Question

How are excess funds in an employee's HSA handled?

A) They are forfeited
B) They can be withdrawn tax-free for any purpose
C) They are rolled over to the next year
D) They are donated to a charity of the employee's choice

Answer 1

Excess funds in an employee's Health Savings Account (HSA) are rolled over to the next year, allowing the savings to accumulate over time without forfeiture.

Step-by-step explanation:

When it comes to excess funds in an employee's Health Savings Account (HSA), the correct answer is C) They are rolled over to the next year. An HSA is a tax-advantaged account that allows individuals to save for medical expenses that high-deductible health plans do not cover. One of the main benefits of an HSA is that the unused funds at the end of the year are not forfeited, but rather, they roll over to the following year. This means that you can continue to build up savings in your HSA year after year without the risk of losing the funds. Additionally, after reaching the age of 65, you can withdraw the funds for non-medical purposes without incurring a penalty, although you will have to pay income tax on the withdrawal.