What exactly is an HSA?

Health Savings Accounts (HSAs) are tax-exempt accounts where funds grow to pay for medical expenses. They were created to help give control back to consumers and lower healthcare costs. HSAs provide a financial incentive for consumers to select a High Deductible Health Plan (HDHP). HDHPs have lower monthly premiums than traditional plans. The HSA/HDHP combination provides consumers with more incentive to shop carefully for healthcare services.

An HSA is your account. If you switch jobs, the HSA goes with you. Your money rolls over every year. There is no “use it or lose it” requirement.

High Deductible Health Plans

In order to open an HSA, you must have a qualified High Deductible Health Plan. The IRS determines the guidelines for qualified HDHPs. The current IRS guidelines are:

IRS Requirements for 2018
Single PlanFamily Plan
Minimum Deductible$1,350$2,700
Maximum Out-of-Pocket$6,650$13,300
Contribution Limit$3,450$6,900
Catch-Up Contribution (55 or older)*$1,000$1,000
If a spouse is also 55 or older, a second HSA must be established and a second contribution of $1,000 could be made to that account.


When you have a qualifying HDHP, the following contribution guidelines apply.

  1. Anyone can contribute to your HSA.
  2. Your contributions are tax deductible.
  3. If your employer contributes to your HSA, that contribution is done on a pre-tax basis.
  4. Any pay-roll deductions made through Section 125 for your HSA are also on a pre-tax basis.
  5. You may contribute the annual maximum amount as determined by the IRS, regardless of your plan’s deductible. The maximum for 2018 is $3,450 for individuals and $6,850 for families.
  6. You may contribute the annual maximum amount determined by the IRS, regardless of when your coverage begins, if you maintain coverage for the 12 month period beyond the calendar year in which you first became eligible. The maximum for 2018 is $3,450 for individuals and $6,900 for families. Example: if you have individual coverage that begins in November 2018, you may still contribute $3,450 for 2018 when you maintain coverage through the end of 2019.
  7. Your employer may roll over funds from your HRA or FSA account once, according to the legislative provision


Here are some key points about distributions:

  1. You can use your money tax-free at any time for eligible medical expenses.
  2. When you turn 65, you can use the money for non-eligible medical expenses. The money is subject to income tax, and there are no IRS penalties.
  3. If you are under age 65 and use your money for non-eligible medical expenses, you will be subject to income tax and a 20% tax penalty.