow much you should put in your HSA, plus get tips to make the most of your money.
• You can maximize your HSA contributions, even if you weren't eligible for the entire year.This is known as theHSA last-month rule, and here's how it works.

You can keep using your HSA funds to covereligible medical expenseswithout paying taxes or penalties. Someexamples of qualified healthcare expensesinclude:

• Acupuncture
• Ambulance services
• Birth control pills
• Diagnostic tests, such asCT scansandMRIs
• Dental care
• Hearing aids
• Mental healthcare expenses
• Vision care

What's more, if you're between jobs, your HSA can help you stay covered. You might be able to use your HSA funds topay for health insurance premiums, includingConsolidated Omnibus Budget Reconciliation Act(COBRA) coverage. This option is available if you're receiving unemployment benefits. EvenMedicare premiumscan be paid from your HSA if you meet certain requirements.

Can my HSA roll over to a new employer?

Yes. You canroll over your HSAto your new employer's HSA administrator. But you can't make additional contributions to an HSA unless you are enrolled in an HSA-qualified HDHP. A rollover involves moving your HSA funds from one account to another.

To do an HSA rollover, inform your current HSA administrator that you want to close the account and transfer the money to a different administrator. They'll then send you the funds, either via bank transfer or check, and it's up to you to deposit this money into your new HSA.

When considering an HSA rollover, bear in mind that theIRS allows only one HSA rolloverevery 12 months. This rule helps you maintain the tax-free status of your HSA funds. Once you receive the money from your old HSA, you have 60 days to deposit it into the new account. If you miss this window, you may incur a 20% penalty tax. But this penalty does not apply if you are age 65 or older.

Another option is a trustee-to-trustee transfer, where your current HSA administrator sends the funds directly to your new HSA administrator. This method is often simpler and eliminates some of the tax penalty risks associated with rollovers. Plus, there's no limit on how many trustee-to-trustee transfers you can do in a year.

Can I contribute to an HSA after being laid off?

Maybe. Makingcontributions to your HSAafter being laid off depends on the type of health insurance you have and certain IRS requirements. You can still contribute to your HSA, up to theannual limit set by the IRS, if you meet the following conditions:

• You're enrolled in anHSA-eligible HDHP plan.
• You'renot enrolled in Medicare.
• You can't be claimed as a dependent on someone else's tax return.
• You don't have any health coverage outside of what the IRS approves for HSA holders.

If you're enrolled in a non-HSA-eligible plan or go without insurance, you won't be able to make new contributions to your HSA. But the existing funds can still be used to pay forqualified healthcare costswhether you have an HDHP, another type of health plan, or no insurance at all.

What will happen to my HSA without an employer?

Without an employer, your HSA stays with you. And the money is yours to use for qualified medical expenses, just as it was when you were employed.

If you're self-employed or starting a business, you canopen and manage your own HSA. Unlike aflexible spending account(FSA), which is owned and managed by an employer, an HSA is not tied to your job. Plus,HSA funds don't expire, so you won't risk losing your money if they're not used by the end of the plan year. As long as you meet the IRS requirements, such as being enrolled in an eligible HDHP, you can contribute to an HSA and enjoy its benefits.

Keep in mind that you may now beresponsible for account feesthat an employer might have previously covered. You may also be subject to certain investment-related fees. It's a good idea to review your HSA administrator's fee structure andconsider shopping around. Some account administrators offer lower fees or even waive them if you maintain a certain balance.

What should I do with my HSA if I leave my job?

If you leave your job, you have several options for managing your HSA. Here are four approaches to consider:

Keep your existing HSA account Keeping your existing HSA account with your former employer is a good option if you no longer have a qualifying HDHP. You can continue using the funds for eligible medical expenses. If you don't need the funds for immediate healthcare expenses, you can leave the money in the HSA to grow tax-free for future use, even inretirement. If you go this route, you can avoid the hassle of transferring or closing accounts, but you might have to pay maintenance and investment fees.

Have multiple HSAs You can have more than one HSA. For instance, you can keep your existing HSA from your previous job and open a new HSA with your next employer if you enroll in a qualified HDHP.

This strategy can be beneficial if your former employer's HSA has low fees or investment options that you prefer. But keep an eye on the annual contribution limits set by the IRS toavoid going over the maximum allowed. Plus, you can always consolidate your HSAs in the future. This allows you to diversify your HSA administrators and investment options, but managing multiple accounts can be time-consuming.

Open a new HSA and consolidate This option can simplify your financial management, and it may be ideal if you've become self-employed. It's also a good solution if your former employer's HSA administrator has high fees or you're looking for better investment choices.

To do this, you would open a new HSA independently as long as you meet the requirements. You can then move the funds from the HSA from your previous job to your new HSA through atrustee-to-trustee transfer or a rollover. This puts all your HSA savings in one place, although there may be fees for transferring money or closing your old account.

Roll over to your new employer's HSA administrator If you enroll in an HSA-qualified health plan under your new employer, you can roll over your existing HSA into the new account. This can also be done through a trustee-to-trustee transfer. Not only does this option make it easier to manage your account, but it may also help you save on fees. Keep in mind, though, that you might face charges for moving funds or closing your previous account. Also, you'll be limited to the HSA administrator chosen by your new employer.

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When you leave your job, your HSA and all the funds in it stay with you. You can still contribute to your HSA after being laid off, but only if you're enrolled in a qualifying high-deductible health plan. If you're not starting a new job soon, you can tap into your HSA money to pay for health insurance premiums while receiving unemployment benefits. You have several options for managing your HSA after leaving a job, including keeping your current account, having multiple HSAs, opening a new HSA, or rolling over to a new employer's plan.

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