Key takeaways:
If you leave your job, your health savings account (HSA) and all the money in it are yours. You can use the money to pay for qualified medical expenses anytime.
You can continue to contribute to your HSA after you quit your job if you’re enrolled in a qualifying high-deductible health plan.
After leaving your job, you can continue using your HSA, roll it over to a new employer’s administrator or your own, or maintain multiple HSAs.
With a health savings account (HSA), you can receive tax benefits to help you save on medical expenses. But you must be enrolled in a qualified high-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 visit copays or 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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You can keep using your HSA funds to cover eligible medical expenses without paying taxes or penalties. Some examples of qualified healthcare expenses include:
What's more, if you’re between jobs, your HSA can help you stay covered. You might be able to use your HSA funds to pay for health insurance premiums, including Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage. This option is available if you're receiving unemployment benefits. Even Medicare premiums can be paid from your HSA if you meet certain requirements.
Can my HSA roll over to a new employer?
Yes. You can roll over your HSA to 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 the IRS allows only one HSA rollover every 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. Making contributions to your HSA after 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 the annual limit set by the IRS, if you meet the following conditions:
You’re enrolled in an HSA-eligible HDHP plan.
You’re not 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.
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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 for qualified healthcare costs whether 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 can open and manage your own HSA. Unlike a flexible 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 be responsible for account fees that 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 and consider 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 in retirement. 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 to avoid 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 a trustee-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.
The bottom line
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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References
Healthcare.gov. (n.d.). Understanding HSA-eligible plans.
HSA Search. (n.d.). HSA provider search.
HSA Search. (2023). HSA rollovers and transfers: A step-by-step guide.
HSA Store. (n.d.). More than you probably need to know about HSA fees.
HSA Store. (n.d.). When a new job is part of your new year.
IRS.gov. (n.d.). Publication 502 (2024), medical and dental expenses.
IRS.gov. (n.d.). Publication 969 (2024), health savings accounts and other tax-favored health plans.
