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Can I Use My HSA After I Leave My Employer?

If your employer provides a health insurance plan that qualifies for a health savings account, the balance in your HSA is yours -- even if you leave your job. The Internal Revenue Service mandates that employees have full ownership of the funds in an HSA, both the funds that they deposit and funds deposited by an employer on their behalf.

  1. Permitted Uses for HSA Funds

    • After you quit your job, you can still use your HSA on a tax-free basis for qualified medical expenses. You can also use the balance in your HSA to pay for COBRA insurance premiums until you are eligible for your next job's health insurance plan. If you are collecting unemployment, you can also use your HSA to pay for individual health insurance premiums.

    Time Limit

    • The funds in an HSA can roll over from year to year. As a result, there is not a time limit to use the balance in your account. Because of this, you have the option to let the account increase in value and use the balance for medical expenses after you retire. While you can continue to let the account accrue interest or earnings, you cannot make deposits into the account unless you are actively enrolled in an HSA-qualified health insurance plan after the year in which you quit your job is over.

    Excess Contributions

    • If you quit your job and you stop participating in an HSA-qualified plan before December 31, the Internal Revenue Service will prorate the contribution limit for your HSA for that year. For every month that is remaining in the year after you quit, the IRS will reduce your contribution limit by 1/12. Conversely, you can make deposits in your account for this year up to the adjusted contribution limit after you leave your job.

    Erroneous Employer Contributions

    • If your employer accidentally makes a deposit into your HSA after you leave your job, the funds cannot be withdrawn from your HSA. If the deposit creates a situation where you exceed your prorated contribution limit, you can either withdraw some of the funds that you deposited, or you can inform your employer, who will then add the excess amount to the taxable portion of your reported income on your W-2.

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