What happens to money in an HSA if HDHP coverage is no longer maintained?
The funds belong to the accountholder for life. Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if the accountholder no longer has HDHP coverage or is no longer eligible for some other reason. The funds remain in the account automatically each year and indefinitely until used. There is no time limit on using the funds.
Once HDHP coverage is discontinued and/or another type of insurance policy is maintained, the IRS no longer allows new contributions, but the funds may still be used for qualified medical expenses, tax-free or alternatively, and non-qualified medical expenses and subject to taxes and possible penalties.