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May 05, 2009
What Becomes of Your Health Savings Account if You Get Laid Off
The good news for people with Health Savings Accounts is they don't need to panic about their healthcare if they get laid off. The money in your Health Savings Account remains yours even after you lose or leave your job, unlike funds in a flexible spending account. So you don't need to rush to the dentist or eye doctor to drain your Health Savings Account before your job is terminated.
You can keep the money in your current Health Savings Account, or you can roll it over to another HSA administrator without having to pay taxes on the move -- a lot like an IRA rollover. The money can then continue to grow in the Health Savings Account and can be used tax-free for future medical expenses in any year... even if you no longer have a high deductible health insurance policy.
But you must have a high deductible health insurance policy to make new contributions, whether you continue your former employer's plan through COBRA or you purchase your own high deductible policy after you leave your job. A high deductible policy is a good option if you've been laid off because it can help keep your premiums low. If you get another job without a high deductible policy, you won't be eligible to make new contributions to your HSA.
You can make HSA contributions at any time during the year, and you have until April 15, 2010, to make your 2009 HSA contributions (and remove any excess contributions). The money you put into an HSA is tax-deductible and grows tax-free for future medical expenses.
HSA money usually can't be used to pay for health insurance premiums, but there's an exception for people who lose their jobs: You can use the HSA money for health insurance premiums (whether for COBRA coverage or any other health insurance) if you're receiving unemployment compensation. That can be a way to pay your premiums with tax-deductible money.
Learn more about Health Savings Accounts at HSA for America.
Posted by Wiley Long at May 5, 2009 08:58 AM