What happens to an Employee’s HSA Benefit Package When
They Leave?
When health savings accounts were created as part of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003,
hopeful advocates said it was the start of a new age of healthcare
consumerism. Given the tax advantages, some have called HSAs
the healthcare version of a 401(k) plan.
But what are the real benefits and drawbacks of this new program
for the healthcare consumer, the health plan industry and employers?
An HSA Account is Yours for Keeps
One of the strategic benefits of a Health Savings Account is
that you own the account. The money is yours to keep, even if
you don't use it all by the end of the year. And if you change
jobs or health insurance coverage, the money goes with you.
You no longer have to worry about that using all your
funds means losing them. The "portability" of HSA accounts
is a vast improvement over the rules that govern Health Reimbursement
Arrangements (HRAs) and Cafeteria Section 125 Flexible Spending
Accounts (FSAs), where any unused funds went back to the employer
at the end of the year or upon termination.
HSA portability gives you more flexibility when it comes to
your healthcare expenditures.
You can take your money with you if you leave your company.
If you remain covered under a High-Deductible Health Plan (HDHP),
you can continue to access your HSA funds through individual
coverage or you can "roll over" funds from one employer's
HSA program to another employer's program (or from an Archer
MSA to an HSA).
Even if your new employer doesn't offer an HSA-compatible HDHP,
you can keep the money in your HSA and continue to use the funds
for qualified expenses. However, you can no longer add money
to the account until you are again covered by an HDHP.
You can use your HSA like an IRA. Withdrawals
for qualified medical expenses can always be made tax-free (there's
a 10% penalty,
plus taxes, for non-medical expenditures). But if you don't use
all the money by the end of the year, your money stays in your
account until you need it.
Any leftover HSA funds earn interest
tax-deferred all the way into retirement. At age 65, you can
make withdrawals from your
HSA for any reason without penalty.  |
