Higher 2024 HSA Contribution Limits Allow You To Save Even More on Taxes

Compare Pricing on the Best HSA Plans Available

This triple tax advantage makes HSAs an incredibly potent tool for healthcare savings and even retirement planning. As of the end of 2022, Americans held a staggering $104 billion in 35.5 million HSAs.

HSAs As a Retirement Asset

Once you reach age 65, you can withdraw funds from your HSA for any purpose without penalty, although non-qualified withdrawals would be subject to income tax.

This flexibility allows you to use your HSA funds strategically to meet both medical and non-medical expenses in retirement.

HSA Portability

Unlike Flexible Spending Arrangements (FSAs), HSAs are portable.

That means they stay with you even if you change jobs or retire.

You, not some third party or even your employer, own the assets in your HSA. Even if your employer made all the contributions to your HSA account.

So there’s no reason not to contribute as much as you can afford to your health savings account, even if your employer set up the HSA. 

Employers: Excepted Benefits Health Reimbursement Arrangement (EBHRA) Maximums Increasing

In addition to increasing the allowable HSA limits, The IRS has decided to raise the maximum amount that employers may contribute to an excepted-benefit health reimbursement arrangement (HRA) in 2024 to $2,100—up from the 2023 amount of $1,950.

An Excepted Benefit Health Reimbursement Arrangement (HRA) is a type of health benefit plan that allows employers to provide additional financial assistance to employees for certain medical expenses.

It is considered an “excepted benefit” because it is not subject to certain requirements under the Affordable Care Act (ACA) that apply to other HRAs.

Employers can use an HRA to offer tax-advantaged assistance to employees to pay things like:

• Limited scope vision and/or dental insurance
• Cost sharing expenses, such as deductibles and copays under the employer’s primary group plan
• COBRA insurance premiums

Unlike other types of HRAs, employees don’t need to enroll in the employer’s primary health plan to be eligible for the benefits.

You can set up an HRA to make these benefits available to employees who elect to enroll in a health sharing plan rather than your group health plan, who enroll in an individual or family health insurance plan separate from your or who get their primary medical insurance from their spouse’s employer.

This increase in the annual cap on EBHRA benefits could help employers provide additional support to employees with health-related expenses.

HSA Limits 2024 Conclusions

The increased contribution limits for 2024 represent an opportunity for taxpayers to further maximize their savings and protect even more income from taxation.

Employers, too, can take this opportunity to emphasize the benefits of HSAs and encourage their employees to make the most of these changes.

Whether you’re an employee, independent contractor, or an employer sponsoring or planning to sponsor a group health plan, it’s a good idea to enlist the help of a Personal Benefits Manager with HSA for America.

Your PBM has a wealth of experience and information that can help individuals, families, or employers alike. And it costs nothing extra to get that professional assistance. The insurance companies, not you, pay our fees.

Make a free, no-obligation appointment with your Personal Benefits Manager today.

Here are some additional blogs on HSA: Unlock the Power of Your HSA: Pay for a Chiropractor & Chiropractic Care from your Health Savings Account | Can I Use an HSA to Pay For Counseling or Therapy? | How to Get the Most Out of Your Health Savings Account

Here are some additional pages related to this article: HSA Secure Plan | Healthshare Plans

HSA Limits 2024: Frequentely Asked Questions

What is a Health Savings Account (HSA)?

Health Savings Accounts are a tax-advantaged account created for individuals who are enrolled in high-deductible health plans (HDHPs). The funds contributed to the account aren’t subject to federal income tax at the time of deposit and can be used to pay for eligible medical expenses.

Who is eligible to open an HSA?

To be eligible for an HSA, you must be enrolled in a high-deductible health plan (HDHP), not be covered by another non-HDHP (with some exceptions), not be enrolled in Medicare, and not be claimed as a dependent on someone else’s tax return.

What is a High-Deductible Health Plan?

A High Deductible Health Plan (HDHP) is a type of health insurance plan with lower premiums and higher deductibles compared to traditional health insurance plans. The purpose of an HDHP is to cover serious illness or injury expenses that could otherwise be financially devastating.

As of 2023, the Internal Revenue Service (IRS) defines an HDHP as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $7,000 for an individual or $14,000 for a family. This limit doesn’t apply to out-of-network services.

One of the benefits of HDHPs is that they can be combined with a Health Savings Account (HSA), allowing individuals to pay for certain medical expenses with pre-tax money.

How much can I contribute to an HSA?

The contribution limits for HSAs in 2023 are $3,650 for individuals and $7,300 for families. But as this blog post describes, you can contribute much more beginning on January 1st, 2024, for the new tax year.

If you are 55 or older, you can contribute an additional $1,000 as a catch-up contribution.

Can my employer contribute to my HSA?

Yes, employers can contribute to their employees’ HSAs. However, the combined total of employer and employee contributions must not exceed the annual maximum contribution limit.

Are HSA contributions tax-deductible?

Yes, contributions made to an HSA are tax-deductible. Also, any interest or other earnings on the assets in the account are tax-free.

Can I use my HSA to pay for non-medical expenses?

Yes, but if you’re under age 65, non-medical withdrawals will be taxed at your income tax rate plus a 20% penalty. After age 65, non-medical withdrawals are taxed as income but don’t face the additional 20% penalty.

What happens to my HSA when I turn 65?

Once you turn 65 and enroll in Medicare, you can no longer contribute to your HSA. However, you can still use the funds for out-of-pocket medical expenses, including Medicare premiums.

Do my HSA funds roll over year to year?

Yes, unlike Flexible Spending Accounts (FSAs), HSAs have no “use it or lose it” policy. Funds in an HSA roll over from year to year, so you can save them for future medical expenses.

Can I invest my HSA funds?

Yes, many HSA providers offer investment options. Like a retirement account, these investments can grow tax-free as long as they remain in the HSA.

What qualifies as a high-deductible health plan (HDHP)?

For 2023, the IRS defines an HDHP as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.

What are qualified medical expenses?

Qualified medical expenses include most medical care and services, dental and vision care, prescriptions, and over-the-counter drugs prescribed by a doctor.

Can I use my HSA to pay health insurance premiums?

Generally, HSA funds cannot be used to pay health insurance premiums. However, there are exceptions for certain types of insurance such as long-term care insurance, health coverage while receiving unemployment benefits, or health insurance after age 65 (other than a Medicare supplement policy).

What happens to my HSA if I change jobs?

HSAs are portable, so if you change jobs, your HSA moves with you and the funds remain available for qualified medical expenses.

If I have an HSA, can I also have a Flexible Spending Account (FSA)?

You can have a limited-purpose FSA (for vision, dental, or preventive care) or a post-deductible FSA (which can be used for all medical expenses but only after the HDHP deductible is met) alongside an HSA.

What happens to my HSA when I die?

If you designate your spouse as the beneficiary, your HSA will be treated as your spouse’s HSA after your death. If you designate someone other than your spouse, the account stops being an HSA and the fair market value of the account becomes taxable to the beneficiary.