What is a Health Savings Account (HSA)?

An HSA is a trust or custodial account designed to reimburse out-of-pocket medical expenses and to provide a vehicle for long term savings. HSAs include a triple tax savings advantage: contributions are tax-free, distributions for qualified medical expenses are tax-free and investment growth of the balance is also tax-free! Best of all, there is no “use it or lose it” to worry about—the accounts belong to each individual for life.

What types of expenses are eligible for reimbursement from an HSA?

We’re proud to partner with HSAStore. A list of eligible expenses is available here.

What does it mean to be considered HSA-eligible?

We’ve summarized the key components of HSA eligibility below. Please refer to IRS Publication 969 for more information. In order to contribute (or have contributions made) to an HSA, an individual must meet the following conditions:

The individual must be covered by a qualified High Deductible Health Plan (qHDHP) and may not have coverage under any of the following:

Medicare, Medicaid or Tricare;
General Purpose Medical FSA or an HRA that provides “first-dollar” reimbursement; and
Benefits from a VA facility in the past 3 months (other than for preventive care or care for a service-related disability).

The individual cannot be claimed as someone’s tax dependent (other than a spouse).

Is it possible for an employer to offer HSAs and an HRA at the same time?

Yes, provided that the underlying health plan is a qualified High Deductible Health Plan and the HRA does not reimburse eligible expenses until the statutory minimum deductible has been met (2024 amount is $1,600 single and $3,200 for family coverage).

A new employee had coverage under his former employer’s qualified High Deductible Health Plan and was contributing to an HSA. He wants to use his HSA to reimburse him for the co-pays under our PPO plan. Is this permissible?

Yes. HSAs are employee-owned bank accounts to be used for eligible out-of-pocket expenses (like the co-pays under your PPO plan). He is not eligible to make contributions to his HSA because he does not have coverage under a qualified High Deductible Health Plan.

What are the consequences of having impermissible health coverage while contributing to an HSA?

The consequences of having non-HDHP coverage include having to pay taxes on HSA contributions and being subject to a 6% excise tax if the contributions (and any earnings) are not removed by the end of the taxable year in which they were made.

What is the 2024 annual maximum HSA contribution limit?

$4,150 self-only; $8,300 family.
The catch-up contribution is $1,000.

My employee is enrolled by herself in our qualified High Deductible Health Plan(qHDHP). Is she permitted to contribute the family maximum to her HSA even though her spouse and children have coverage elsewhere?

The HSA maximum contribution limit is dictated by the level of coverage in the qHDHP. Therefore, the maximum she may contribute is $4,150 for 2024.