What Happens If HSA Funds Are Not Distributed?

Health Savings Accounts (HSAs) are a valuable tool for managing healthcare expenses and saving for the future. However, some individuals may wonder what happens if their HSA funds are not distributed.

If HSA funds are not distributed, they will continue to remain in the account and grow tax-free. There is no penalty for leaving the funds unspent, unlike flexible spending accounts (FSAs) which have a 'use-it-or-lose-it' rule.

Here are some key points to consider regarding unspent HSA funds:

• HSAs have no expiration date, so the funds can roll over from year to year
• If you change jobs or health insurance plans, you can still keep and use the funds in your HSA
• Unused HSA funds can be a valuable resource for covering future medical expenses, including those in retirement

It's important to note that while there are no penalties for not distributing HSA funds, withdrawing funds for non-qualified medical expenses before age 65 will incur a 20% penalty plus income tax.

Therefore, it is recommended to save HSA funds for medical expenses to fully benefit from the tax advantages and avoid penalties.




Health Savings Accounts (HSAs) are designed for flexibility, allowing the funds to grow tax-free over time. If you choose not to withdraw your HSA funds, they will continue to accumulate without any penalties, which is a great advantage compared to other savings plans.