Does Your HSA Follow You When You Change Jobs?

A Health Savings Account (HSA) is a tax-advantaged savings account for medical expenses, designed for individuals enrolled in a High Deductible Health Plan (HDHP). HSAs offer a triple tax advantage: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are tax-free. This makes HSAs a tool for managing healthcare costs, present and future. To be eligible, an individual must be covered by an HDHP with no other health coverage.

Understanding HSA Ownership

An HSA is an individually owned account. Once funds are contributed, they belong to the account holder, not to an employer or health insurance plan. This personal ownership provides flexibility.

Unlike Flexible Spending Accounts (FSAs), which are employer-owned and subject to “use-it-or-lose-it” rules, HSA funds roll over year after year without expiration. Funds remain available indefinitely, regardless of employment or health coverage changes. FSA funds are forfeited if you leave your job.

HSA Portability in Life Changes

HSAs are fully portable due to individual ownership, remaining with you through various life changes. When you change jobs, your HSA and its funds remain yours. You can continue using these funds for qualified medical expenses. If you enroll in a new HDHP, you can continue contributions through your new employer or directly.

If you lose HDHP eligibility, due to a job change or different insurance, you can no longer make new contributions. However, existing funds remain yours and can still be used tax-free for qualified medical expenses.

Upon retirement, HSAs are an asset for healthcare expenses. After age 65, withdrawals for qualified medical expenses remain tax-free. You can also withdraw funds without the 20% penalty for non-qualified withdrawals before age 65. Non-medical withdrawals are subject to ordinary income tax. HSAs can also pay for certain Medicare premiums (Parts A, B, and D, and Medicare HMO premiums), but not Medigap policies.

Upon the account holder’s death, HSA funds transfer to the named beneficiary. If the beneficiary is a surviving spouse, the HSA is treated as their own, and the transfer is not taxable. The spouse can use funds for qualified medical expenses, retaining the account’s tax-advantaged status. If the beneficiary is someone other than a spouse, the HSA ceases to be an HSA, and the fair market value is generally includible in the beneficiary’s gross income in the year of death.

Ongoing Management of Your HSA

Managing your HSA involves understanding contribution rules, withdrawal guidelines, and investment opportunities. For 2025, the annual contribution limit for self-only HDHP coverage is $4,300, and for family HDHP coverage, it is $8,550. Individuals age 55 and older can contribute an additional $1,000 as a catch-up contribution. Contributions can come from the account holder, an employer, or a third party, but total contributions cannot exceed annual limits.

HSA funds can be withdrawn tax-free for qualified medical expenses, defined by the IRS, including common healthcare costs like doctor visits, prescriptions, dental care, and vision care. Retain records for all medical expenses to substantiate tax-free withdrawals. Withdrawals for non-qualified expenses before age 65 are subject to both income tax and a 20% penalty.

HSAs offer the ability to invest funds for long-term growth. Many HSA custodians offer various investment options, such as mutual funds, stocks, and exchange-traded funds (ETFs). This allows money to grow tax-free, accumulating a sum for future healthcare needs, including retirement.

Individuals can choose their HSA custodian and transfer funds between custodians. You can move funds without penalty if you find better investment options or lower fees. This reinforces individual control, allowing optimization and management according to your financial strategy.