Many employees receive a Health Savings Account through their workplace benefits, but plenty of people still aren’t sure how these
Some confuse HSAs with FSAs and worry their balance disappears at the end of the year. But unlike FSAs, HSA funds never expire. The money stays with you year after year, even if you change jobs or insurance plans.
Still, understanding what you can use your HSA for — and what actions can jeopardize rollover status — is key to keeping your balance safe.
To clear up the confusion, we spoke with Dr. Sarah Elneser, a doctor of osteopathic medicine, about what HSAs do, how to check your balance and what people should know before the end of the year.
Below, she answers some of the most common questions:
Q: What is an HSA?
“An HSA is a health spending account,” Elneser said. “A lot of companies now when you sign up for your insurance policies through them and find out what your benefits are, they provide an option called an HSA where you can put some money into this account. It kind of helps with taxes on that money, and then you can use it throughout the year for your health required needs.”
She said HSA funds can be used for medications or certain appointments and are taxed differently than regular income.
Q: Do employers contribute to your HSA?
“Typically on their own, depending on your company, some of them will go ahead and give you amounts. There’s just a set amount. Some of them will match. Some of them, it’s just allowing you to elect how much of your money you want to put in there from your income throughout the year,” Elneser said.
She noted that offerings vary widely by employer.
Q: What should people spend their HSA money on?
“It’s always a good idea to sit down with your family and plan out, based on your health history, what you think your upcoming needs may be,” Elneser said. She offered examples including glasses, medications, screenings, immunizations and certain over-the-counter supplies, depending on the employer’s rules.
“There are even some programs that do offer certain medical products, such as devices that measure your heart rate and your activity or your steps that you get throughout the day to kind of help toward your overall health,” she said.
But she emphasized: “The most important thing is to check before you purchase what is eligible on your HSA account. Every program is different.”
Q: Where can people check what their HSA covers and how much money they have?
“Usually on your insurance card it will have a website that you may be participating in with an insurance company, or at the very least, a phone number on the back of that card that you can call,” she said. Both options allow employees to verify their balance and eligible expenses.
What You Can Use Your HSA Funds For
As long as your spending falls under IRS-approved medical expenses, your money rolls over and remains tax-free. Some qualified expenses include:
- Doctor visits, specialist visits, and urgent care
- Prescription medications
- Over-the-counter medications and common pharmacy items
- Dental work, cleanings, fillings, braces, and dentures
- Vision exams, glasses, contacts, and LASIK
- Physical therapy, chiropractic care, and mental health services
If the IRS considers it a medical expense used to diagnose, treat, or prevent a condition, or a doctor approves, it’s typically eligible.
As long as you stick to these qualified uses, your money stays protected and continues rolling over indefinitely.
What NOT to Do if You Want Your HSA Funds to Roll Over
1. Do NOT transfer your HSA into a different type of account.
You cannot roll HSA money into an FSA, HRA, 401(k), or any other account. Doing so is treated as a non-qualified distribution — not a rollover.
2. Do NOT use HSA money for non-qualified expenses.
Once you spend HSA funds on something the IRS does not approve, the money is considered spent, not rolled over. If you’re under 65, this also triggers a 20% penalty plus income tax.
3. Do NOT fail the IRA-to-HSA transfer testing period.
If you complete a one-time IRA-to-HSA transfer but switch to a non-HSA-eligible health plan within 12 months, the entire transfer becomes invalid and taxable.
4. Do NOT enroll in Medicare before the 12-month testing period ends.
Enrolling in Medicare ends HSA eligibility. If you enter Medicare too soon after an IRA-to-HSA transfer, the transfer fails — resulting in taxes and potential penalties.
The Bottom Line
Your HSA funds will roll over every single year and remain yours for life — as long as you avoid the few actions that can disqualify them and stick to IRS-approved medical spending.