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 where we cover what you can do with multiple HSAs.
Transfer funds
The simplest way to consolidate your HSAs is to complete an HSA transfer. Funds are directly transferred from your former HSA custodian to your new one. Because you never take ownership of the HSA funds during the transfer, you’re allowed to complete as many transfers as needed and don’t need to report the transfer on your tax return.
To transfer funds from a former HSA to your HSA by First American Bank Health Account Services, complete and send the HSA Transfer Request Form, available in your consumer portal under Tools & Support, to your former HSA custodian. Your former custodian will transfer your HSA funds to us.
Roll them over
You can also consolidate your HSAs by completing a rollover. Funds are withdrawn from your former HSA and sent to you, and you are responsible for depositing them into your new HSA. Since you take ownership of the HSA funds during the rollover, you will have to report them on your tax return. The IRS also has a couple of stipulations:
- You may only complete a rollover once every 12 months.
- You must deposit the rollover funds to your new HSA within 60 days of the withdrawal.
If you do not complete the rollover per IRS rules, your funds could be subject to income taxes plus a 20% penalty for a nonqualified withdrawal.
Spend them down
HSAs can be used for a variety of reasons. Some consumers spend their funds, others save and invest, and many 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 the balance, you can close the account. Closing the account is an important step to avoid being charged service fees.
Leave them open
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 service fees. It could also mean multiple online accounts to manage and debit cards to keep track of.
