The ABCs of HSAs: Your Common HSA Questions Answered

By Debbie Shipman, CIS, CIP, CISP, CHSP

Health savings accounts (HSAs) continue to grow in popularity. And as they become more popular, you should expect an increase in HSA-related questions from clients. This article provides answers to some of the more common HSA questions that your clients may have.

Is this expense a qualified HSA medical expense?

Although this is a common question, your financial organization should not help HSA owners determine if certain expenses are qualified medical expenses. HSA owners should discuss whether an expense is considered a qualified medical expense with their competent tax advisor. They could also refer to IRS Publication 502, Medical and Dental Expenses, which has alphabetical listings of medical expenses that taxpayers may (and may not) include in their medical expense deduction. These expenses are also HSA-eligible reimbursable expenses.

The IRS has also released a series of frequently asked questions (FAQs) that address whether certain costs related to nutrition, wellness, and general health are considered medical expenses under Internal Revenue Code Section (IRC Sec.) 213. Expenses for medical expenses defined in IRC Sec. 213 are eligible to be paid or reimbursed from an HSA.

What is an HSA-compatible high deductible health plan (HDHP)?

A health plan is considered an HSA-compatible HDHP if the plan satisfies the annual deductible and maximum out-of-pocket expense requirements for self-only or family coverage. These amounts are subject to annual cost-of-living-adjustments (COLAs).

The IRS usually issues HSA COLAs each year in May. This ensures that individuals whose insurance runs July through June have the information needed to make decisions on coverage provided through their employer. To be considered an HSA-compatible HDHP, a self-only plan must have a minimum deductible of $1,500 for 2023 or $1,600 for 2024, and a maximum out-of-pocket amount of $7,500 for 2023 or $8,050 for 2024. A family plan must have a minimum deductible of $3,000 for 2023 or $3,200 for 2024, and a maximum out-of-pocket amount of $15,000 for 2023 or $16,100 for 2024.

The contribution limit for self-only coverage is $3,850 for 2023 or $4,150 for 2024, and $7,750 for 2023 or $8,300 for 2024 for family coverage. Individuals who are age 55 or older by the end of the calendar year may make an additional $1,000 catch-up contribution for 2023 and for 2024.

The HSA owner’s file indicates that he has self-only coverage, but he insists that he has family coverage. How much can we accept as a contribution?

While financial organizations do have a few responsibilities when it comes to HSAs, tracking the type of insurance coverage that the HSA owner has is not one of them. Financial organizations can accept contributions up to the annual family plan limit for any HSA owner, plus the catch-up contribution if the HSA owner will be age 55 or older by the end of the calendar year. HSA owners are responsible for contributing no more than the amount that they are eligible for—based on the type of coverage that they carry and when they first became eligible.

How does Medicare affect an HSA owner’s ability to contribute to her HSA?

Individuals who are not enrolled in Medicare, and are otherwise HSA eligible, may contribute to an HSA until the month that they actually enroll in Medicare. Individuals should keep in mind that this rule applies to retroactive Medicare coverage. Therefore, if an individual delays applying for Medicare and his enrollment is backdated, any contributions during the retroactive coverage period are considered excess contributions.