Employee Benefits
Even with great health insurance, the cost of health care can be surprising. One way to help save on those costs is with a health savings account (HSA), an account designed to be used for qualified healthcare expenses.
An HSA works by allowing you to contribute money on a pre-tax basis to pay for various out-of-pocket health-related expenses. HSAs are used in combination with high-deductible health plans (HDHP).
According to the Internal Revenue Service (IRS), a qualifying HDHP for 2025 is defined as having a deductible of at least $1,650 for self-only coverage or $3,300 for family coverage.1 A qualifying HDHP must also limit the annual out-of-pocket maximum expenses to $8,300 for self-only coverage and $16,600 for family coverage. Such out-of-pocket expenses include deductibles, co-payments, and other amounts — but not premiums.1
In addition to being enrolled in an HSA-compatible HDHP, you’ll need to meet the following requirements to contribute to an HSA:2
If you're enrolled in an eligible HDHP, you can make pre-tax dollar contributions to an HSA — as can your employer, spouse, and family members.2 For 2025, HSA contribution limits are $4,300 for individuals and $8,550 for families.1
For a complete list of eligible expenses, review Publication 502, Medical and Dental Expenses from the IRS.3 Here are some examples of eligible HSA expenses from the IRS list:
There are several benefits to having an HSA:
Contributions aren’t subject to tax: The money you put into an HSA is excluded from your taxable income, as are any contributions made by an employer.
Money can be invested to grow tax-free: The money in your account can be used to invest.
Withdrawals aren’t subject to tax: As long as you use the money in your account for qualified medical expenses, withdrawals are tax-free.
Balances automatically roll over to the next year: HSAs aren’t subject to any “use-it-or-lose-it” mandates. This means the money in your account doesn't expire, and any leftover money can be used the following year.
A flexible spending account (FSA) is similar to an HSA. Both are health savings accounts intended to be used for medical expenses.
Here are some key differences between them:
A health reimbursement arrangement (HRA) is an account that can also help you save on eligible healthcare costs. But unlike an HSA, an HRA is entirely funded by your employer. This means you can’t make contributions from your own income.2
Here are some key differences between HSAs and HRAs: