Introduction:
When you embark on a new job opportunity, it’s essential to consider your Health Savings Account (HSA) and the funds you’ve accumulated over time. Your HSA is a valuable asset that can continue to serve your healthcare needs, even after leaving an employer. In this comprehensive blog post, we’ll delve into what happens to your HSA when you change jobs and explore the options available to you.
What Happens to Your HSA When You Leave a Job?
Your HSA is yours to keep, irrespective of whether it was offered as part of your previous employer’s benefits package. You have the flexibility to manage your HSA funds according to your preferences. Here are three potential choices:
1. Leave Your HSA Where It Is:
- You can choose to leave your HSA with your previous employer’s provider. This option allows you to continue contributing to your HSA if you remain in an HSA-eligible health plan, even with a new employer.
- Be aware that you may need to make post-tax contributions if you no longer work for the employer that sponsored your HSA plan. However, you can still deduct these contributions from your tax bill when filing your tax return.
- Be cautious about account fees that your old HSA provider may impose on non-employees. These fees can accumulate over time, so it’s crucial to assess the costs and benefits of keeping your old HSA.
- Inactivity in your old HSA may result in funds being considered abandoned property and transferred to the state’s unclaimed property division.
2. Roll Over Into a New HSA:
- You have the option to transfer your HSA funds to a new HSA at a different provider. This can streamline your accounts, particularly if you have HSA funds elsewhere.
- When searching for a new HSA provider, research options with minimal administrative fees and investment choices that align with your preferences.
3. Roll Over Into a New Employer-Provided HSA:
- If your new job offers an HSA, you can transfer the funds from your previous employer’s HSA to your new employer’s HSA. This consolidation can help centralize your accounts and potentially save on fees.
Tips for Maximizing Your HSA After Changing Jobs:
As you transition between employers, here are two important considerations:
1. Determine Your HSA Contribution Eligibility:
- Understand whether you are still eligible to contribute to an HSA after changing jobs. HSAs are available exclusively to individuals enrolled in HSA-eligible, high-deductible health plans (HDHP).
- The HDHP for 2023 must have a minimum deductible of $1,500 for self-only coverage and $3,000 for family coverage. Additionally, the maximum annual deductible and other out-of-pocket expenses should not exceed $7,500 for self-only coverage and $15,000 for family coverage.
- Changing jobs often entails changing health plans. Ensure that your new health plan is HSA-eligible if you intend to maintain your HSA contributions. If not, you can maintain your HSA but won’t be able to add more funds until you have HSA-eligible coverage again.
2. Be Mindful of Rollover Timelines:
- If you decide to roll over your HSA, your old provider may offer two options: a check-based transfer or a trustee-to-trustee transfer.
- With a check-based transfer, you can only perform this once within a 12-month period. You must deposit the check into another HSA within 60 days to avoid taxes and penalties (20% withdrawal penalty if you’re under 65).
- A trustee-to-trustee transfer is simpler and does not have these limitations. Your old HSA provider directly transfers your assets to the new provider, potentially allowing you to retain your investments. There is no limit on the number of trustee-to-trustee transfers you can execute within 12 months, and you won’t incur taxes or penalties.
Conclusion:
Your Health Savings Account is a valuable financial tool that continues to benefit you even when you change jobs. By understanding your options and following these guidelines, you can ensure that your HSA remains a valuable asset in managing your healthcare expenses and saving for the future, regardless of your employment situation.
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