What Happens If HSA Drops Below Threshold?

Health Savings Accounts (HSAs) are a valuable tool for saving money on healthcare expenses while enjoying tax benefits. But what happens if your HSA balance drops below the threshold?

If your HSA balance falls below the threshold, here's what you need to know:

• No Penalty: Unlike Flexible Spending Accounts (FSAs), there are no penalties for having your HSA balance drop below the threshold.
• No Loss of Funds: You won't lose the money in your HSA if it goes below the threshold. The funds remain in your account and continue to earn interest.
• No Impact on Tax Benefits: Even if your HSA balance is below the threshold, you can still enjoy tax benefits on qualified medical expenses.
• No Restrictions on Spending: You can still use the remaining funds in your HSA for eligible healthcare expenses.

It's essential to monitor your HSA balance regularly to ensure you have enough funds to cover medical expenses. If your balance is low, consider contributing more to your HSA to keep it above the threshold.

Health Savings Accounts (HSAs) offer a great way to save for future medical care. If your HSA balance drops below the threshold, don’t panic; there are several important points to consider.

• No Penalty: Unlike Flexible Spending Accounts (FSAs), a drop in your HSA balance doesn't incur any penalties or loss of contributions.
• Keep Your Funds: This is your money, and you won't lose it just because the balance is low. These funds will stay intact and even accumulate interest over time.
• Tax Benefits Remain: Dropping below the threshold doesn’t mean you can't benefit from the tax advantages of HSAs for qualified medical expenses.
• Spending Freedom: You have the flexibility to spend what you have left in your account for qualified healthcare costs without restrictions.

Remember to check your HSA balance regularly and consider making additional contributions. This practice helps build a financial cushion for your healthcare costs.