Understanding health
savings accounts
Frequently asked questions
What are the advantages of an HSA?
Triple tax-free benefit—No other type of account offers these
three tax advantages together.
1. Tax deductible contributions—All HSA contributions
reduce your annual taxable income by the amount you
contribute.
2. Tax-free earnings—Your HSA balance is yours to
keep and can be invested over time once your account
balance reaches a minimum (usually $1,000 or $2,000),
as determined by your employer or the health plan. Any
earnings on your HSA balance grow tax free.
3. Tax-free withdrawals—Any withdrawals for QMEs are
tax free.
1
Flexibility—You can spend your HSA balance now on current
out-of-pocket medical costs for you, your spouse and qualied
dependent(s). You can also save it to help pay for QMEs
in retirement.
Portability—Your HSA is portable. The account belongs to you,
just as an individual retirement account (IRA) belongs to you.
Once you open an HSA, you can take it with you whether you
change jobs, switch health plans or retire.
Control—Owning an HSA lets you decide how to save and
pay for QMEs. You can even use it to help cover your health
plan deductible and out-of-pocket medical expenses such as
over-the-counter medications.
Who can contribute to an HSA?
You, your employer and family members may contribute to your
HSA as long as you’re covered by an HSA-qualied HDHP.
The HSA holder must not have other health plan coverage
(e.g., through a spouse’s plan, a spouse’s full-purpose FSA or
enrollment in Tricare or Medicare).
The account holder may not be claimed as a dependent on
another person’s tax return. The account holder is responsible for
ensuring they’re eligible to make or receive an HSA contribution.
How much can I contribute to an HSA?
The maximum contribution amount is updated annually by the
IRS and includes all contributions, including those made by an
employer or family member on behalf of an account holder (IRS
publication 969).
Tax year
Maximum HSA contribution
limit
2
Individual Family
2023
3
$3,850 $4,150
2024
$7,750 $8,300
Catch up (age 55+)
4
$1,000
What is a health savings account?
A health savings account (HSA) is a tax-advantaged account you can use to pay for qualied medical
expenses (QMEs) for you, your spouse and qualied dependent(s) at any time, now or in the future.
It works in tandem with an HSA-qualied high deductible health plan (HDHP), which offers lower
monthly premiums, to give you more control over your healthcare spending. You can put the money
saved on the HDHP premiums into your HSA to cover QMEs as needed.
2
Understanding health savings accounts
Differences with other plans
How is an HSA different from a medical FSA?
Both an FSA and HSA allow you to pay for QMEs tax free.
However, an HSA balance is yours to keep year after year,
while an FSA balance left unspent at the end of the benet
year (sometimes with a grace period of typically 2½ months)
is forfeited. You can have both an HSA and FSA as long as the
medical FSA is considered a “limited purpose” FSA that is only
used to pay for vision and dental expenses.
The IRS sets maximum annual contribution limits for both FSAs
and HSAs. An FSA has one limit ($3,050 for 2023) and is not
dependent on the type of health coverage you select. The limit for
an HSA is higher and determined by whether you have individual
or family health plan coverage. An HSA also allows catch-up
contributions once you reach age 55, whereas an FSA does not.
How is an HSA different from a retirement plan
such as a 401(k) or 403(b)?
An HSA is similar to a retirement plan in that they both allow
you to save money on a pretax basis. However, there are
important differences to consider.
IRS contribution limits to a retirement plan are signicantly
higher, and catch-up contributions are allowed earlier (at age 50).
However, funds may not generally be accessible before age 59½
without incurring a tax penalty.
Additionally, withdrawals of pretax contributions and their
earnings from a retirement plan are subject to income taxes.
(If you made Roth contributions, qualied withdrawals are not
taxed.) With an HSA you may withdraw money for QMEs at
any age without penalty. After age 65, you may withdraw from
your HSA for any reason, though money used for expenses other
than QMEs would be subject to income taxes. HSA withdrawals
for nonqualied medical expenses before age 65 are subject to
ordinary income tax and a 20% tax penalty.
When used solely for QMEs, an HSA has added benets,
including no required minimum distributions in retirement. Both
a retirement plan and an HSA are great resources for saving for
retirement. The best plan for your retirement may be to couple an
HSA with your retirement plan for the maximum advantage. You
should talk to a TIAA nancial consultant and/or tax advisor for
help making your decisions.
Contributions
Are there any income limits for contributing to an HSA?
Income is not a factor in determining eligibility to make HSA
contributions. The only requirement is participation in an HSA-
qualied HDHP as described on page 1.
How do I make contributions to an HSA?
• Payroll deduction—If your employer offers this option, you
may have your contributions deducted from your paycheck.
Your contributions will be made pretax (before Social
Security, federal and most state income taxes are deducted),
thereby reducing your taxable income. Most employers offer
the ability to change your HSA contribution amount at any
time during the year. Check with your employer for any
specic payroll policies that may apply.
• Direct contributions—You may choose to make all or part of
your annual HSA contribution directly with the administrator
or custodian. These contributions may be deducted on your
income tax return, using IRS Form 1040 and Form 8889.
• Employer contributions—Your employer may make
contributions to your HSA. These contributions are part of the
HSA annual contribution limit. They are not included as part
of your gross income.
If you change health plans and are no longer covered by an
HSA-qualied HDHP or you enroll in Medicare, you’re no longer
eligible to make or receive contributions to your HSA. However,
you’ll continue to have full access to your HSA balance, which
can be used to pay for any out-of-pocket QMEs for you, your
spouse or eligible dependent(s). Your HSA goes wherever you go.
What if I’m self-employed?
If you’re self-employed, you can also contribute to an HSA
outside of an employer-sponsored health plan, but you still need
to be covered by an HSA-qualied health plan and can le for a
deduction on your annual tax return.
I have an HSA from a prior employer. Can I transfer it
to TIAA?
Yes, you’ll rst need to enroll in the TIAA HSA if you aren’t
already. Once you receive your account setup notication and
HSA card from HealthEquity, the administrator of the TIAA
HSA, you can complete the HSA Transfer Form.
3
Spending your HSA
What healthcare expenses are covered by my HSA?
Your HSA can be used tax free to pay for qualied medical
expenses, including deductibles, coinsurance, prescriptions,
dental, vision care and more.
Numerous over-the-counter products are also considered QMEs
and can be purchased with your HSA debit card. Go to the
HSAstore.com for a convenient way to purchase guaranteed
HSA-eligible products. More details regarding reimbursable
healthcare expenses can be found in IRS Publication 502.
Can I pay out-of-pocket eligible expenses with after-
tax dollars instead of using my HSA funds?
Yes. You can pay out-of-pocket QMEs with other funds instead
of using your HSA. If you do use other funds to pay your current
QMEs, be certain to save your itemized receipts and other
documentation in the case of an IRS audit. You may choose to
reimburse yourself for these eligible expenses now or at any time
in the future.
Can I use my HSA to pay for QMEs of family members
who may not be covered under my health plan?
Yes. You may use your HSA to reimburse yourself for healthcare
expenses of your spouse and any dependent you claim on your
income taxes, even if they are not covered under your health
plan. You also may claim expenses incurred by children who are
claimed on a former spouse’s return.
What happens to my HSA if I leave my job?
Your HSA is portable and stays with you even if you change
jobs or retire. If you choose COBRA continuation coverage, you
can even use your HSA to pay for your COBRA premiums and
other out-of-pocket medical expenses. If you enroll in an eligible
HSA-qualied HDHP in the future, you may be able to continue
contributing to your existing HSA or consolidate your account
with a new administrator or custodian.
What if I spend my HSA on medical expenses that
are not qualified?
If you withdraw funds from an HSA for any purpose other than
QMEs prior to age 65, you’ll pay ordinary income tax plus a 20%
penalty tax on the amount withdrawn. Once you reach age 65, the
20% penalty tax no longer applies, and you would be subject to
ordinary income tax only on nonqualied medical expenses. If an
HSA is used for QMEs, withdrawals are tax free.
Saving and investing in your HSA
Will my HSA earn interest?
Contributions to an HSA are typically deposited into an FDIC or
NCUA-insured interest-bearing account. Any interest credited to
the HSA will grow tax free. Assuming you withdraw for QMEs,
then the withdrawal from the HSA will also be tax free.
Can I invest my HSA balance?
Once an HSA balance reaches a certain threshold, commonly
$1,000 or $2,000, you may choose to invest future contributions
among a variety of available mutual funds or a brokerage account
to potentially grow your HSA balance. Check with your HSA
administrator or custodian for more details.
Reaching age 65
What happens to my HSA balance if I’m still working
after I reach age 65?
If you’re still employed and not enrolled in Medicare, you may
continue contributions to your HSA while enrolled in an HSA-
qualied HDHP. Once you enroll in Medicare, you’re no longer
eligible to contribute to your HSA. However, you may continue
to access your HSA balance. If you begin Social Security income
benets prior to age 65, you’ll be automatically enrolled in
Medicare Part A when you turn age 65, even if you remain enrolled
in your employer’s HSA-qualied HDHP. The general rule of
thumb is to stop contributing to your HSA at least six months
before enrolling in Medicare to avoid any potential tax penalties.
Once enrolled in any part of Medicare, you can use your
HSA to pay for Medicare premiums and QMEs, including
deductibles, copays and coinsurance for Part A (hospital and
independent care), Part B (doctor and outpatient care) and Part D
(prescription drugs). However, you cannot use your HSA to pay
for Medigap plans.
What if I retire before age 65?
If you retire before age 65, you can use your HSA balance
for a wide range of QMEs. You can use it to pay for COBRA
continuation coverage premiums, or you may choose to enroll in
an individual health plan. You may use your HSA to pay premiums,
deductibles, copays or other out-of-pocket QMEs. You also may
use your HSA to pay for portions of a qualied long-term care
(LTC) premium. The allowed amount for a qualied LTC policy
increases with age, and you should consult with your tax advisor.
Withdrawals from your HSA to pay for QMEs are tax free. If you
use the funds for nonqualied expenses, the distribution becomes
taxable and will be subject to the 20% penalty.
Understanding health savings accounts
Understanding health savings accounts
Death benefits
What happens to my HSA when I die?
Once you enroll in your HSA, you may designate beneciaries.
What happens with your HSA depends on the beneciary.
Spouse as beneciary—A spouse can take ownership of the HSA
(if covered by an HSA-qualied HDHP), contribute to the HSA
and may continue to withdraw money tax free for their QMEs.
Nonspouse as beneciary—If you designate someone other than
your spouse as the beneciary of your HSA:
• The account stops being an HSA on the date of your death
and must be withdrawn in full by the beneciary.
• Ordinary income taxes are due on the fair market value of the
HSA in the year in which you die with no penalties.
• The amount taxable to a beneciary (other than your estate)
is reduced by any QMEs you incurred prior to your death that
are paid from the HSA by the beneciary within one year
after the date of death.
No beneciary—If no beneciary is named, your HSA will
become a part of your estate upon your death.
Estate as beneciary—If your estate is the beneciary of your
HSA, the value of your HSA is included on your nal income
tax return.
Want to learn more?
Visit the TIAA Health Savings Account
Resource Center.
(09/23)
3023872
HFS-3023872PO-Y0824W
1
State and local tax treatment of HSAs and distributions may vary. HSA holders should discuss their specific situation with their legal, tax or
financial professional.
2
Annual maximum contribution limit includes employer, employee and family member contributions combined.
Prior-year contributions can be made up until April 15 of the current year.
If you’re over age 55, you may make an additional “catch-up” contribution of $1,000.
This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities
recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not
take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions
should be made based on the investor’s own objectives and circumstances.
This material is not a recommendation to buy, sell, hold or roll over any asset; adopt an investment strategy; retain a specific investment manager; or
use a particular type of health coverage or account type. It does not take into account the specific health status, investment objectives, tax and financial
condition or particular needs of any specific person. Federal, state and local tax treatment of health savings accounts (HSAs) and distributions may vary.
HSA holders should discuss their specific situation with their legal, tax or financial professional.
Distributions for qualified medical expenses (QMEs) are tax free. Any distributions prior to age 65 and not used for QMEs are subject to ordinary income
tax and a 20% excise tax. Any distributions after age 65 that are not used for QMEs are taxable at ordinary income tax rates.
HealthEquity, Inc. does not provide financial advice. HealthEquity Advisors, LLC™, a wholly owned subsidiary of HealthEquity, Inc. and an SEC-registered
investment adviser, does provide web-based investment advice to HSA holders that subscribe for its services (minimum thresholds and additional fees
apply). HealthEquity Advisors, LLC™ also selects the mutual funds offered to HSA holders through the HealthEquity, Inc. platform. Registration does
not imply endorsement by any state or agency and does not imply a level of skill, education or training. This material is for informational or educational
purposes only and does not constitute investment advice under ERISA. This material does not take into account any specific objectives or circumstances
of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and
circumstances.
Health savings accounts (HSAs) are individual custodial accounts offered or administered by HealthEquity, Inc. TIAA and HealthEquity are not legally
affiliated, and TIAA HSAs are not a plan established or maintained by TIAA or an employer. TIAA may receive a referral fee from HealthEquity for each
HSA opened.
Investments are subject to risk, including the possible loss of the principal invested, and are not FDIC or NCUA insured,
or guaranteed by HealthEquity, Inc. Investing through the HealthEquity investment platform is subject to the terms and
conditions of the Health Savings Account Custodial Agreement and any applicable investment supplement.
Investment, insurance, and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not
insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.
The TIAA group of companies and HealthEquity do not provide legal or tax advice. Please consult your legal or tax advisor.
TIAA products may be subject to market and other risk factors. See the applicable product literature, or visit TIAA.org for details.
TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributes securities products.
©2023 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY 10017
