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It’s Open Enrollment Season. Have You Taken a Good Look at an HSA?

What Is an HSA, and How Does It Work?

Employees covered by qualifying HDHPs are also allowed to contribute to an HSA. The parameters for what constitutes an HDHP are a moving target. For 2024, plans with annual deductibles of at least $1,600 for individuals and $3,200 for families are classified as high-deductible. There’s also a cap on allowable out-of-pocket expenses for people insured under HDHPs. The out-of-pocket maximum for HDHP plans is $8,050 for single coverage and $16,100 for family coverage.

Three tax breaks serve as an incentive to contribute to a health savings account and make the HSA the most tax-friendly savings wrapper in the tax code.

HSA contributions consist of pretax dollars (or they’re deductible, for people who aren’t using payroll deductions to fund their HSAs).

Any interest or investment gains earned on the account are tax-free.

Withdrawals for qualified medical expenses are also tax-free.

Companies may also contribute to the HSA on behalf of their employees.

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