What is an HSA?
As plan premiums and deductibles continue to rise on standard employer health plans, many employers are turning to Health Savings Accounts (HSAs) with high-deductible health plans (HDHPs) to help contain costs.
HSAs give employees the option to set aside pre-tax income for future qualifying medical expenses. Only employees who are enrolled in a high-deductible healthcare plan are eligible for enrollment in an HSA.
HSA funds can be used at any point in the future — not just within the plan year — making this an excellent way for employees to save for future medical costs.
Employers may make contributions to an HSA, but this is not required.
How an HSA adds value to your employee benefit package
Employees who are enrolled in a high-deductible healthcare plan may enroll and contribute to an HSA plan.
Employers also have the option of contributing to their employees' HSA, though this is not required.
HSAs are only available for employees who are currently enrolled in a high-deductible healthcare plan.
Unlike FSAs, unused HSA funds remain in the employee's account for future use. These funds are not available for employer use.
There are thousands of eligible items, including:
- Copays, coinsurance, insurance premiums
Doctor visits and surgeries
- Over-the-counter medications (first-aid, allergy, asthma, cold/flu, heartburn, etc.)
- Prescription drugs
Birthing and Lamaze classes
- Dental and orthodontia
- Vision expenses, such as frames, contacts, prescription sunglasses, etc.
Learn more by viewing the Eligible Expenses List.
Employee and employer contributions are tax-free (contribute pre-tax through payroll or deduct at tax time), investments grow tax-free, and you can take out tax-free funds at any time to pay for or reimburse eligible out-of-pocket healthcare expenses.
HSAs are not “use-it-or-lose-it” accounts. Unlike flexible spending accounts (FSAs), unused HSA dollars roll over every year and continue to grow tax-free.
The HSA belongs to the employee, including employer contributions, even if they terminate employment. Think of your HSA as a personal savings account. Any unspent money in the HSA remains with the employees, allowing them to grow the balance over time. When they reach the age of 65, they can withdraw money (without penalty) and use it for anything, including non-healthcare expenses.
An HSA is a benefit that allows employees to choose how much of their paycheck they’d like to set aside before taxes are taken out, for healthcare expenses or use as a retirement savings tool.
Employees must be enrolled in a High-Deductible Health Plan (HDHP) to enroll in the HSA. Employees aren’t eligible for an HSA if:
- They’re claimed as dependent on someone else’s taxes.
- They’re covered by another plan that conflicts with the HDHP, such as Medicare, a Medical Flexible Spending Account (FSA) or select Health Reimbursement Arrangements.
- The employee or their spouse is contributing to a Medical FSA.
HSA funds are available to spend, save or invest after they’ve been deducted from the employee's paycheck and contributed to their HSA. Employees can adjust their payroll deductions or contributions at any time, no questions asked
The HSA is your privately owned savings account. Funds roll over from year to year. And if they change employers, the HSA stays with them. There is also no requirement to submit receipts or substantiation for qualified purchases.