HSA Frequently Asked Questions (FAQ)

J. Leaving the University

HSA Prorated Maximum Worksheet (2022)

1. What if I don’t use all my contributions before I leave the university?

When leaving the university, you take the money with you, and:

  • Continue to use the money tax-free for qualified health expenses, or
  • pay taxes and IRS penalties for other expenses (If you are over age 65, you pay taxes, but have no penalty)

2. What happens to my account funds if I leave my job or switch to a non-HDHP plan?

When your HDHP coverage ends, you are no longer eligible to make tax-free Health Savings Account contributions. However, the money in your HSA is yours until you spend it*. As a result, you may keep your HSA with Nyhart and continue to use the funds to pay for qualified expenses. When you are no longer an active employee on the HSA, you will then be responsible for the HSA account maintenance fees (see Fee Schedule (PDF)).

If you become eligible again, i.e., enrolled in a HDHP, you may make additional contributions to your HSA. Please remember that you are responsible for tracking your personal contribution limit (including coordination of contributions should your spouse also contribute to an HSA) and contact your tax advisor if you have additional questions about your specific situation.

*Note, if you term your HDHP coverage during a tax year, your maximum HSA contribution for that year is prorated based on the number of months that you were enrolled in an HDHP plan.

3. What is the maximum contribution I can make to my Health Savings Account?

The amount you can contribute to an HSA is set by federal regulations and is adjusted annually for inflation. For the 2021 tax year, the maximum annual contribution amount is $3,600 if you have employee-only coverage, and $7,200 if you cover one or more family members. If you're 55 or older, you can also make an additional $1,000 "catch-up" contribution to your HSA.

The IRS maximums are the combined total of IU contributions, employee's contributions to their HSA, spouse's contributions to their own HSA (if applicable), and contributions made to an Archer MSA (if applicable).

The maximums can be further affected by the number of months you are covered under an HDHP.


  1. If your HDHP was effective January 1st, and you maintain HDHP coverage for the entire plan year, the total amount you can contribute to your account is the full maximum contribution amount set by the IRS.
  2. If this is your first year of coverage under a HDHP and you start mid-year, you can contribute up to the full maximum contribution limit; including a full catch-up amount if age 55 or greater, so long as you start your HDHP coverage no later than December 1 of that year. In this case; however, you will be subject to a testing period. The testing period requires that you maintain HSA eligibility for a period beginning on December 1 of the year you started and ending on December 31 of the next year. If you lose HSA-eligibility during the testing period (for reasons other than death or becoming disabled) you will have to include the excess contributions as taxable income. You will also have to pay a penalty on that contribution amount.
  3. If your HDHP coverage ends mid-year, and is not continued through COBRA or through another employer's HDHP, your maximum contribution amount is pro-rated based on the number of months your HDHP was in effect.

Details on the calculation of the IRS prorated maximum can be found in IRS publication 969. If your contributions have exceeded the IRS prorated maximum, you must work with Nyhart to resolve the excess contribution issue. Excess contributions not withdrawn from the Health Savings Account are subject to a 6% excise tax until withdrawn. Reporting requirements for excess contributions are detailed in the Instructions for IRS Form 8889.

Contact Nyhart for instructions on how to remove “excess contributions” from your HSA at 800-284-8412 or at .

4. I am currently enrolled in an HDHP and HSA, but plan to leave the university. Can I continue the HDHP and HSA after I have separated from the university?

Yes, you may retain enrollment in the plan for up to 18 months through COBRA continuation coverage. The University will no longer make contributions to your Health Savings Account via pre-tax payroll deductions, but as long as you are enrolled in a HDHP, you are still allowed to put tax-free contributions into your Health Savings Account up to the IRS allowed maximum. Any contributions put in your account on an after-tax basis are eligible to be deducted from your gross taxable income on your tax return.

5. I am currently on COBRA continuation coverage; can I elect an HDHP and HSA during open enrollment?

Yes, you may elect an HDHP plan. However Indiana University will not make a contribution to or open a Health Savings Account for you. If you choose to open an HSA, you will be entirely responsible for opening the account and all associated fees.

6. Can I use my HSA to pay for COBRA premiums?

Yes.  COBRA premiums are an IRS qualified health care expense.

IU COBRA premiums have to be paid with a check or money order.  You can use your HSA funds to pay your premiums in two ways:

  1. Use the “Make an HSA Transaction” feature online from your Nyhart HSA account, sending a distribution to COBRA (a $10 fee may apply)
  2. Send a check from your personal bank account then use the “Make an HSA Transaction” feature online, transferring funds from your HSA to your personal bank account to reimburse yourself for the cost of the premiums (no fee applies to online transfers)

Learn more about your COBRA benefits.

7. Do I have to contribute the full $300 minimum before I leave?

No, the $300 minimum contribution only applies to employees who enroll in the HSA and remain an active employee through the end of the year.

8. Will IU make their contribution to my HSA if I’m on COBRA?

No, IU will only make a contribution to your HSA account when you are an actively employed eligible individual.

9. Will I have to return any of IU’s contribution to my HSA if I leave mid-year?

No, once a contribution has been made to your HSA account, it is yours.  You may, however, owe taxes on any contributions made to your account that exceed the IRS prorated contribution maximum.

Details on the calculation of the IRS prorated maximum can be found in IRS publication 969 (PDF). If your contributions have exceeded the IRS prorated maximum, you must work with Nyhart to resolve the excess contribution issue. Excess contributions not withdrawn from the Health Savings Account are subject to a 6% excise tax until withdrawn. You should be aware of the reporting requirements for excess contributions as detailed in the instructions for IRS Form 8889.

Caution: if this is your first year of HSA eligibility the amounts above may be reduced if you fail to meet a testing period. If you are an existing HSA owner, the amounts above may be reduced if you fail to maintain your eligibility for the full tax year.

Please contact your tax advisor if you have additional questions.

10. What are the account fees associated with my Nyhart HSA?

Indiana University will pay the basic monthly account maintenance fee for the Cash account as long as you are an active employee in the HSA. The basic fee covers online account activity and reporting and two debit/VISA cards.

When you separate from the university or switch to a different IU medical plan, you will be responsible for all account fees (currently $2.75/month for the Nyhart HSA Cash Account). There are no transaction fees for using the card at point of sale. However, additional fees do apply for things like insufficient funds, additional cards, checks, etc. A complete Fee Schedule (PDF) is available.

11. Can I transfer my HSA to another HSA account?

Yes. Complete a HSA Transfer form from your new HSA provider and they will have your Nyhart account balance transferred to your new account. This type of transfer is free and does not count toward the IRS contribution maximum.

12. Can I transfer my HSA to my spouse’s HSA?

No. An HSA is an individual account in your name. You cannot combine it with an account in someone else’s name.

13. Can I remove all the funds and close my HSA?

Yes. However, if you remove your funds from the HSA for non-healthcare related expenses you will then be subject to income taxes on the amount removed, AND, if you are under age 65, you will also be subject to a 20% penalty.

14. What do I do with my HSA if I am moving out of the country?

You can continue to keep this account and continue to use it, tax-free, for your healthcare expenses. The Benefit card (debit/Visa) can be used at healthcare providers anywhere that VISA is accepted.

15. I am leaving the university during the month of December. Is there anything I need to consider with regards to my HSA enrollment?

Monthly paid employees receive their December paycheck in January. Biweekly paid employees may be paid for December hours in January, depending on the termination date. These checks are paid in a new tax year and will pick up the elections for the HSA and FSA that you made during Open Enrollment. If you do not want an HSA or FSA deduction taken in the new year, please waive coverage during Open Enrollment.

If an HSA deduction is taken on the January paycheck, you may complete an HSA Distribution Request Form to retrieve the funds. If you remain enrolled in your HDHP or enroll in an HSA-eligible HDHP through another employer, etc., you are not required to remove the HSA funds from your Nyhart account (unless your HDHP coverage ends during the year and it creates an excess contribution). Due to IRS rules and regulations, IU cannot reverse and refund the HSA deduction.

Back to main FAQ page