Here’s What Happens to Your HSA if You Change Jobs

You're in luck if your employer offers a Health Savings Account (HSA). Here, we'll explain how an HSA works and, more importantly, what happens to that money when you change jobs.

What is an HSA?

As the name suggests, an HSA is a type of savings account set up expressly to cover certain healthcare costs. Pre-tax money is taken out of your paycheck each month, meaning it's withdrawn before you pay taxes on your income. Although your take-home pay will be slightly less for each contribution, having money in an HSA means not having to dig into your personal bank account to cover every medical cost you encounter.

HSAs are available to those covered by certain high-deductible health plans (HDHPs). You know you have an HDHP when the monthly premium is low, but the deductible and total out-of-pocket amount you're responsible for is higher than average.

There's a limit on how much you can contribute to an HSA. In 2023, that total is $3,850 if you cover only yourself. If you're covering a family, the total is $7,750 per year. And remember, the amount you contribute to an HSA is withdrawn from your income before income taxes are paid, meaning you save on taxes.

What about when you change jobs?

All in all, HSAs are a pretty sweet deal for anyone with an HDHP as they help fight the high cost of medical care. Still, it's worrying to wonder what will happen to that money if you're laid off or accept a job with another company. Fortunately, like with a 401(k), you have options. They include the following.

Transfer

If your new employer also offers an HSA, you can transfer the administration of your account to the new employer. If you decide to go this route, the new company will provide you with a form authorizing the new HSA administrator to take over the account. There are no IRS fees or penalties imposed if you choose this option.

Rollover

Much like when rolling over a 401(k), you have the option of receiving a check for your HSA funds. When that check arrives, you have 60 days to move the money into a new HSA account. You don't want to miss that window because once you exceed the 60-day mark, the funds are seen as a distribution, and you'll be taxed and hit with a whopping 20% penalty.

Leave everything the same

If you decide to leave your HSA with your old employer's HSA administrator, that's okay. You can continue to withdraw funds for eligible expenses as you have been. However, unless your new employer also has a high deductible plan, you can no longer contribute to the HSA.

Bottom line

Once you've contributed money to an HSA, that money is yours. Your company can't keep any portion of it. And because it's solely yours, you're the one who gets to decide what happens to it next.

If you regularly contribute to an HSA but rarely (if ever) use it, don't forget it's there when you leave. It's like having a special pocket of cash in your emergency savings account.