Health Savings Account (HSA) FAQs

Written by: Chase Charaba
Published on April 28, 2022.

The popularity of health savings accounts (HSAs) has surged dramatically in recent years. According to a report by Devenir Research, there are more than 30 million HSAs, with one in five Americans in their 30s having one.

But what are HSAs, and why are they so popular? This article will answer the most frequently asked questions about HSAs. Use the menu on the left to jump to the HSA FAQ you’re most interested in.

What is an HSA?

A health savings account (HSA) is a flexible savings plan that allows you to save pre-tax dollars from your paycheck in an account that earns interest. The funds can be used to pay for qualified medical expenses, such as doctor visits, prescription drugs, dental care, vision care, and over-the-counter medications.

With an HSA, you can withdraw funds tax-free to reimburse yourself for medical expenses or defer taking such reimbursements indefinitely without penalties.

HSAs have unique benefits with triple tax advantages, including:

  • Tax-deductible contributions for employers and employees
  • Tax-free accumulation of interest and dividends
  • Tax-free distributions for qualified medical expenses

How does an HSA work?

All contributions you make to an HSA are deposited into a savings account that allows you to earn interest. These contributions are FDIC-insured and tax-free. Both you and your employer can choose to contribute to your HSA.

Generally, you use your HSA funds to pay for qualified medical expenses up to your individual or group health insurance deductible. Once you reach the deductible, your health insurance coverage begins.

Your HSA provider usually issues you a debit card that’s connected to your HSA. Unused funds remain in your HSA until you use them.

How do HSAs help you save money?

You reduce your total annual taxable income as you deposit funds into your HSA. All of the funds withdrawn from your HSA used for a qualified medical expense are tax-advantaged.

Am I eligible for an HSA?

Many factors determine HSA eligibility. To open an HSA, you need a high deductible health plan (HDHP). This can be an HDHP that you purchase on your own or get through your employer’s group health insurance plan.

For 2022, an HDHP is a health plan with a deductible of at least $1,400 for an individual and $2,800 for a family. There is a maximum annual deductible and out-of-pocket expenses cap of $7,050 for self-only coverage and $14,100 for family coverage.

To qualify for an HSA:

  • You must be covered under an HDHP on the first day of the month you are contributing to an HSA
  • You have no other health coverage except what is permitted in IRS Publication 969
  • You aren’t enrolled in Medicare
  • Nobody can claim you as a dependent on their tax return for the year

How much can I contribute to my HSA?

The IRS adjusts the contribution limits guidelines for HDHPs and HSAs each year.

Catch-up contributions are available to those age 50 or older to help make up for the years you might not have contributed to an HSA when you were younger. You can make these contributions in addition to the yearly HSA contribution limits.

For 2022 the limits are as follows:

Contribution type


Family coverage

HSA contribution limit



HSA catch up contribution




What expenses can an HSA be used for?

You may spend the HSA money tax-free on out-of-pocket medical expenses, such as deductibles, copays for medical care, prescription drugs, or bills not covered by insurance, such as vision and dental care.

The IRS determines the types of medical expenses you can use tax-free with HSA funds. They are listed in IRS Publication 502.

If you use HSA funds for non-medical expenses before age 65, you must pay taxes on the withdrawal plus a 20% penalty.

After age 65, you can use your HSA funds for non-medical expenses without an additional tax penalty. You’ll only need to pay standard income taxes on that amount.

Can I use my HSA for my spouse if they are not on my plan?

Yes, you can use your HSA for your spouse or dependents, even if they aren’t on your insurance plan.

You can use your HSA to pay for qualified medical expenses for your spouse and any dependents if you claim them on your income tax return. Your spouse must meet the eligibility requirements for an HSA.

Do HSA funds expire?

No. Unlike with a flexible spending account (FSA), you don’t have to use HSA funds by the end of the year. Instead, HSA funds can grow tax-deferred in your HSA for later use.

How do I invest my HSA money?

HSA administrators typically offer accounts that are easy to access for medical expenses. Many HSA administrators or banks will let you shift money into mutual funds and other investments after your HSA account balance reaches a certain level. These can vary by your HSA provider.

Investment options for HSAs include mutual funds, exchange-traded funds (ETFs), stocks, and bonds. You can’t invest in collectibles, art, automobiles, or real estate with an HSA.

Can I contribute to my HSA account after age 65?

You must not enroll in Medicare Part A or Medicare Part B to contribute to an HSA after age 65. You can enroll in Medicare Part A by filing an application or being approved automatically. The Social Security Administration also automatically enrolls you in Part A when you start collecting Social Security benefits.

Many employees who work for smaller organizations with fewer than 20 employees will have Medicare as their primary insurance at age 65.

If you avoid enrolling in Medicare or taking Social Security benefits yet, you can continue contributing to an HSA and participating in catch-up contributions after age 65.

Do the HSA tax benefits phase out at certain income levels?

No, there is no income limit with an HSA.

If I set up an HSA through my employer, what happens if I switch jobs?

If you set up an HSA through your employer and switch jobs, you can keep the money after you leave. There is no requirement to spend your HSA balance before you terminate employment.

To contribute to your HSA, you need HDHP coverage. However, your HSA belongs to you. You’ll always be able to use your funds for qualified expenses.

Can I cash out my HSA when I leave my job?

Yes, you can cash out your HSA at any time. However, any funds withdrawn for costs other than qualified medical expenses will result in the IRS imposing a 20% tax penalty.

If you leave your job, you don’t have to cash out your HSA if you continue to have an HDHP. You can keep your HSA after leaving your job as long as you maintain an HDHP for your insurance.

What happens if I change insurance?

As long as you have a qualified HDHP, you can continue contributing to your HSA. Most HSAs can be transferred. If you are no longer covered by an HDHP, you can still use your funds. You just won’t be able to contribute to the HSA.

How does health reform change HSAs?

Recent health reform bills have changed how HSAs operate. The Affordable Care Act (ACA) was signed into law in 2010 and significantly changed HSAs.

The ACA made two changes to HSAs:

  • Over-the-counter medications were no longer eligible for tax-free withdrawals unless obtained with a prescription (except for insulin)
  • The excise tax for non-qualified HSA withdrawals increased from 10% to 20%

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which passed on March 27, 2020, restored the ability to use HSAs to purchase certain over-the-counter drugs and medications, like allergy medication, aspirin, and other pain medications without a prescription.

The CARES Act also classified menstrual care products as an eligible expense for the first time.

Can you have an HSA and an HRA at the same time?

Yes, you can have an HSA and a health reimbursement arrangement (HRA) simultaneously as long as your HRA is considered “HSA-qualified.” There are many ways to adjust HRAs to make them HSA qualified, but the simplest is using a limited-purpose HRA.

In years where you want to contribute to an HSA, you can only use your HRA to reimburse the following expenses:

  • Health insurance premiums
  • Wellness/preventative care (e.g., checkups, mammograms, smoking cessation, weight loss, etc.)
  • Dental expenses
  • Vision expenses
  • Long-term care premiums

Once the HSA deductible is met, the HRA can reimburse all qualified medical costs.

Get our free HRA and HSA compatibility guide to see how these benefits can work together

What is the difference between an HRA, HSA, and FSA?

HRAs, HSAs, and FSAs are types of health benefits available to you. However, they each work differently.


An HSA is a savings account used in conjunction with a high deductible health plan (HDHP) that allows you to save money tax-free for medical expenses. HSAs can be used for non-medical expenses, but it will be subject to a tax penalty until age 65.

You and your employer can contribute to your HSA.


HRAs are employer-funded and tax-advantaged health benefits used to reimburse employees for qualifying medical expenses. These include individual health insurance premiums and out-of-pocket medical costs.

An HRA is often offered in place of traditional group health insurance so that employees can purchase their own individual health insurance plans that best fit their unique needs. However, an integrated HRA can be paired with a group health insurance plan like an HDHP to extend coverage for employees.

Three of the most popular types of HRAs are:

Should you offer an HRA or an HSA? See the pros and cons of each in our article


A health FSA is a special account offered to employees by their employers. You put money into an account tax-free for certain out-of-pocket healthcare costs with a healthcare FSA. Employees submit expense claims to their employer with a statement that their health insurance plan doesn’t cover the expense. Then employers reimburse employees for their expenses.

FSA funds generally expire after the benefit year, but your employer can establish a grace period or allow up to $570 per year to carry over.

See how HRAs, HSAs, and FSAs compare with our free chart

What's the difference between an HSA and a health stipend?

A health stipend is a taxable sum of money offered to employees for their medical expenses. This can be a benefits card, a lifestyle spending account (LSA), or a reimbursement method similar to an HRA.

Health stipends are offered to employees by their employers, and there aren’t any contribution limits. Employers generally provide a monthly allowance and choose which types of medical expenses are eligible.

One advantage of offering a health stipend is its flexibility. You can provide a health stipend for all of your employees, including 1099 contractors and international workers.

Learn more about offering health stipends in our blog article


HSAs are an excellent tax-advantaged way to provide your employees with additional health benefits alongside your high deductible health plan. However, HSAs don’t work for all organizations. If you’re worried about your employees using their HSA as an extra retirement fund instead of for health savings, offering an integrated HRA or health stipend could be better.

If you’re ready to provide an HRA or health stipend instead of an HSA, PeopleKeep can help! Our HRA and employee stipend benefits administration software make it easy to set up employee benefits in minutes.

Schedule a call with a personalized benefits advisor to see how personalized employee benefits can work for your organization

This blog article was originally published on August 12, 2013. It was last updated on April 28, 2022.

Originally published on April 28, 2022. Last updated April 28, 2022.


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