Skip to content
English
Sign in
Contact us
  • There are no suggestions because the search field is empty.

Understanding Health Savings Accounts (HSA): Benefits and Contributions

Summary: This article provides an overview of the Health Savings Account (HSA) plan, including covered expenses, employee contributions, and the benefits of the plan.

Understanding the HSA Plan

What Expenses Can Be Covered?

Health Savings Accounts (HSAs) can be used to pay for qualified medical expenses. These typically include:

  • Doctor visits (Primary Care Physician, specialists)
  • Urgent care services
  • Emergency room visits
  • Prescription medications
  • Other qualified medical expenses as defined by the IRS

Employee Contributions

Employees can contribute to their HSA, and contributions can be made on a pre-tax basis. For the year 2025, the maximum contribution limits are:

  • $4,300 for individual coverage
  • $8,550 for family coverage

These limits include both employee and employer contributions.

Employer Contributions

Employers may contribute to employees' HSAs. For example, an employer might contribute $1,800 annually, which can be prorated based on the number of pay periods. This employer contribution counts towards the IRS maximum contribution limits for the calendar year.

Timing of Contributions

Employees can start contributing to their HSA as soon as the plan is effective. If there are missed contributions, adjustments can be made to catch up on contributions from previous pay periods.

Benefits of the HSA Plan

HSAs offer several advantages:

  • Triple Tax Benefit:
    • Contributions are made pre-tax, reducing taxable income.
    • Funds grow tax-free.
    • Withdrawals for qualified medical expenses are tax-free.
  • Rollover of Funds: Unused funds in the HSA roll over year to year, allowing for savings for future medical expenses or retirement healthcare costs.
  • Lower Monthly Premiums: HSAs are often paired with High Deductible Health Plans (HDHPs), which typically have lower monthly premiums but higher deductibles.

Considerations for HDHPs

While HSAs can be beneficial, particularly for those who use less medical care, it is important to understand that most services under an HDHP are subject to the deductible before insurance coverage kicks in. This means that individuals may face higher upfront costs before receiving benefits.

Conclusion

The HSA plan provides a flexible way to save for medical expenses while offering significant tax advantages. Understanding the contribution limits, covered expenses, and the benefits of HSAs can help individuals make informed decisions about their healthcare financing.