What Happens to Your HSA if You Leave Your Job?
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If you've been laid off or decided to leave your job, you may be wondering what will happen to your health savings account (HSA). Since you own the HSA, it'll follow you wherever you go. This means you'll still have your HSA, whether employed, unemployed, or switching jobs. Learn more about how to open an HSA and what happens to your HSA when you leave a job.
What Is an HSA and How Does It Work?
An HSA is a savings account dedicated to helping you pay for qualifying medical expenses. You can use your HSA for:
- Vision and dental care
- Over-the-counter drugs and prescription medications
- Chiropractic care, massages, and other forms of complementary treatment
- Addiction treatment and recovery
- Medical supplies such as first-aid kits and health-monitoring equipment
- Copayments, deductibles, and coinsurance
An HSA is not health insurance — rather, it's an account you can use to pay for medical expenses not covered by your current plan.
Why Set up an HSA?
An HSA comes with certain tax advantages, including tax-free contributions and withdrawals. You won't have to pay taxes on the interest your HSA accrues. You can also invest with your HSA, and any investment earnings are also tax-free. Your investment options may vary depending on your HSA provider, but you can generally invest in stocks, bonds and mutual funds, similar to investing with an individual retirement account (IRA).
How Do You Open an HSA?
You can open an HSA through your employer if you have the option or with a bank, credit union, or other financial institution. In either case, you must be enrolled in a qualified high-deductible health plan (HDHP) to be eligible to open a health savings account. Your health plan must have a deductible that meets the requirements set by the IRS. For example, the minimum deductible for an HDHP in 2025 for an individual plan is $1,650.
Other eligibility requirements include:
- You can't have other health insurance, including Medicare
- Someone else couldn't have claimed you as a dependent on their prior year's tax return
Through Your Employer
If you open an HSA at work, your employer will contribute funds to your HSA on your behalf. Here’s how it works:
- You agree to withhold a portion of your salary.
- Your employer contributes the amount taken from your salary to your HSA.
Your employer may also contribute a set amount to your HSA that's unrelated to your withholdings. Since these contributions are not technically wages, the IRS does not tax them. You can deduct additional HSA contributions from your taxes, reducing your taxable income and the taxes you owe. Note that the IRS limits how much you or another person can contribute to your HSA. For 2025, the limit for an individual plan is $4,300. If you contribute more than the limit, you'll owe a penalty for every year the extra is in your account.
On Your Own
The first step to opening an HSA on your own is finding a financial institution that offers this type of account. Start your search online or contact your health insurer for a recommendation. Your current bank, brokerage firm, or credit union can send you in the right direction, too.
Before opening an HSA on your own, find out the following:
- Fees you'll have to pay, if any
- Services and features offered
- How you'll access your money and check your balance
Lastly, think about how you'll contribute money to your HSA. You'll likely contribute cash already taxed and then claim a tax deduction for any contributions you made when you file your tax return.
Your Options When You Leave Your Job
No matter how you leave your job, you get to keep your HSA. You can leave it where it is, roll it into a new individual HSA, or roll it into another employer-sponsored HSA if you already have a new job lined up and they offer an HSA.
What Happens to Your HSA if You Quit Your Job?
If you quit or change your job, you still get to keep your HSA. The account and the funds belong to you, even the portions your employer contributed, whether or not you keep your job. However, if quitting your job means you'll lose your HDHP, you can no longer contribute to your HSA — you'll have to wait until you enroll in an HDHP to start adding funds again.
Can you still withdraw from your HSA if you lose your HDHP? You sure can. As long as you use the funds to pay for qualified medical expenses, you can access your funds regardless of the type of plan you have or if you're uninsured — and you can do so free of taxes and penalties.
What Happens to Your HSA if You're Fired or Laid Off?
Did you get fired from your job? No worries — you still own your HSA. Same as if you quit your job, your employer will stop contributing to your HSA once you're terminated, and you won't be able to add funds if you lose your HDHP. However, you can still use your HSA for qualified medical expenses and start contributing once you're re-enrolled in an HDHP.
If you were laid off, you might have access to certain benefits. For example, if you're currently receiving unemployment compensation, you may be able to use your pretax HSA funds to pay for monthly insurance premiums, including the Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage.
How Do You Transfer Your HSA From Your Old Employer?
You do not need to keep the same HSA provider if you quit your job or get fired — it's completely up to you. If you want to keep your HSA with your old provider, know that you may have to pay a maintenance fee to keep it open. Employers usually cover these costs when they sponsor accounts, so you'll be responsible for them once you have an individual account.
You can transfer your funds to a new HSA provider any time you wish, and it's usually a simple process. Once you choose a new provider and open an account with them, they can guide you through a direct transfer or a rollover.
Submit a Transfer Form
Transferring funds to a new HSA typically involves completing a transfer form. You may be able to complete a transfer form online through your old HSA provider's website. If that's not an option, call your provider and ask them to mail you the form. The IRS does not consider a direct transfer to be a contribution, distribution, or income, so you don't need to pay any taxes or penalties for transferring funds. However, there may be a transfer fee to send funds from your former HSA to your new one.
Complete a Rollover
You can also initiate a rollover. With a rollover, you'll ask your old HSA provider to send your funds to you via direct deposit or check. You'll then have 60 days to deposit that money in your new HSA. If you miss the deadline, you may have to pay a penalty and taxes to the IRS.
You can only do a check transfer once a year. This limit means that if you roll your HSA into an individual account, and your new employer offers an HSA, you would only be able to roll funds into the employer-sponsored account with a direct transfer.
What if You Want to Close Your HSA?
You can close your HSA at any time. However, you'll need to pay taxes on any money you withdraw that you don't spend on qualifying medical expenses. You'll also have to pay a penalty if you don't use HSA funds for medical expenses and are under age 65. To avoid taxes or penalties, consider keeping your HSA open while you look for a new job or HSA provider. It could be worth it in the long run. If you decide you don't want an HSA, talk to your provider for specifics on how to close your HSA account.
FAQs About Your HSA After You Leave Your Job
Here are some common questions about an HSA that you might have if you've left or are planning to leave your job:
- Can you keep contributing to an HSA? Whether you can keep contributing depends on whether you still have an HDHP. If you lose your HDHP, you can't contribute to an HSA.
- Can you use HSA funds for qualified medical expenses? Yes, you can spend your funds on qualified expenses, no matter what kind of health insurance plan you have.
- Can you use HSA funds to pay for my family's medical expenses? Yes, you can spend your funds on qualified medical expenses for your spouse and any dependents you can claim on your tax return.
- Does your age affect what happens to your HSA? Your age generally won't matter. However, if you are 65 or older, you can use your HSA funds for anything you want, so you can close your account without incurring penalties. You will have to pay regular income taxes on the amount.
- Can you roll HSA funds into an IRA? No, you cannot roll HSA funds into an IRA or any other kind of account. You can only transfer HSA funds to another HSA.
Learn About HSAs From The Difference Card
Once you open an HSA, it's yours to own and take with you wherever you go — whether you change employers or are unemployed. As long as you continue to meet the eligibility requirements, you can enjoy your HSA and its many benefits.
Are you interested in opening an HSA or offering one to your employees or clients? Learn more about HSAs from The Difference Card or request a custom proposal today.
