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Health Savings Accounts (HSA)

February 23, 2023

A Health Savings Account (HSA) is a tax-advantaged savings account that is designed to help individuals save for future medical expenses.  It is typically paired with a high deductible health insurance plan.  Contributions to an HSA are tax deductible, earnings grown on a tax-free basis, and withdrawals for qualified medical expenses are also tax-free.

When changing jobs or being laid off, there are several options available for individuals with an HSA:

  1. Roll the HSA into a personal HSA: You can choose to roll the HSA into a personal HSA that is not tied to an employer-sponsored plan. This option is particularly advantageous if you are no longer eligible for a high-deductible health insurance plan, as you can still contribute to the account and use the funds for qualified medical expenses.
  2. Transfer the HSA to a new employer: If you have already found a new job with a high-deductible health insurance plan, then you can transfer the HSA balance to the new employer.
  3. Keep the HSA with the former employer: If the HSA is tied to the previous employer’s high deductible health insurance plan, it can be kept open even after leaving the job. This can be advantageous if you are currently unable to contribute to the account or if you have a significant balance in the account.
  4. Use the HSA funds: If you have a significant balance in the HSA, you can choose to use the funds to pay for qualified medical expenses. However, if the funds are used for non-qualified medical expenses, the distribution may be subject to taxes and a penalty.

It is important to understand the rules and regulations associated with HSAs and it may be beneficial to consult a Financial Advisor to ensure that the funds are being used in the most tax-effective manner.

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