Health Savings Accounts do not expire, but the money inside them can be lost if you do not use it by the end of the plan year

An HSA itself never closes just because time passes. The account exists as long as you keep it open and meet the requirements to hold one — primarily, staying enrolled in a high-deductible health plan (HDHP). However, the funds you contribute each year operate under a "use it or lose it" rule called the forfeiture rule. Money you do not spend on may have access to medical expenses by December 31 of the plan year is gone; your employer or plan administrator does not roll it forward, and you cannot get it back.

The timing matters because HSAs are tied to calendar years, not to when you opened the account or when you leave your job. If you contribute money in January and do not spend it by December 31, that money is forfeited — even if you still have an active HSA in January of the next year.

Key Takeaways

  • Money contributed to an HSA in a given calendar year must be spent on may have access to medical expenses by December 31 of that year, or it is forfeited permanently.
  • The HSA account itself does not expire as long as you remain enrolled in an HDHP and meet the requirements to hold one.
  • Some employers offer a grace period of up to 2.5 months into the following year to spend the previous year's funds, but this is optional and not may provide.
  • If you leave your job or drop your HDHP coverage, your HSA remains yours, but you can no longer contribute new money to it.
  • Unused HSA funds do not roll over to the next year unless your employer has adopted a carryover provision, which is rare.

How the forfeiture rule works with your HSA

The forfeiture rule is part of the Internal Revenue Code Section 223, which governs HSAs. It means that any money you contribute to your HSA in a calendar year — whether you contribute it yourself or your employer contributes it — must be used for may have access to medical expenses before the year ends. may have access to expenses include deductibles, copayments, coinsurance, prescription drugs, dental work, vision care, and many other out-of-pocket health costs.

The key date is December 31. If you have $2,000 in your HSA on December 30 and you do not spend it by midnight on December 31, that $2,000 is forfeited. Your employer cannot return it to you, and you cannot carry it forward. The money straightforward disappears from the account.

This rule applies to each plan year separately. If you contribute $3,000 in 2024 and spend only $2,000 by December 31, 2024, the remaining $1,000 is lost. Any new contributions you make in 2025 are subject to the same rule for 2025, independent of what happened in 2024.

Grace periods and carryover provisions: the rare exceptions

Some employers have adopted optional provisions that soften the forfeiture rule, but these are not automatic and not common. The grace period allows employees to spend money from the previous year's HSA balance during the first 2.5 months of the new year — typically January 1 through March 15. If your employer offers this, you can use December 2024 contributions to pay for medical expenses incurred in January, February, or March 2025.

A separate option, called the carryover provision, lets you keep up to $650 of unused HSA funds (this amount changes yearly and is set by the IRS) and roll them into the next year. However, carryover is rare; most employers do not adopt it because it complicates administration.

You need to check with your employer's benefits office or your HSA plan documents to know whether either of these provisions applies to you. If they do not mention a grace period or carryover, assume the standard forfeiture rule applies: use it by December 31 or lose it.

What happens to your HSA when you leave your job

Leaving your job does not close your HSA or cause it to expire. The account remains yours, and any money in it stays in the account. However, your ability to contribute new money stops when ready when you leave. If your employer was making contributions on your behalf, those contributions end.

The forfeiture rule still applies to money contributed in the year you leave. If you leave in June and your employer contributed $2,000 for the full year, you must spend that $2,000 by December 31 of that year or it is forfeited. Money you contributed yourself is subject to the same important date.

After you leave, you can continue to use your HSA to pay for may have access to medical expenses, and you can withdraw money tax-free as long as you use it for those expenses. Many people keep their HSA open for years after leaving a job, using it as a supplemental retirement savings account by paying medical expenses out of pocket and letting the HSA balance grow.

Losing HSA may be able to access and what it means for your account

You must be enrolled in an HDHP to hold an HSA. If you drop your HDHP coverage — by switching to a standard health plan, Medicare, Medicaid, or going uninsured — you lose the right to contribute to your HSA. However, the account itself does not close, and the money inside does not expire.

Once you lose may be able to access, you can still withdraw money from your HSA for may have access to medical expenses without penalty or tax. You straightforward cannot add new contributions. This is different from losing the account entirely; the account persists, but it becomes a withdrawal-only account.

If you withdraw HSA money for non-medical expenses after you lose HDHP may be able to access, you owe income tax on the withdrawal plus a 20% penalty. Before age 65, this penalty applies. After age 65, the penalty goes away, but you still owe income tax on non-medical withdrawals.

Planning to avoid forfeiture

The most straightforward way to avoid losing HSA money is to track your medical expenses throughout the year and spend down your HSA balance before December 31. Keep receipts for out-of-pocket costs — copayments, deductibles, prescriptions, dental work, glasses, and other may have access to expenses — and reimburse yourself from your HSA before year-end.

If you know you will not spend all your HSA money by December 31, you have a few options. First, check whether your employer offers a grace period; if so, you can defer spending until early the next year. Second, if you have predictable medical expenses coming in January or February, you can schedule them before December 31 if possible — for example, scheduling a dental cleaning or vision exam in December rather than January. Third, you can use your HSA to pay for over-the-counter items like pain relievers, cold medicine, and first-aid supplies, which are may have access to expenses.

Some people intentionally keep their HSA balance low by spending it regularly, while others try to maximize the balance by spending as little as possible and letting it grow. The forfeiture rule makes the second strategy risky unless you have a grace period or carryover provision.

HSA accounts after retirement

An HSA does not expire when you turn 65 or retire. If you keep your HSA open and maintain an HDHP, you can continue to contribute and use the account. However, once you enroll in Medicare, you lose HDHP may be able to access and can no longer contribute to your HSA. The account remains open, and you can withdraw money for may have access to medical expenses without penalty or tax.

After age 65, if you withdraw HSA money for non-medical expenses, you owe income tax but no longer face the 20% penalty. This makes HSAs attractive as a supplemental retirement savings vehicle for people who have accumulated a large balance and do not expect to spend it all on medical expenses before retirement.

Frequently Asked Questions

Can I get my forfeited HSA money back?

No. Once December 31 passes, any unspent HSA money from that year is forfeited permanently. Your employer cannot refund it, and you cannot recover it through the IRS. The only exception is if your employer has adopted a grace period, which extends the important date to March 15 of the following year for some expenses.

What counts as a may have access to medical expense for HSA spending?

may have access to expenses include deductibles, copayments, coinsurance, prescription medications, dental care, vision care, mental health treatment, and many over-the-counter items like pain relievers and bandages. Cosmetic procedures, gym memberships, and vitamins generally do not count. Your HSA plan documents or the IRS Publication 969 list the full range of may have access to expenses.

If I have a grace period, can I spend 2024 money in April 2025?

No. A grace period extends only through March 15 of the following year. Money from 2024 that is not spent by March 15, 2025 is forfeited. Money you contribute in 2025 is subject to its own December 31, 2025 important date and its own grace period if one exists.

What happens to my HSA if I switch to Medicare?

Your HSA remains open and the money stays in it. You can no longer contribute new money, but you can withdraw funds for may have access to medical expenses without tax or penalty. After age 65, non-medical withdrawals are taxed as income but no longer face a 20% penalty.

Do HSA funds carry over if I change employers?

Yes, your HSA is yours to keep regardless of employment changes. However, the forfeiture rule still applies to money contributed in each calendar year. If you leave your job in June, money your employer contributed for the full year must still be spent by December 31 of that year or it is forfeited.