Health Savings Account (HSA) Solutions for Employers

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.

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.

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.

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.

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.

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.