Can You Lose the Balance of an HSA?

If you have a Health Savings Account (HSA), you might be wondering whether you can lose the balance that you've built up over time. The good news is that in most cases, the money in your HSA is yours to keep, even if you change jobs or health insurance plans. However, there are certain circumstances under which you may lose some or all of the balance in your HSA.

One way you could lose the balance of your HSA is by making ineligible purchases with the funds. The IRS has strict rules about what expenses can be paid for using HSA money, and if you use the funds for non-qualified expenses, you may face penalties and taxes, potentially decreasing your balance.

Another scenario where you might lose your HSA balance is if you close the account and there are remaining funds. In this case, you may be required to pay taxes on the unused portion of the account. It's important to carefully consider your options before closing an HSA to avoid any unexpected losses.

Additionally, if you no longer have an HSA-eligible high-deductible health plan (HDHP), you may no longer be eligible to contribute to your HSA. While the money already in your account remains yours, you won't be able to add more funds until you have an HDHP again.

Key Points:

• Money in your HSA is generally yours to keep.
• Avoid using HSA funds for non-qualified expenses to prevent penalties.
• Be cautious when closing an HSA to avoid tax implications.
• You can't contribute to your HSA if you no longer have an HSA-eligible HDHP.

If you have a Health Savings Account (HSA), it's natural to worry about your hard-earned savings. Luckily, in general, your HSA funds are safe and remain yours regardless of job changes or shifts in health insurance plans. However, there are a few pitfalls that could lead to losing your balance.

One significant risk is making ineligible purchases. The IRS specifies what constitutes a qualified medical expense, and using your HSA for non-qualified expenses may result in penalties and taxes, reducing your overall balance.

You should also be cautious if you're considering closing your HSA. If there are remaining funds, the IRS may require you to pay taxes on whatever is left, so think through your decision carefully.

Moreover, if you lose your HSA-eligible high-deductible health plan (HDHP), while the money in your account is still yours, you won't be able to contribute additional funds until you re-enroll in an HDHP.