Transferring Your HSA Benefits:

Whether you are planning on switching jobs, or if you are concerned about what will happen to your health savings account when you die, it is important to understand exactly how the transition of your HSA will occur.

Switching Your Job

Your health savings account is your own, and is not tied to any one employer. This means that the funds that you have contributed to your health savings account are your own and will follow you, no matter what job you take.

However, when you change employers, this typically means that you will also have to change insurance companies. Your new job may offer a different group plan, or you may wish to find an insurance policy on your own. This transition period can be eased by using COBRA until your new policy takes affect.

If you do plan to take advantage of COBRA, this means that you will need to keep paying your premiums on the health insurance policy with your former employer until you are ready to make the switch. This can be very helpful in the event that your new employer's group plan is not HSA eligible.

The majority of group plans currently available feature low deductibles and higher monthly premiums. In order for an insurance plan to be HSA eligible, it must have a deductible of at least $1000 and it may not offer a co-payment plan for your health care needs.

If your new employer does not offer an HSA plan, you may be better off finding your own insurance policy, which will fit the HSA eligibility requirements. Although this may mean an initial higher out-of-pocket expense, the long term savings offered by an HSA can usually more than make up the difference.

You will also need to contact your HSA administrator to inform them of your change of employment. If your new employer plans on making contributions for you, it is very important that your administrator is aware of this change to ensure that you will receive all the money that is owed to you.

If your employer has contributed to your HSA, the money within the account is still yours. They will not be allowed to withdraw their contribution. In addition, you will not be taxed on any contributions made by your former employer or by your new employer. This feature of a health savings account is very useful, particularly for those who change their place of employment frequently due to the nature of their work.

Transferring Benefits

Your health savings account will allow you to name a beneficiary for the money you have saved. This means that it is very important to have a beneficiary in place as soon as possible, to avoid any confusion.

You will need to name this beneficiary in your will. If the beneficiary is your spouse, they will be able to use the money that is in your health savings account tax-free, so long as it is used for qualified medical expenses. If your spouse needs to use the HSA for non-qualified medical expenses, they will then be taxed on their purchases.

In the event that your beneficiary is not your spouse, such as your children or dependants, this means that the beneficiary will have to pay income tax when the health savings account is transferred over to them. However, they will not need to pay a penalty. It is important to consider this aspect when you are selecting your beneficiary.

If you have not named a beneficiary for your health savings account in your will, this may mean that the funds will be inaccessible for your spouse or dependants. Instead of creating a legal problem for your loved ones, it is a good idea to change or add to your will when you set up your health savings account. By doing this at the same time, you can ensure that everything will be taken care of and that you will not forget this important point.

<< Back