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HSA funds are especially helpful for covering medical bills that often arise during job changes. In 2023, over 37 million health savings accounts covered more than 61 million Americans, according to a survey by the American Bankers Association’s Health Savings Account Council. This number continues to grow as healthcare costs rise. So, what happens to HSA money when you leave a job? The good news is that your HSA stays with you—even after your employment ends—meaning the funds remain yours to use for qualified medical expenses.
HSAs allow tax-deductible contributions and tax-free withdrawals for medical treatments. Understanding HSAs is crucial during job changes for informed healthcare financial decisions. This blog will discuss what happens to an HSA after leaving a job.
What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is a tax-beneficial account for medical expenses. Most people open such accounts as part of a High-Deductible Health Insurance Policy. You pay into the account before tax, reducing your taxable income.
Employers cannot limit the use of funds for deductibles, co-pays, coinsurance, or other qualified expenses. Unused cash rolls over to the following year. Thus, HSAs remain valuable for current and future medical expenses.
How HSAs Are Linked To Your Employment
A health savings account (HSA) is primarily associated with employment in connection with high-deductible health plans (HDHPs) that employers typically offer. To benefit from the HSA, one must be within the HDHP limits, which often include employers setting aside funds for their employees’ HSAs.
The HSA is portable; it’s tied to you, not your employer. So, your spending limit remains, and the funds stay intact even if you switch jobs. If you leave but keep your HDHP, you can still add to the HSA. Your employer will then stop contributions. However, your funds won’t disappear. They stay active and aren’t returned to the employer.
Read related blog: What Happens To FSA Money When You Leave a Job?
What Happens to Your HSA When You Leave a Job
If you leave your job, the HSA money you can keep. The employer does not own it. They can access the funds after leaving, whether switching jobs or being unemployed. They can withdraw money tax-free for qualified medical expenses.
Nonetheless, you cannot make HSA contributions after leaving employment unless you join a high-deductible health plan again. The principal, however, may still be appreciated from interest and/or depreciation, depending on the agency. You can transfer accounts if you create an HSA with a different provider.
Options for Managing Your HSA Post-Employment
After leaving your job, you can manage your HSA in several ways:
- Keep it with your old employer: If the fees and services are reasonable, you can keep it. This makes things simple.
- Move it Elsewhere: You can transfer your HSA to a bank or investment firm. This opens up more investment options and might lower your fees.
- Withdraw and Pay Taxes: You can withdraw funds that are not needed for medical expenses. However, a 10% penalty and income tax apply if you’re under the eligibility age.
- Keep Contributing: If you have a high-deductible plan, you can continue contributing to your HSA even after leaving your job. This helps you save for future medical bills.
Using HSA Funds For Qualified Medical Expenses
One advantage of the HSA is that it can yield several tax savings. Money set aside for medical expenses can be withdrawn without incurring a government tax. Such expenses include certain medical surgeries, dental, and vision expenses.
It is possible to still use an HSA for medical care even after one has left employment. This Fund is renewable at once or at the time of expenditure, or it may be kept for future expenditures. Again, there is no panicking and using it all. Account money that is self-hosted earns interest rates without tax.
Read related blog: How to Quit Your Job and Still Make Money
Strategies to Maximize Your HSA Benefits
Boosting your HSA benefits is vital, especially when changing jobs. Here are some strategies.
- Invest your HSA funds: Many HSAs allow investing after reaching a certain balance. This can grow your savings, providing more for retirement healthcare costs.
- Keep contributing to the HSA account: Even after leaving your job, keep contributing to the HSA. It offers tax-free savings for future medical needs.
- Keep receipts: You don’t need to use your HSA funds right away. Keep receipts for medical expenses. You can reimburse yourself later, even years later.
- Consolidate HSAs: If you have HSAs from different jobs, merge them. This can simplify managing your healthcare savings and may reduce fees.
Conclusion
Managing your HSA during job changes is straightforward. First, remember that your HSA is portable. You keep control after leaving a job. Next, explore your options. Consider consolidating accounts or investing your HSA funds. This approach ensures your healthcare savings remain effective, even between jobs.
Beem offers solutions for simplifying HSAs and other benefits during job transitions. It is a platform that more than 5 million Americans trust. You can get all the help you need with understanding and navigating HSAs or resources for filing your taxes. Furthermore, get insights on your financial health, take personal loans, or monitor credits, all in one place! Download the app now.
What happens to my HSA money if I quit my job?
If you leave your job, you can keep the HSA money. The account is portable, which means you can access your funds from anywhere. So you can still use it for qualified medical expenses.
Can I continue using my HSA after leaving my job?
Yes, you can keep using your HSA after leaving your job. The funds are still there for qualified medical expenses. Moreover, you can continue contributing with a qualifying high-deductible health plan.
How can I manage my HSA funds after changing jobs?
After changing jobs, you can keep your HSA or move it. You can also consider combining multiple HSAs to simplify management and cut fees.
