Your Guide to 2023 HSA Eligibility Requirements
In recent years, the IRS has made available tax-advantaged savings accounts specifically designed to pay for out-of-pocket medical expenses. With healthcare costs rising across the country—and with high-deductible health plans becoming the norm increasingly—the federal government has been trying to encourage people to set money aside to pay for medical costs.
One of those accounts is called a Health Savings Account, or HSA. People with these accounts can contribute to them using pre-tax dollars, which lowers their overall medical costs and has the side benefit of reducing their taxable income.
There are specific rules set in place by the IRS that determines who is eligible to have an HSA. In addition, the IRS determines contribution limits and adjusts those levels annually. To learn more, read on for your complete guide on 2023 HSA eligibility requirements.
How Does an HSA Work?
An HSA works a lot like a 401(k) plan, but instead of saving for retirement, these accounts are made to allow people to save for out-of-pocket medical costs.
Those with an HSA can contribute to them using pre-tax dollars. This money can be taken directly out of their paycheck before taxes are assessed—just like contributions to a 401(k) or similar retirement plans.
The design of an HSA is to help people lower their overall medical costs. They can be used to pay copayments, deductibles, coinsurance, and other medical expenses. They cannot be used to pay health insurance premiums.
Who Qualifies for an HSA?
To have an HSA, you must have a high-deductible health plan or HDHP. These plans are becoming more commonplace today to keep premiums low when medical costs and insurance are rising simultaneously.
You can have an HDHP offered through your employer or obtained through the Marketplace and still qualify for an HSA. Generally, these plans will typically only cover preventative healthcare services before the insured person meets their deductible.
The IRS sets annual minimum deductibles for plans to qualify for an HSA. For 2023, self-only plans must have a minimum deductible of $1,500, while family plans must have a minimum deductible of $3,000. The maximum out-of-pocket amounts for these accounts for 2023 are $7,500 and $15,000 for self-only and family plans, respectively.
If you purchase your health insurance through the Marketplace, the plan will signify that it’s “HSA-eligible” when you choose your plan.
What Are the HSA Contribution Limits for 2023?
In 2023, the IRS set new limits for HSA contribution limits that represent a significant increase over the numbers for 2022; this was done mainly to reflect the high inflation that the country continues to experience.
For self-only plans, the annual contribution limit for 2023 is $3,850. For family plans, it’s $7,750. So if each spouse in a married couple has self-only coverage eligible for an HSA, each person can contribute as much as $3,850 in a separate HSA account.
Those who end up contributing more than the annual HSA limit must pay a 6% penalty tax annually on the amount they contribute above the limit unless they withdraw that amount from their HSA before the deadline to file taxes in that year.
Can Employers Contribute to the Employees’ HSAs?
Employers can contribute to their employees’ HSA plans similarly to how they can contribute to their employees’ retirement plans. Doing so can be very beneficial to both the employer and the employees.
From the employers’ standpoint, contributing to employees’ HSAs can help companies save on their FICA and payroll taxes. That’s because these contributions are tax deductible.
In addition, making HSA contributions for employees is a great recruiting and retention tool. Many companies are taking alternative recruiting approaches today, focusing more on ancillary benefits rather than salary when trying to attract and retain top talent.
One thing to note is that the IRS contribution limits for HSAs apply to the total amount the employer and employee contributed. So, for instance, if the employer contributes $1,000 to an employee’s single-only plan in 2023, the employee may only contribute an additional $2,850 for the year.
Beckham Insurance Group Has You Covered
We hope you enjoyed this guide on 2023 HAS eligibility requirements! As you can see, HSAs are an excellent way for people to lower their out-of-pocket medical expenses and reduce their taxable income at the same time. They work a lot like 401(k) plans in that the contributions are made pre-tax, and they have annual contribution limits set by the IRS.
Companies today can stand out among the competition for recruiting and retaining employees by offering HSA plans for their employees and potentially making contributions on their behalf.
Interested in learning more? If you’re in the South Carolina or Georgia area, contact our team at Beckham Insurance Group for a free proposal for your business. Our experienced professionals have the knowledge and experience to provide you with the coverage you need to create a healthier and happier workplace.
Thank you for visiting our blog, and we hope to help you soon!