What is an HSA?
A Health Savings Account (HSA) is a tax-advantaged savings account an individual owns and uses to pay qualified medical expenses. It works only alongside a qualifying high deductible health plan (HDHP). Contributions can be made pre-tax through payroll under an employer’s Section 125 cafeteria plan, or deducted on the employee’s tax return. Growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
The account belongs to the employee. Unused money rolls over every year and stays with the employee if they change jobs or retire.
Who qualifies for an HSA?
To contribute to an HSA, a person generally must:
- Be covered by an HSA-qualified high deductible health plan on the first day of the month.
- Have no other disqualifying health coverage (for example, a general-purpose health FSA, either their own or their spouse’s).
- Not be enrolled in Medicare.
- Not be claimed as a dependent on someone else’s tax return.
For 2026, a plan counts as a high deductible health plan if its deductible is at least $1,700 for self-only coverage (2026) or $3,400 for family coverage (2026), and out-of-pocket costs (not counting premiums) are capped at $8,500 self-only (2026) or $17,000 family (2026).
2026 HSA contribution limits
- Self-only HDHP coverage: $4,400 (2026)
- Family HDHP coverage: $8,750 (2026)
- Extra catch-up contribution, age 55 or older: $1,000 (2026) [verify]
Employer and employee contributions both count toward the limit. Source: IRS Rev. Proc. 2025-19.
HSA vs. FSA: what’s the difference?
- Health plan requirement: an HSA requires a high deductible health plan. A health FSA does not.
- Ownership: the employee owns an HSA and keeps it after leaving the job. A health FSA belongs to the employer’s plan and usually ends when employment ends.
- Rollover: HSA money rolls over with no cap. Health FSA money is generally use-or-lose, except for a limited carryover or grace period if the plan allows one.
- Limits: HSA limit is $4,400 self-only / $8,750 family (2026). Health FSA limit is $3,400 per employee (2026).
- Investing: many HSAs let balances be invested. FSAs do not.
Learn more on our What is an FSA? page.
HSA frequently asked questions
Can I have an HSA and an FSA at the same time?
Not a general-purpose health FSA. You can pair an HSA with a limited-purpose FSA (dental and vision only) if the employer offers one.
What happens to my HSA if I change jobs?
It stays with you. You can keep using the balance for qualified medical expenses.
What if I use HSA money for non-medical expenses?
The withdrawal is taxable income, and before age 65 there is generally an additional 20% tax.
Do HSA funds expire?
No. Unused balances carry over year to year.
How do employers offer an HSA?
Employers typically offer an HDHP and let employees make pre-tax HSA contributions through a Section 125 cafeteria plan. That requires a written plan document.
How CBIS helps
CBIS works with outside account administrators to help employers set up employee benefits that can include an HDHP with an HSA option, along with the Section 125 plan document needed for pre-tax payroll contributions. Call (858) 283-7575 or email [email protected].
Related Section 125 pages: Section 125 plans · What is a Section 125 premium only plan? · Section 125 plan: a fit for small employers · Section 125 Health FSA plan document
This page is general education, not tax or legal advice. Limits change every year; confirm current figures with IRS guidance or a tax professional.