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Health Savings Account (HSA) Solutions for Employers

Boost your employees’ qualified high-deductible health plan (HDHP) with a health savings account (HSA). It offers tax advantages for employees and employers, making healthcare costs more affordable.

What Is a Health Savings Account (HSA)? 

An HSA account pairs with a qualified HDHP and helps:

  • Employees save on taxes by setting aside tax-advantaged funds
  • Cover copays, deductibles, and other qualified medical expenses
  • Supplement employees’ retirement savings
an employee using her health saving account for her medical checkup

See Why Paychex Is a Leading HSA Solution

Seamless Payroll Integration

Our HSA contribution arrangement integrates with Paychex payroll, helping you control costs and simplify administration when automating data entry.

HSA Expertise

We can help you communicate health savings account benefits and enrollment with your staff, simplify employee health spending accounts, and more through our Paychex Flex® Benefits platform.

Self-Service Capabilities

Paychex Flex, our all-in-one platform, allows employees to initiate various HSA activities themselves, such as viewing health plan information, enrolling in an HSA, payroll deduction selection, and more.

Support When You Need It

Call our toll-free support line, and a benefits specialist can help answer questions and provide guidance when needed.

How Does an HSA Work for Employers?

Offering a qualified HDHP and an employee HSA can make things easier for the employer. Also, know that:

  • Employees can contribute via payroll deduction, using funds for healthcare expenses not paid by or covered by the qualified HDHP
  • Employers can also contribute, helping them save on FICA taxes through tax-deductible contributions
  • These employer health savings account contributions must be reported on employees’ Form W-2
employee satisfied with their benefits

HSA Benefits for Employers

Increased Employee Engagement

As employees contend with rising healthcare costs, an HSA account benefits a qualified HDHP, helping staff feel appreciated and engaged.

Payroll Tax Savings

Employers save on payroll taxes for employees’ contributions to an HSA. Further, when employers contribute to an HSA on their employees' behalf, these contributions are tax-deductible.

Enhanced Benefits Offerings

Given the generally lower cost of qualified HDHPs vs. other traditional healthcare plans, an affordable healthcare plan paired with an HSA can be a key differentiator as you look to recruit and retain high-quality employees.

Reduced Annual Premium Hikes

An employee HSA allows your staff to take ownership of their healthcare, while you can see a reduction in annual health premiums.

Focus on Employee Wellbeing. Offer an HSA.

How Does an HSA Work for Employees?

Employees covered under a qualified HDHP contribute their HSA via pre-tax deductions from each paycheck, and the HSA can be used to pay for eligible medical expenses. Withdrawals for non-eligible medical expenses by employees under 65 will be taxed on the distribution and incur a 20% penalty.

two hr managers discussing offering benefits to part-time employees

Benefits of HSAs for Employees

Lower Monthly Health Insurance Premiums

Qualified HDHPs often have lower monthly premiums than traditional health plans, allowing employees to save money monthly on health insurance costs.

Triple Tax Advantage

Employees can make pretax payroll contributions to HSA accounts. Distributions are tax-free for qualified medical expenses, while earnings also grow tax-free.

Rollovers and Portability

Employees have ownership of the funds in their health spending accounts. They can keep unused money without time limits and retain the earnings even if they change jobs.

Tax-Free Savings for Retirement Healthcare Costs

Employees can invest HSA funds and let them grow over the long term to cover medical expenses in retirement.

HSA Frequently Asked Questions

  • Who Owns a Health Savings Account?

    Who Owns a Health Savings Account?

    An individual employee owns an HSA, even after that person resigns, retires, or is terminated. The account, including contributed funds and earnings, belongs to them.

  • What Is a Qualified Medical Expense for an HSA?

    What Is a Qualified Medical Expense for an HSA?

    Qualified medical expenses covered by HSA accounts include most medical care, including dental, vision, and IRS-eligible over-the-counter drugs. Some HSA-eligible expenses include:

    • Office visit copays
    • Health insurance deductibles
    • Dental expenses (tooth extraction, fillings, etc.)
    • Vision care (eye exams and eyeglasses)
    • Prescription drugs and insulin
    • Medicare premiums
    • A portion of the premiums for tax-qualified, long-term care insurance policy
    • Hearing aids
    • Imaging (X-rays, MRIs)
    • Wheelchairs, walkers, and crutches
    • Flu Shots
    • Allergy Medicines
    • Orthodontia
    • Eye surgery

    A detailed list of HSA-covered medical and dental expenses can be found on the IRS Publication 502.

    Paychex partners with the HSA Store, which also provides an expansive list of HSA-eligible items while offering a means for employees to use their funds.

  • What Are the 2023 HSA Contribution Limits?

    What Are the 2023 HSA Contribution Limits?

    The IRS announced the 2023 Health Savings Account (HSA) limits via Revenue Procedure 2022-24. The annual contribution limit for self-only coverage increases by $200 to $3,850, and family coverage increases by $450 to $7,750. Also included are updates to the minimum deductible and maximum out-of-pocket expense amounts that a high-deductible health insurance plan (HDHP) must meet to qualify to pair with an HSA. For self-only coverage, the minimum deductible increases to $1,500, with maximum out-of-pocket expenses increasing to $7,500. For family coverage, the minimum deductible increases to $3,000, with the maximum out-of-pocket expenses increasing to $15,000.

    Looking ahead to 2024, the maximum contribution for HSA accounts is increasing and will be $8,300 for a family and $4,150 for self-only coverage. HSA participants aged 55 and older can contribute an extra $1,000, which means an older married couple could set aside $10,300 a year (if separate HSA accounts), up from $9,750 for 2023. HSA contribution limits are adjusted for inflation each year. Therefore, the family maximum limit went up by $550 for 2024.

    To learn more about your annual contribution limits, try an HSA Contribution Calculator.

  • Can You Take Money Out of Your HSA Account?

    Can You Take Money Out of Your HSA Account?

    Regarding distributions of an HSA, health plan account holders, their spouses, and dependents can take out funds in their health spending account tax and penalty-free at any time for eligible medical expenses that an HDHP doesn’t pay or cover. Depending on the HSA plan, participants can use an issued debit card or reimburse themselves. Taking money out of an HSA account to pay for items that aren’t qualified medical expenses will incur taxes and an additional IRS penalty if employees are younger than age 65. Individuals aged 65 and over can take out and spend HSA funds for any expense without penalty. However, the withdrawal must be reported as part of the individual’s gross annual income.

  • Who Is Eligible for an HSA?

    Who Is Eligible for an HSA?

    When it comes to the eligibility of health savings account for employees, one must be covered under a qualified HDHP, not enrolled in Medicare, not have other disqualifying coverage, and cannot be claimed as a dependent on someone else’s tax return. HSA eligibility is not possible if an individual has received a Veterans Affairs Benefit within the past three months.

  • Are There HSA Pros and Cons?

    Are There HSA Pros and Cons?

    HSAs are a great way to help your employees boost their health savings this year and keep your business competitive in today’s labor market. But as with any benefit, there are pros and cons of HSA plans. Consider all of your options, including comparing HSAs, HRAs, and FSAs, and how each plan can uniquely help you attract employees, reduce your tax bill, and control healthcare costs.

  • How Do You Set Up an HSA Account?

    How Do You Set Up an HSA Account?

    Setting up an HSA account doesn’t have to be difficult. Eligible employees can begin the process by contacting their HR department or benefits provider, who will provide the necessary enrollment paperwork and guidance. Once employees have enrolled, they can start contributing funds through HSA payroll deduction.

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