Health Savings Account (HSA)
What is a Health Savings Account (HSA)?
An HSA is a tax-advantaged savings account paired exclusively with a High-Deductible Health Plan (HDHP). Funds deposited into an HSA are 100% tax-free when contributed, grow tax-free, and remain tax-free when spent on qualified medical expenses (such as doctor visits, prescriptions, dental, and vision care).
Funding Options
Employer Contributions: The employer may directly contribute funds (“seed money”) into your account to assist with meeting your deductible.
Employee Pre-Tax Payroll Deductions: You can contribute funds directly from your paycheck on a pre-tax basis, lowering your overall taxable income.
Direct Contributions: You can also contribute post-tax dollars directly to your account and claim a tax deduction when filing your personal income tax return.
Annual IRS Contribution Limits (2027)
The IRS establishes maximum combined annual contribution limits (employer + employee combined).
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Self-Only Coverage: Up to $4.500 per year.
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Family Coverage: Up to $9,000 per year.
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Catch-Up Contributions: Individuals aged 55 and older can contribute an additional $1,000 per year.
Account Ownership & Portability
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It Belongs to You: Unlike a Flexible Spending Account (FSA), HSA funds are 100% owned by the employee from day one.
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No “Use-It-or-Lose-It”: Unused funds automatically roll over from year to year indefinitely – there is no deadline to spend them.
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Portability: If you change jobs, retire, or leave the health plan, the HSA and all funds inside it remains yours for life.
Medicare Restrictions & Rules
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Contribution Eligibility: Once you enroll in any part of Medicare (Part A, B, C, or D), you are no longer eligible to make new contributions to an HSA (or receive employer contributions).
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Using Existing Balances: If you have an existing HSA balance prior to Medicare enrollment, you can continue to use those funds tax-free for qualified medical expenses indefinitely, including paying for Medicare Part B, Part D, and Medicare Advantage premiums. You cannot use HSA funds tax-free to pay for Medicare Supplement (Medigap) insurance premiums.
Learn more about Health Savings Accounts (HSAs) to decide if it would be a good fit for you and your family.
HSA Contribution Limits