Health Savings Accounts

What Happens to Funds Remaining in Your HSA?

At the end of the year

One of the advantages of HSAs is that, unlike FSAs, HSAs do not have a "use it or lose it" provision. You do not forfeit unused funds remaining in your account at the end of the year, and the money in the HSA can continue to accumulate tax-free for use in later years.

If you change jobs

An HSA is portable. Because the account is yours, you can keep it. If you qualify, you may continue to make contributions even if you change employers or leave the workforce.

If you divorce

If all or part of your interest is transferred to your spouse as part of a divorce settlement, it will not be considered a taxable transfer, and the transferred money will continue to be treated as an HSA.

If you retire

Although you can no longer make contributions to an HSA once you reach age 65 and are enrolled in Medicare, you can take tax-free distributions from your account to pay for qualified medical expenses. You can withdraw funds from your account for non-medical purposes without owing a penalty, although the amount you withdraw will be subject to income tax.

If you die

Funds remaining in your HSA upon your death become the property of your designated beneficiary. If the designated beneficiary is your surviving spouse, he or she becomes the account holder and the account remains an HSA. Distributions will continue to be tax-free when used for qualified medical expenses. If the beneficiary is anyone other than your surviving spouse, the account ceases to be an HSA as of the day of your death. Your non-spouse beneficiary must include in his or her gross income the fair market value of your HSA account at your date of death (less any amounts paid from your HSA for your qualified medical expenses, if paid within one year after your death.)

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