New job. New career. And a new health savings account (HSA). This scenario can play out often over the course of your life. The average person changes jobs 5.7 times just between the ages of 18 and 24. We change jobs less as we get older, but the average is still 1.9 times between ages 45 and 52.
Since HSAs are employee-owned, they stay with you even when you leave your employer. The funds are yours. As you change jobs, you may have two, three, four, or more of these accounts open. We've outlined a few options below, or watch our episode of Benefits Buzz where we cover what you can do with multiple HSAs.
The simplest way to reduce your number of HSAs to one is to complete an HSA transfer. This process is completed by your current and former HSA custodian. Because you never take ownership of the funds during the transfer, you’re allowed to complete as many transfers as you need to. You also don’t need to report a transfer on your tax return.
For our participants who are moving to an HSA by WEX, we have an HSA Transfer Request Form. They simply complete the form to transfer funds from their former custodian to us.
Roll them over
You can also reduce the number of HSAs you have by withdrawing the funds from the old account(s) and depositing them into the new one. This process differs from a transfer because you’re taking ownership of the funds for a time, which means you will have to report any rollovers with your tax return. The IRS also has a couple stipulations:
- You may complete a rollover only once during a one-year period.
- You must complete this process within 60 days of receiving your funds from the withdrawal.
If you do not complete the rollover per IRS rules, your funds could be subject to taxes and/or face a 20 percent penalty.
Spend down one of your multiple HSAs
HSAs can be used for a variety of reasons. Some spend their funds, while others save and invest. And many of you do all three. If you’re an HSA spender, you could choose to simply spend down the balance of accounts that you aren’t actively contributing to.
Once you’ve depleted these balances, you could then close the HSAs without funds in them. Closing these accounts is an important step, since you could be charged service fees if you don't close them.
Leave the multiple HSAs be
You could also choose to leave all of your HSAs open. As mentioned, this could come at a higher cost to you since multiple accounts could mean multiple fees. And multiple HSAs can also mean multiple online accounts to manage and multiple debit cards to keep track of.
One of our HSA Day contributors told us they have two HSAs: one for spending needs now, and the other for longterm saving.
“We’ve planned to use (my husband’s HSA) for our retirement,” Titi Tran told us during last year’s HSA Day. “With my account, we have contributed a shorter amount of time, and so it doesn’t have as much money. We use it on a more day-to-day basis to cover medical expenses and prescriptions, eye exams, and dental expenses.”
Watch our video to learn more about how you'll benefit with an HSA.
The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.