What Happens To My HSA When I Leave My Job?
A health savings account is a kind of tax-free savings account that you can use to save on medical expenses when enrolling in a high-cost, affordable health care plan. If you have an HSA and have just moved from a job, this article provides helpful tips on what happens to the HSA when you leave work. And even if you do not intend to change jobs at the moment, it is still a good idea to read this article. Because if you have HSA, it is better to know your options ahead of time if you are in a condition where you need to change or quit for any reason.
The HSA has long been one of the most powerful savings accounts authorized by the federal government. Health savings accounts have many advantages and can save health care costs and even retirement for you. If you can wait until age 65 to use the money saved in the HSA, you can even use it as a retirement account instead of a health savings account.
A health savings account helps you pay for medical expenses that your insurance policy does not cover. Besides helping you save money for out-of-pocket expenses that health insurance will not pay for, HSAs offer other benefits.
What happens to your HSA if you quit your job?
The funds in your HSA are always at your disposal, regardless of employment status or insurance coverage. The fact that HSA funds are always given to you is another important advantage of this type of account. Unlike Flexible Expense Accounts (FSAs), savings on HSA accounts do not have a specific date. This means that if you change your job or health plan, you can maintain your HSA and spend your budget normally on eligible medical expenses or see it grow until retirement. (As long as you are ready to use your cash any way you want). You can also help your account as long as you comply with IRS eligibility rules.
Benefits of HSA when changing jobs:
- The HSA acts as a savings account:
Many consumers are unaware that, in addition to accumulating various tax benefits, many HSA accounts allow you to invest your capital like pension funds. You can keep your Health Savings Account (HSA) when you leave your job. Even if you open your HSA in connection with a high deductible health plan (HDHP); All the money in it, including your employer’s contributions, your contributions, and interest or investment growth, will be given to you.
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- Pay COBRA monthly premiums using HSA:
If you lose your health insurance due to leaving your job, you can use the money in the HSA to pay your monthly COBRA premium. This is an eligible medical expense, so you will not have to pay income tax on withdrawals.
- Use your HSA as an emergency fund:
Some people consider their HSA as an emergency fund and invest their HSA funds in stocks, bonds, or interest-bearing accounts. You can use the money of your HSA to pay for medical expenses. But some people allow the profits from these investments to grow for years without tax. These people pay their medical bills with other money, and they save these receipts for medical expenses paid from other funds. When they need money in the future, they can get it back from your out-of-pocket medical expenses for the duration of the HSA. Withdrawn funds are not taxable, as they can be used to reimburse you for any medical expenses you have already incurred.
- HSA for retirees:
When you turn 65, you may withdraw money from your HSA for any reason without incurring a 20% non-medical withdrawal penalty. However, the only money you receive for eligible medical expenses is tax-free. Note that you can always use your HSA budget to pay for your spouse’s treatment.
HSA and its relationship with the employer:
If you have an employer participating in your HSA, these benefits also belong to you, but they do not happen again after leaving your job. Your employer cannot withdraw any of your benefits, and all of your HSA costs are for your maintenance and use. If your employer pays some or all of the monthly management costs to your account, you will be responsible for those costs. HealthEquity will email you if your dependency changes, including information about these costs, as well as suggestions for preventing or reducing them.
While you are preparing to leave your job for a new job, freelancer, or any other purpose, it may be wise to compare health savings accounts and their offers, so you can move on to a new account. You may want to transfer your existing HSA funds to your new HSA. Under these circumstances, you can still keep your existing HSA open and intact and open a new account with your new employer to enjoy the benefits of employer-backed HSA. Note that just because your employer offers an HSA health care plan does not mean that the HSA is better.
There are no rules for having multiple HSAs. The only thing to keep in mind about multiple HSAs is that the total participation fee for all of your HSAs should not exceed the maximum annual IRS contribution for your specific circumstances.
Today Many employers offer HAS accounts to employees. This type of account provides a tax-free contribution to cover medical expenses. As we explained in this article, if you leave your job, you can keep your funds in the HSA. One of the main benefits of HSA is that it only belongs to you. The HSA belongs to you, and you can retain, terminate, resign, relocate or retire. You can keep a health savings account and all the money in it, including your employer’s assistance.
If you receive unemployment advantages, you can use your HSA to pay for long-term care, COBRA premiums, or other health insurance premiums. We hope by reading this article, you are aware of the countless benefits of HSA (even after leaving the job). If you have experience using this type of account, share it with us.
“If you have any feedback about what happens to my HSA when I leave my job that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”
NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.
This is a very helpful article on Health Savings Account, and extremely useful to know that one can even use the HSA to help with your retirement income. Can someone who is self-employed also have a HSA? Or do I have to be in employment with a company to qualify for a HSA? What would be the tax benefits of having a HSA? Thank you.