Use Your HSA and FSA Wisely After a Job Change

Changing employers often means changing health insurance plans. If you’re going from a high-deductible health plan (HDHP) with a health savings account (HSA) to a traditional health plan, you may wonder what to do with your HSA funds.

The good news is that you can still use your HSA even if you’re no longer enrolled in an HDHP. However, there are some restrictions.

What You Can Do With Your HSA

Continue to contribute to your HSA. You can still contribute to your HSA even if you’re not enrolled in an HDHP. However, the contribution limits are lower for non-HDHP participants. For 2023, the limits are $3,850 for individuals and $7,750 for families.
Use your HSA funds for qualified medical expenses. You can use your HSA funds to pay for a wide range of qualified medical expenses, including doctor’s visits, prescriptions, and hospital stays. You can also use your HSA funds to pay for health insurance premiums, long-term care insurance premiums, and medical expenses for your spouse and dependents.
Invest your HSA funds. HSAs offer tax-free investment options, which can help you grow your savings over time. You can invest your HSA funds in stocks, bonds, and mutual funds.

What You Can’t Do With Your HSA

Use your HSA funds for non-qualified expenses. You can’t use your HSA funds to pay for non-qualified expenses, such as groceries, clothing, or entertainment. If you do, you’ll have to pay taxes on the withdrawal and a 20% penalty.
Contribute more than the annual limit. You can’t contribute more than the annual limit to your HSA. The annual limit for 2023 is $3,850 for individuals and $7,750 for families. If you contribute more than the annual limit, you’ll have to pay taxes on the excess contribution.

If You Have an FSA

If you have a flexible spending account (FSA) through your new employer, you can use your FSA funds to pay for qualified medical expenses. However, FSA funds are “use it or lose it” funds, meaning you must use the funds by the end of the year or you will lose them.

Using Your HSA and FSA Together

You can use your HSA and FSA together to pay for qualified medical expenses. However, it’s important to use your FSA funds first, since FSA funds are “use it or lose it” funds.

Once you’ve used up your FSA funds, you can start using your HSA funds. HSA funds can be used to pay for qualified medical expenses for you, your spouse, and your dependents.

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