Health Savings Accounts (HSAs)

Changes from August 13, 2020 to August 8, 2022

This page shows textual changes in the document between the two versions indicated in the dates above. Textual matter removed in the later version is indicated with ~~red strikethrough~~ and textual matter added in the later version is indicated with blue.

Health Savings Accounts (HSAs)
August August ~~13, 2020~~8, 2022
A health savings account (HSA) is a tax-advantaged account that individuals can use to A health savings account (HSA) is a tax-advantaged account that individuals can use to save and pay for pay for
unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and unreimbursed medical expenses (e.g., deductibles, co-payments, coinsurance, and ~~services not~~
~~Ryan~~ Ryan J. Rosso
services not covered by insurance). Although eligibility to contribute to an HSA is associated covered by insurance). Although eligibility to contribute to an HSA is associated ~~with enrollment~~
Analyst in Health Care Analyst in Health Care
inwith enrollment in a high-deductible health high-deductible health ~~insurance plans (HDHPs), HSAs are~~plan (HDHP), an HSA is a trust/custodial account a trust/custodial account ~~and are~~
Financing Financing
and is not health insurance. not health insurance.

HSAs have several tax advantages: individual contributions are tax deductible unless made HSAs have several tax advantages: individual contributions are tax deductible unless made

through a cafeteria plan; employer contributions and individual contributions made through a through a cafeteria plan; employer contributions and individual contributions made through a
cafeteria plan are excluded from taxable income and from Social Security, Medicare, and unemployment insurance taxes; cafeteria plan are excluded from taxable income and from Social Security, Medicare, and unemployment insurance taxes;
account earnings are tax exempt; and withdrawals are not taxed if used for qualified medical expenses. account earnings are tax exempt; and withdrawals are not taxed if used for qualified medical expenses.
Individuals may establish and contribute to an HSA for each month that they are covered under an HSA Individuals may establish and contribute to an HSA for each month that they are covered under an HSA -qualified HDHP, do -qualified HDHP, do
not have disqualifying coverage, and cannot be claimed as a dependent on another person’s tax return. The not have disqualifying coverage, and cannot be claimed as a dependent on another person’s tax return. The ~~a ccount can be~~
~~established with an insurer, bank, or other Internal Revenue Service (IRS)-approved trustee and~~account is tied to the individual is tied to the individual.
~~Account~~ and account holders retain access to their accounts holders retain access to their accounts (and can keep using HSA funds) if they change employers, insurers, or subsequently become ineligible to if they change employers, insurers, or subsequently become ineligible to
contribute to the HSA. contribute to the HSA.
To be considered an HSA-qualified HDHP, a health plan must meet several tests: it must have a deductible above a certain To be considered an HSA-qualified HDHP, a health plan must meet several tests: it must have a deductible above a certain
minimumminimum ~~level~~ threshold, it must limit, it must limit total annual out-of-pocket expenditures for covered benefits to no more than a certain maximum total annual out-of-pocket expenditures for covered benefits to no more than a certain maximum
~~level~~threshold, and it can , and it can ~~provide~~cover only preventive care services and (for only preventive care services and (for ~~plan years beginning on or before December 31, 2021)~~
limited periods) telehealth services before the deductible is met. In telehealth services before the deductible is met. In ~~2020~~2022, HSA-qualified HDHPs must have a minimum deductible of $1,400 , HSA-qualified HDHPs must have a minimum deductible of $1,400
for self-only coverage and $2,800 for family coverage and an annual limit on out-of-pocket expenditures for covered benefits for self-only coverage and $2,800 for family coverage and an annual limit on out-of-pocket expenditures for covered benefits
that does not exceed that does not exceed ~~$6,900 and $13,800~~$7,050 and $14,100, respectively. In , respectively. In ~~2021~~2023, HSA-qualified HDHPs must have a minimum deductible of , HSA-qualified HDHPs must have a minimum deductible of
~~$1,400~~ $1,500 for self-only coverage and $for self-only coverage and $~~2,800~~3,000 for family coverage and an annual limit on out-of-pocket expenditures for covered for family coverage and an annual limit on out-of-pocket expenditures for covered
benefits that does not exceed $7,benefits that does not exceed $7,~~000~~500 and $ and $1415,000, respectively. These amounts are adjusted for inflation (rounded to the ,000, respectively. These amounts are adjusted for inflation (rounded to the
nearest $50) annually. nearest $50) annually.
If an individual is eligible to contribute to an HSA any time during a given tax year, the total amount that individual may If an individual is eligible to contribute to an HSA any time during a given tax year, the total amount that individual may
contribute to his or her HSA is capped. Generally, the maximum amount an individual may contribute to his or her HSA in a contribute to his or her HSA is capped. Generally, the maximum amount an individual may contribute to his or her HSA in a
tax year is based on the months during the year that he or she was considered HSA eligible; the type of HDHP coverage the tax year is based on the months during the year that he or she was considered HSA eligible; the type of HDHP coverage the
individual had during those months (self-only or family); and the individual’s age (those aged 55 or older are allowed individual had during those months (self-only or family); and the individual’s age (those aged 55 or older are allowed
additional catch-up contributions). For additional catch-up contributions). For ~~2020~~2022, the maximum, the maximum annual amount an individual with self-only coverage can annual amount an individual with self-only coverage can
contribute to his or her HSA is $3,contribute to his or her HSA is $3,~~550~~650 and the maximum annual amount an individual with family coverage can contribute to and the maximum annual amount an individual with family coverage can contribute to
his or her HSA is $7,his or her HSA is $7,~~100. For 2021~~300. For 2023, the maximum, the maximum annual contribution limit amounts are $3,annual contribution limit amounts are $3,~~600~~850 and $7, and $7,~~200~~750 respectively. For respectively. For
those aged 55 or older, the maximumthose aged 55 or older, the maximum annual amount an individual can contribute to his or her HSA is increased by $1,000. annual amount an individual can contribute to his or her HSA is increased by $1,000.
Individuals may have lower contribution limits if they were not HSA eligible for the entire year. Individuals may have lower contribution limits if they were not HSA eligible for the entire year.
Individuals may make tax-free HSA withdrawals to pay for the qualified medical expenses for the account holder, the Individuals may make tax-free HSA withdrawals to pay for the qualified medical expenses for the account holder, the
account holder’s spouse, or the account holder’s dependents. Qualified medical expenses include the costs of diagnosis, cure, account holder’s spouse, or the account holder’s dependents. Qualified medical expenses include the costs of diagnosis, cure,
mitigation, treatment, or prevention of disease and the costs for treatments affecting any part of the body; the amounts paidmitigation, treatment, or prevention of disease and the costs for treatments affecting any part of the body; the amounts paid
for transportation to receive medical care; and qualified long-term care services. for transportation to receive medical care; and qualified long-term care services. ~~In general, health~~Health insurance premiums insurance premiums generally are are
not considered qualifying medical expenses not considered qualifying medical expenses ~~for HSA purposes~~ (except in limited circumstances). Withdrawals not used to (except in limited circumstances). Withdrawals not used to
pay for qualified medical expenses must be included in an individual’s gross income when determining federal income taxespay for qualified medical expenses must be included in an individual’s gross income when determining federal income taxes
and generally are and generally are ~~also~~ subject to a 20% penalty. Individuals do not need to be enrolled in an HSA-qualified HDHP to make subject to a 20% penalty. Individuals do not need to be enrolled in an HSA-qualified HDHP to make
withdrawals from an HSA. withdrawals from an HSA.
For tax year 2017, the IRS estimated that 9 million tax returns reported an HSA that received employer contributions For tax year 2017, the IRS estimated that 9 million tax returns reported an HSA that received employer contributions
(including pretax employee contributions) and 1.9 million tax returns reported an HSA that received individual contributions. (including pretax employee contributions) and 1.9 million tax returns reported an HSA that received individual contributions.
These populations are not mutually exclusive. Furthermore, these data are at the tax return level (not individual) and do not These populations are not mutually exclusive. Furthermore, these data are at the tax return level (not individual) and do not
account for individuals who were eligible to contribute to an HSA in 2017 but did not do so. account for individuals who were eligible to contribute to an HSA in 2017 but did not do so.
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Introduction
An HSA is a tax-advantaged account that individuals can use to An HSA is a tax-advantaged account that individuals can use to ~~pay~~save and and ~~save~~pay for unreimbursed for unreimbursed
medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by
insurance). Eligibilityinsurance). Eligibility to contribute to to contribute to ~~HSAs~~an HSA is associated with enrollment in is associated with enrollment in a high-deductible high-deductible
health health ~~insurance plans (HDHPs~~plan (HDHP); however, ); however, ~~HSAs are~~an HSA is a trust/custodial account and a trust/custodial account and ~~are~~is not health not health
insurance.insurance.
HSAs were first authorized in the Medicare Prescription Drug, Improvement, and Modernization HSAs were first authorized in the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (P.L. 108-173) and are one type of health-related tax-advantaged Act of 2003 (P.L. 108-173) and are one type of health-related tax-advantaged
account/arrangement that individuals can use to pay for unreimbursed medical expenses.1account/arrangement that individuals can use to pay for unreimbursed medical expenses.1
Eligible individuals make, or receive (e.g., from an employer), deposits into a designated HSA account, where the account holders are allowed to invest such funds and subsequently make withdrawals from the account to pay for certain unreimbursed medical expenses. HSAs have several tax advantages: individualHSAs have several tax advantages: individual contributions are tax deductible unless made contributions are tax deductible unless made
through a cafeteria plan; employer contributions and individual contributions made through a through a cafeteria plan; employer contributions and individual contributions made through a
cafeteria plan are excluded from taxable income and from Social Security, Medicare, and cafeteria plan are excluded from taxable income and from Social Security, Medicare, and
unemployment unemployment insurance taxes; earnings on invested account balances~~insurance taxes; account balances may be invested and any corresponding~~
~~earnings~~ are tax exempt; and withdrawals are not taxed if used for qualified medical expenses.2 are tax exempt; and withdrawals are not taxed if used for qualified medical expenses.2
This report summarizes the principal rules governing HSAs, covering such matters as eligibility, This report summarizes the principal rules governing HSAs, covering such matters as eligibility,
qualifying health insurance, contributions, withdrawals, and tax advantages. It incorporates qualifying health insurance, contributions, withdrawals, and tax advantages. It incorporates
changes made to HSAs as a result of the Coronavirus Disease 2019 (COVID-19) pandemic and changes made to HSAs as a result of the Coronavirus Disease 2019 (COVID-19) pandemic and
corresponding recession. It concludes with a discussion of HSA data limitations and recent trends corresponding recession. It concludes with a discussion of HSA data limitations and recent trends
in HDHP enrollment and HSAin HDHP enrollment and HSA utilization. utilization.
Eligibility to Establish and Contribute to an HSA
Individuals are eligibleIndividuals are eligible to establish and contribute to an HSA if they have coverage under an to establish and contribute to an HSA if they have coverage under an
HSA-qualifiedHSA-qualified HDHP, do not have disqualifying coverage, and cannot be claimed as a dependent HDHP, do not have disqualifying coverage, and cannot be claimed as a dependent
on another person’s tax return.3 on another person’s tax return.3
Whether someone qualifies for an HSA is determined as of the first of each month; thus, a person Whether someone qualifies for an HSA is determined as of the first of each month; thus, a person
might be eligiblemight be eligible to contribute to an HSA in some months of a given tax year but not in others. to contribute to an HSA in some months of a given tax year but not in others.
For example, if someone first enrolled in an HDHP on September 15, his or her HSA eligibility For example, if someone first enrolled in an HDHP on September 15, his or her HSA eligibility
period would begin on October 1 of that year. Individuals may keep their HSAs and withdraw period would begin on October 1 of that year. Individuals may keep their HSAs and withdraw
funds if they become ineligiblefunds if they become ineligible but cannot make contributions until they become eligible once but cannot make contributions until they become eligible once
again. again.
Accounts may be established with banks, insurance companies, or other entities approved by the Accounts may be established with banks, insurance companies, or other entities approved by the
Internal Revenue Service (IRS) to hold individualInternal Revenue Service (IRS) to hold individual retirement accounts (IRAs) or Archer medical retirement accounts (IRAs) or Archer medical
~~savings accounts (Archer MSAs).4 HSAs also may be established with additional nonbank~~

1 Other categories of health-related tax-advantaged accounts/arrangements include health flexible spending 1 Other categories of health-related tax-advantaged accounts/arrangements include health flexible spending
arrangements (FSAs),arrangements (FSAs), Archer medical savingsArcher medical savings accounts (Archer MSAs),accounts (Archer MSAs), and health reimbursement arrangements and health reimbursement arrangements
(HRAs). For more information on these types of tax-advantaged accounts/arrangements, see (HRAs). For more information on these types of tax-advantaged accounts/arrangements, see ~~IRS, Publication 969:~~
~~Health Savings Accounts and Other T ax-Favored Health Plans, January 30, 2020, at https://www.irs.gov/pub/irs-pdf/~~
~~p969.pdf. Hereinafter IRS, Publication 969.~~
CRS Report R46782, A Comparison of Tax-Advantaged Accounts for Health Care Expenses. 2 2 Cafeteria plans are further discussedare further discussed in in “ Allowable Contributors”.
3 3 ~~T ax~~Tax dependency is determined on a yearly basis dependency is determined on a yearly basis ~~and~~ and might not be known until the end of the year. IRS,might not be known until the end of the year. IRS, Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans, p. 3, January 6, 2022, at https://www.irs.gov/pub/irs-pdf/p969.pdf. Hereinafter IRS, Publication 969.~~Publication~~
~~969, p. 3~~.
~~4 Archer MSAs are another type of health-related tax-advantaged account that individuals can use to set aside money to~~
~~pay for unreimbursed medical care. Because Archer MSAs share many similarities to HSAs and existed before HSAs,~~
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savings accounts (Archer MSAs).4 HSAs also may be established with additional nonbank entities if such entities requested and received approval from the IRS.5 entities if such entities requested and received approval from the IRS.5 ~~Al eligible~~ All eligible individuals individuals
have the flexibilityhave the flexibility to establish an HSAto establish an HSA with an institution other than their insurer or may choose with an institution other than their insurer or may choose
not to establish an account. not to establish an account.
HSA-Qualified High-Deductible Health Plans
To be HSA qualified, a health plan must meet several tests: it must have a deductible above a To be HSA qualified, a health plan must meet several tests: it must have a deductible above a
certain minimum certain minimum ~~level~~threshold, it must limit out-of-pocket expenditures for covered benefits to no more , it must limit out-of-pocket expenditures for covered benefits to no more
than a certain maximum than a certain maximum ~~level~~threshold, and it can cover only preventive care services and (for , and it can cover only preventive care services and (for ~~plan years~~
~~beginning on or before December 31, 2021~~limited time periods) telehealth services before the deductible is met.6 (See ) telehealth services before the deductible is met.6 (See
Table 1 for the minimum deductibles and out-of-pocket limits for for the minimum deductibles and out-of-pocket limits for ~~2020 a~~nd2022 and Table 2 for the for the
minimum deductibles and out-of-pocket limits for minimum deductibles and out-of-pocket limits for ~~2021~~2023.) .)
In addition, the plan’s coverage cannot be limited to a narrow set of services, such as coverage for In addition, the plan’s coverage cannot be limited to a narrow set of services, such as coverage for
a particular disease (e.g., cancer-only coverage) or vision-only coverage.7 This rule is designed to a particular disease (e.g., cancer-only coverage) or vision-only coverage.7 This rule is designed to
prevent individuals from establishing and making HSAprevent individuals from establishing and making HSA contributions when the only insurance contributions when the only insurance
they have is coverage for a narrow class of benefits.they have is coverage for a narrow class of benefits.
Table 1. HSA-Qualified HDHP Deductible and Out-of-Pocket Limit Requirements
for ~~2020~~2022
Requirement
Self-Only Plan
Family Plan
Minimum Deductible Minimum Deductible
$1,400 $1,400
$2,800 $2,800
Out-of-Pocket Limit Out-of-Pocket Limit
$ $~~6,900~~
~~$13,800~~7,050 $14,100
Source: Internal Revenue ServiceInternal Revenue Service (IRS), (IRS), Internal Revenue ~~Bul etin: 2019-22~~Bulletin: 2021-21, Revenue Procedure , Revenue Procedure ~~2019~~2021-25, May -25, May ~~18,~~
~~2019~~24, 2021, at https://www.irs.gov/irb/, at https://www.irs.gov/irb/~~2019-22_IRB~~2021-21_IRB#REV-PROC-#REV-PROC-~~2019~~2021-25. -25.
Notes: HSA = health savings account. HDHP = high-deductible health plan. Not HSA = health savings account. HDHP = high-deductible health plan. Not al all HDHPs are consideredHDHPs are considered HSA-HSA-
qualified HDHPs. As an example, plans may meet the deductible and out-of-pocket limitsqualified HDHPs. As an example, plans may meet the deductible and out-of-pocket limits but may cover more but may cover more
than preventive care servicesthan preventive care services and telehealth servicesand telehealth services before the deductible is met.before the deductible is met. ~~Minimum deductible and~~ The out- out-
~~of-pocket limits apply only to in-network payments for usual, customary, and reasonable (UCR) charges. UCR is~~
~~defined as “the amount paid for a medical service in a geographic area based on what providers in the area~~
~~usual y charge for the same or similar medical service.” Centers for Medicare & Medicaid, Glossary, at~~
~~https://www.healthcare.gov/glossary/ucr-usual-customary-and-reasonable/.~~

~~Archer MSAs can be thought of as an older, more restrictive version of HSAs.~~
~~5 IRS,~~ of-pocket limit does not apply to out-of-network payments if the plan uses a network of providers. Minimum Deductible To be HSA qualified, a health plan’s annual deductible for self-only coverage must be at least $1,400 in 2022 and $1,500 in 2023.8 For family coverage, the minimum deductible is $2,800 in 4 Archer MSAs are another type of health-related tax-advantaged account that individuals can use to set aside money to pay for unreimbursed medical care. Because Archer MSAs share many similarities to HSAs and existed before HSAs, Archer MSAs can be thought of as an older, more restrictive version of HSAs. 5 IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2, January 12, 2004, at https://www.irs.gov/irb/2004-, Notice 2004-2, January 12, 2004, at https://www.irs.gov/irb/2004-
02_IRB#NOT02_IRB#NOT -2004-2. Hereinafter IRS, -2004-2. Hereinafter IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2, Notice 2004-2.
6 26 U.S.C. 6 26 U.S.C. §223(c)(2) and IRS,§223(c)(2) and IRS, Publication 969,, ~~p. 3. Individuals should be able~~ pp. 2-5. Individuals should be able to find out from their insurer whether to find out from their insurer whether
their high-deductibletheir high-deductible health plan (HDHP) is HSAhealth plan (HDHP) is HSA qualified.qualified. ~~T hey~~ They cannot apply to the IRS or another government cannot apply to the IRS or another government
agency for a determination. agency for a determination.
7 26 U.S.C. 7 26 U.S.C. §223(c)(2)(B). 8 IRS, Internal Revenue Bulletin: 2021-21, Revenue Procedure 2021-25, May 24, 2021, at https://www.irs.gov/irb/2021-21_IRB#REV-PROC-2021-25 and IRS, Internal Revenue Bulletin: 2022-20, Revenue Procedure 2022-24, May 16, 2022, at https://www.irs.gov/irb/2022-20_IRB#REV-PROC-2022-24. Hereinafter IRS, Internal Revenue Bulletin: 2021-21, Revenue Procedure 2021-25 and Internal Revenue Bulletin: 2022-20, Revenue Procedure 2022-24, respectively. Congressional Research Service 2 Health Savings Accounts (HSAs) 2022 and $3,000 in 2023.9 Minimum deductible amounts are adjusted for inflation (rounded to the nearest $50) annually.10 Premiums are not~~§223(c)(2)(B).~~
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~~Health Savings Accounts (HSAs)~~

~~Minimum Deductible~~
~~To be HSA qualified, a health plan’s annual deductible in 2020 and 2021 must be at least $1,400~~
~~for self-only coverage; for family coverage, it must be at least $2,800.8 These amounts are~~
~~adjusted for inflation (rounded to the nearest $50) annual y.9~~
~~In addition, a health plan is required to take into account only~~ ~~usual, customary, and reasonable~~
~~charges~~ ~~for covered benefits that are provided in network when determining whether deductibles~~
~~are met.10 Premiums cannot be~~ included in meeting the deductible. included in meeting the deductible.
If a health plan has a deductible requirement for prescription drugs that is different than If a health plan has a deductible requirement for prescription drugs that is different than
requirements for other benefits, in order for the plan to be HSA qualified, the prescription drug requirements for other benefits, in order for the plan to be HSA qualified, the prescription drug
deductible must also meet the same minimum requirements.11deductible must also meet the same minimum requirements.11
Out-of-Pocket Limit
To be HSA qualified, a health plan’s annual limit To be HSA qualified, a health plan’s annual limit on out-of-pocket expenditures for covered on out-of-pocket expenditures for covered
benefits for self-only coverage must not exceed $benefits for self-only coverage must not exceed $~~6,900 in 2020~~7,050 in 2022 and $7, and $7,~~000 in 2021~~500 in 2023. For family . For family
policies, the limit must not exceed $policies, the limit must not exceed $~~13,800 in 2020 and $14,000 in 2021~~14,100 in 2022 and $15,000 in 2023.12 These amounts are .12 These amounts are
adjusted for inflation (rounded to the nearest $50) adjusted for inflation (rounded to the nearest $50) ~~annual y.~~
~~General y~~annually. Generally, enrollee cost sharing—deductibles, co-payments, and coinsurance—for in-network , enrollee cost sharing—deductibles, co-payments, and coinsurance—for in-network
coverage provided under the HSA-qualifiedcoverage provided under the HSA-qualified HDHP is taken into account in determining HDHP is taken into account in determining ~~whether~~
accumulation toward the out-of-pocket limitsthe out-of-pocket limits ~~are exceeded~~. However, these limits should not be interpreted as ceilings . However, these limits should not be interpreted as ceilings
on on all out-of-pocket expenditures for health care. Enrollee payments to providers for services out-of-pocket expenditures for health care. Enrollee payments to providers for services
provided out of network that are in addition to any relevant cost sharing (i.e., balance provided out of network that are in addition to any relevant cost sharing (i.e., balance ~~bil s~~bills) or ) or
payments for services that are not covered by the HSA-qualified HDHPpayments for services that are not covered by the HSA-qualified HDHP do not count toward the do not count toward the
out-of-pocket limit. Premiums for the HSA-qualified HDHPout-of-pocket limit. Premiums for the HSA-qualified HDHP and any other insurance also do not and any other insurance also do not
count toward the out-of-pocket limit. count toward the out-of-pocket limit.

8 IRS, Internal Revenue Bulletin: 2019-22~~, Revenue Procedure 2019-25, May 28, 2019~~ Table 2. HSA-Qualified HDHP Deductible and Out-of-Pocket Limit Requirements for 2023 Requirement Self-Only Plan Family Plan Minimum Deductible $1,500 $3,000 Out-of-Pocket Limit $7,500 $15,000 Source: Internal Revenue Service (IRS), Internal Revenue Bulletin: 2022-20, Revenue Procedure 2022-24, May 16, 2022, at https://www.irs.gov/irb/2022-20_IRB#REV-PROC-2022-24. Notes: HSA = health savings account. HDHP = high-deductible health plan. Not all HDHPs are considered HSA-qualified HDHPs. As an example, plans may meet the deductible and out-of-pocket limits but may cover more than preventive care services and telehealth services before the deductible is met. The out-of-pocket limit does not apply to out-of-network payments if the plan uses a network of providers. Services Allowed to Be Provided Before the Deductible Has Been Met Generally, HSA-qualified HDHPs are not allowed to provide any benefits before the deductible has been met; however, HSA-qualified HDHPs may have no deductible (or a deductible less than 9~~, at https://www.irs.gov/irb/~~
~~2019-22_IRB#REV-PROC-2019-25, and IRS, Internal Revenue Bulletin: 2020-24, Revenue Procedure 2020-32, June~~
~~8, 2020, at https://www.irs.gov/irb/2020-24_IRB#REV-PROC-2020-32. Hereinafter IRS,~~ ~~Internal Revenue Bulletin:~~
~~2019-22~~ IRS, Internal Revenue Bulletin: 2021-21, Revenue Procedure , Revenue Procedure ~~2019~~2021-25 and -25 and ~~IRS,~~ Internal Revenue Bulletin: ~~2020-24~~2022-20, Revenue Procedure , Revenue Procedure ~~2020-32,~~
~~respectively.~~
~~9 T his~~2022-24. 10 This and other HSA inflation adjustments are based and other HSA inflation adjustments are based upon the Chained Consumer Price Index for All Urban upon the Chained Consumer Price Index for All Urban
Consumers publishedConsumers published by the U.S. Department of Labor. 26 U.S.C. §223(g)(1)(B) provides that the measurement period by the U.S. Department of Labor. 26 U.S.C. §223(g)(1)(B) provides that the measurement period
for HSAfor HSA inflation adjustments is the 12-month period ending on March 31 of the prior year. inflation adjustments is the 12-month period ending on March 31 of the prior year.
~~10 Usual, customary, and reasonable (UCR) is defined by the Centers for Medicare & Medicaid as “the amount paid for~~
~~a medical service in a geographic area based on what providers in the area usually cha rge for the same or similar~~
~~medical service.” Centers for Medicare & Medicaid, Glossary, at https://www.healthcare.gov/glossary/ucr-usual-~~
~~customary-and-reasonable/. If an enrollee pays a provider an amount greater than the UCR, then any amount above the~~
~~UCR does not count toward to the deductible.~~
~~11 IRS,~~ 11 IRS, Internal Revenue Bulletin: 2004-15, Revenue RulingRevenue Ruling 2004-38, April 12, 2004, at https://www.irs.gov/irb/2004-2004-38, April 12, 2004, at https://www.irs.gov/irb/2004-
15_IRB#RR-2004-38.15_IRB#RR-2004-38.
12 IRS,12 IRS, Internal Revenue Bulletin: ~~2019-22~~2021-21, Revenue Procedure , Revenue Procedure ~~2019~~2021-25 and -25 and ~~IRS,~~ Internal Revenue Bulletin: ~~2020-24~~2022-20, ,
Revenue Procedure Revenue Procedure ~~2020-32~~2022-24. Congressional Research Service 3 link to page 9 link to page 9 Health Savings Accounts (HSAs) the aforementioned minimum annual deductible requirement) for.
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~~Table 2. HSA-Qualified HDHP Deductible and Out-of-Pocket Limit Requirements~~
~~for 2021~~
~~Requirement~~
~~Self-Only Plan~~
~~Family Plan~~
~~Minimum Deductible~~
~~$1,400~~
~~$2,800~~
~~Out-of-Pocket Limit~~
~~$7,000~~
~~$14,000~~
Source: Internal Revenue Service (IRS), Internal Revenue Bul etin: 2020-24, Revenue Procedure 2020-32, June 8,
~~2020, at https://www.irs.gov/irb/2020-24_IRB#REV-PROC-2020-32.~~
Notes: HSA = health savings account. HDHP = high-deductible health plan. Not al HDHPs are considered HSA-
~~qualified HDHPs. As an example, plans may meet the deductible and out-of-pocket limits but may cover more~~
~~than preventive care services and telehealth services before the deductible is met. Minimum deductible and out-~~
~~of-pocket limits apply only to in-network payments for usual, customary, and reasonable (UCR) charges. UCR is~~
~~defined as “the amount paid for a medical service in a geographic area based on what providers in the area~~
~~usual y charge for the same or similar medical service.” Centers for Medicare & Medicaid, Glossary, at~~
~~https://www.healthcare.gov/glossary/ucr-usual-customary-and-reasonable/.~~
~~Services Allowed to Be Provided Before the Deductible Has Been Met~~
~~General y, HSA-qualified HDHPs are not al owed to provide any benefits before the deductible~~
~~has been met; however, HSA-qualified HDHPs are al owed to provide~~ preventive care benefits preventive care benefits
and and (for limited time periods) telehealth services.13 Preventive Care Services ~~(for plan years beginning on or before December 31, 2021) telehealth services without a~~
~~deductible or with a deductible less than the aforementioned minimum annual deductible~~
~~requirement.13~~
~~Preventive Care Services~~
IRS guidance provides that IRS guidance provides that preventive care includes, but is not limited to, periodic health includes, but is not limited to, periodic health
evaluations, routine prenatal and evaluations, routine prenatal and ~~wel~~ well-child care, immunizations, tobacco cessation programs, -child care, immunizations, tobacco cessation programs,
obesity weight-loss programs, and various screening services.14 Drugs and medications can be obesity weight-loss programs, and various screening services.14 Drugs and medications can be
considered preventive care when taken by a person who has developed risk factors for a disease considered preventive care when taken by a person who has developed risk factors for a disease
that has not yet manifested itself or not yet become that has not yet manifested itself or not yet become ~~clinical y~~clinically apparent or to prevent a disease apparent or to prevent a disease
recurrence.15recurrence.15
~~Additional y,~~ Additionally, HSA-qualifiedHSA-qualified HDHPs are required to comply with the federal private health HDHPs are required to comply with the federal private health
insurance requirement to provide specified preventive care services without imposing cost insurance requirement to provide specified preventive care services without imposing cost
sharing.16 For this requirement, sharing.16 For this requirement, preventive care includes evidenced-based services that have in includes evidenced-based services that have in
effect a rating of “A” or “B” in the current recommendations of the United States Preventive effect a rating of “A” or “B” in the current recommendations of the United States Preventive
Services Task Force, routine immunizations, and other evidence-based preventive care and Services Task Force, routine immunizations, and other evidence-based preventive care and
screenings for women and children.17 Because this requirement provides that health plans, screenings for women and children.17 Because this requirement provides that health plans,

~~13 26 U.S.C. §223(c)(2)(C), 26 U.S.C. §223(c)(2)(E).~~
~~14 IRS, Publication 969, p. 3, and IRS,~~ including HSA-qualified HDHPs, cannot impose any cost sharing for the specified preventive services, all such services must be covered by HSA-qualified HDHPs before the plan’s deductible is met and such coverage does not disqualify the plan from being considered HSA qualified.18 In general, preventive care does not include services or benefits intended to treat existing illnesses, injuries, or conditions, although there are three exceptions to this rule. One exception allows pre-deductible coverage of treatments that are incidental to a preventive care service if it would have been unreasonable or impracticable to perform another procedure for such treatment.19 A second exception allows pre-deductible coverage of specified items and services prescribed both to treat an individual diagnosed with corresponding chronic conditions and to prevent the exacerbation of the chronic condition or the development of a secondary condition (see Table 3).20 13 26 U.S.C. §223(c)(2)(C), 26 U.S.C. §223(c)(2)(E). 14 IRS, Publication 969, p. 4, and IRS, Internal Revenue Bulletin: 2004-15, Notice 2004-23, April 12, 2004, at , Notice 2004-23, April 12, 2004, at
https://www.irs.gov/irb/2004-15_IRB#NOThttps://www.irs.gov/irb/2004-15_IRB#NOT -2004-23. Hereinafter IRS, -2004-23. Hereinafter IRS, Internal Revenue Bulletin: 2004-15, Notice , Notice
2004-23. 2004-23.
15 IRS,15 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50, August 16, 2004, at https://www.irs.gov/irb/2004-, Notice 2004-50, August 16, 2004, at https://www.irs.gov/irb/2004-
33_IRB#NOT33_IRB#NOT -2004-50. Hereinafter IRS, -2004-50. Hereinafter IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. , Notice 2004-50.
16 42 U.S.C. 16 42 U.S.C. §300gg-13. §300gg-13.
17 42 U.S.C.17 42 U.S.C. §300gg-13. For more information about preventive care services, see Department of Health and Human §300gg-13. For more information about preventive care services, see Department of Health and Human
Services,Services, “ “Preventive Care,” February 1, 2017, at https://www.hhs.gov/healthcare/about-the-aca/preventive-care/Preventive Care,” February 1, 2017, at https://www.hhs.gov/healthcare/about-the-aca/preventive-care/
index.html. index.html. ~~T he~~The United States Preventive Services United States Preventive Services ~~T ask~~Task Force is an independent, Force is an independent, volunteer panel of experts in volunteer panel of experts in
prevention, evidence-based medicine, and primary care. prevention, evidence-based medicine, and primary care. ~~T he~~The task force makes preventive care recommendations and assigns each recommendation a letter grade based on the strength of the evidence supporting the recommendation. For more information about the task force, see U.S. Preventive Services Task Force, “About the USPSTF,” https://www.uspreventiveservicestaskforce.org/. 18 IRS, Internal Revenue Bulletin: 2013-40, Notice 2013-57, September 30, 2013, at https://www.irs.gov/irb/2013-40_IRB#NOT-2013-57. 19 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. 20 IRS, Internal Revenue Bulletin: 2019-32, Notice 2019-45, August 5, 2019, at https://www.irs.gov/irb/2019-32_IRB#NOT-2019-45. Congressional Research Service 4 Health Savings Accounts (HSAs) ~~task force makes preventive care recommendations and~~
~~Congressional Research Service~~

4

~~link to page 9 link to page 9~~ ~~Health Savings Accounts (HSAs)~~

~~including HSA-qualified HDHPs, cannot impose any cost sharing for the specified preventive~~
~~services, al such services must be covered by HSA-qualified HDHPs before the plan’s deductible~~
~~is met and such coverage does not disqualify the plan from being considered HSA qualified.18~~
~~In general, preventive care does not include services or benefits intended to treat existing~~
~~il nesses, injuries, or conditions, although there are three exceptions to this rule. One exception~~
~~al ows pre-deductible coverage of treatments that are incidental to a preventive care service if it~~
~~would have been unreasonable or impracticable to perform another procedure for such~~
~~treatment.19~~
~~The second exception al ows pre-deductible coverage of specified items and services prescribed~~
~~both to treat an individual diagnosed with corresponding chronic conditions and to prevent the~~
exacerbation of the chronic condition or the development of a secondary condition (see Table
3)~~.20~~
Table 3. HSA-Qualified HDHP Preventive Care Services for
Specified Chronic Conditions
Items and Service
Chronic Condition
Angiotensin Converting Enzyme (ACE) inhibitors Angiotensin Converting Enzyme (ACE) inhibitors
Congestive heart failure, Congestive heart failure, diabetes, and/or coronary diabetes, and/or coronary
artery disease artery disease
Anti-resorptive Anti-resorptive therapy therapy
Osteoporosis Osteoporosis and/or osteopenia and/or osteopenia
Beta-blockers Beta-blockers
Congestive heart failure and/or coronary artery disease Congestive heart failure and/or coronary artery disease
Blood pressure Blood pressure monitor monitor
Hypertension Hypertension
Inhaled corticosteroids Inhaled corticosteroids
Asthma Asthma
Insulin and other glucose lowering agents Insulin and other glucose lowering agents
Diabetes Diabetes
Retinopathy screening Retinopathy screening
Diabetes Diabetes
Peak flow meter Peak flow meter
Asthma Asthma
Glucometer Glucometer
Diabetes Diabetes
Hemoglobin Hemoglobin A1c testing A1c testing
Diabetes Diabetes
International Normalized International Normalized Ratio (INR) testing Ratio (INR) testing
Liver Liver disease and/or bleeding disorders disease and/or bleeding disorders
Low-Density Lipoprotein Low-Density Lipoprotein (LDL) testing (LDL) testing
Heart disease Heart disease
Selective Selective Serotonin Reuptake Inhibitors (SSRIs) Serotonin Reuptake Inhibitors (SSRIs)
Depression Depression
Statins Statins
Heart disease and/or diabetes Heart disease and/or diabetes
Source: Internal Revenue Service,Internal Revenue Service, Internal Revenue Bul etin: 2019-32, Notice 2019-45, August 5, 2019, at
~~https://www.irs.gov/irb/2019-32_IRB#NOT-2019-45.~~

~~assigns each recommendation a letter grade based on the strength of the evidence supporting the recommendation. F or~~
~~more information about the task force, see U.S. Preventive Services T ask Force, “About the USPST F,”~~
~~https://www.uspreventiveservicestaskforce.org/.~~
~~18 IRS, Internal Revenue Bulletin: 2013-40, Notice 2013-57, September 30, 2013, at https://www.irs.gov/irb/2013-~~
~~40_IRB#NOT -2013-57.~~
~~19 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.~~
~~20 IRS,~~ Internal Revenue Bulletin: 2019-32, Notice 2019-45, August 5, 2019, at https://www.irs.gov/irb/2019-, Notice 2019-45, August 5, 2019, at https://www.irs.gov/irb/2019-
32_IRB#NOT32_IRB#NOT ~~-2019-45.~~
~~Congressional Research Service~~

5

~~Health Savings Accounts (HSAs)~~

-2019-45. Notes: HSA = health savings account. HDHP = high-deductible health plan. The itemsHSA = health savings account. HDHP = high-deductible health plan. The items and servicesand services in this table in this table
are treated as preventive care for purposes of HSA-qualified HDHPs if prescribedare treated as preventive care for purposes of HSA-qualified HDHPs if prescribed both to treat an individual both to treat an individual
diagnosed with corresponding chronic conditions and to prevent the exacerbation of the chronic condition or diagnosed with corresponding chronic conditions and to prevent the exacerbation of the chronic condition or
the development of a secondary condition. the development of a secondary condition.
~~The~~A third exception was developed by the IRS in response to the COVID-19 pandemic and third exception was developed by the IRS in response to the COVID-19 pandemic and
corresponding recession.21 Under this exception, HSA-qualified HDHPs are corresponding recession.21 Under this exception, HSA-qualified HDHPs are ~~al owed~~allowed to provide to provide
benefits related to the testing for and treatment of COVID-19 before the deductible has been met. benefits related to the testing for and treatment of COVID-19 before the deductible has been met.
~~Specifical y~~Specifically, plans can provide benefits regarding the following (if incurred on or after January 1, , plans can provide benefits regarding the following (if incurred on or after January 1,
2020): diagnostic testing for influenza A & B, norovirus, and other coronaviruses, and respiratory 2020): diagnostic testing for influenza A & B, norovirus, and other coronaviruses, and respiratory
syncytial virus, and any items or services required to be covered with zero cost sharing under syncytial virus, and any items or services required to be covered with zero cost sharing under
Section 6001 of the Families First Coronavirus Response Act (Section 6001 of the Families First Coronavirus Response Act (P.L. 116-127, as amended by the Coronavirus , as amended by the Coronavirus
Aid, Relief, and Economic Security Act [CARES Act], P.L. 116-136).22Aid, Relief, and Economic Security Act [CARES Act], P.L. 116-136).22 ~~As such, HSA-qualified~~
~~HDHPs are able to satisfy federal coverage requirements related to COVID-19 testing and stil be~~
~~considered HSA eligible.~~
~~Allowable Telehealth Services~~
~~HSA-qualified HDHPs with a plan year that begins on or before December 31, 2021, are al owed~~
~~to provide telehealth and other remote care benefits without a deductible or with a~~ 21 IRS, Internal Revenue Bulletin: 2020-14, Notice 2020-15, March 30, 2020, at https://www.irs.gov/irb/2020-14_IRB#NOT-2020-15. 22 IRS, Internal Revenue Bulletin: 2020-22, Notice 2020-29, May 26, 2020, at https://www.irs.gov/irb/2020-22_IRB#NOT-2020-29. Hereinafter IRS, Internal Revenue Bulletin: 2020-22, Notice 2020-29. For an overview of Section 6001 of the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, see CRS Report R46316, Health Care Provisions in the Families First Coronavirus Response Act, P.L. 116-127 and CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116-136), respectively. Congressional Research Service 5 Health Savings Accounts (HSAs) Allowable Telehealth Services From April through December 2022, HSA-qualified HDHPs may have no deductible (or a deductible less deductible less
than the aforementioned minimum annual deductible requirementthan the aforementioned minimum annual deductible requirement~~. This requirement applies to~~
) for telehealth and other remote care benefits.23 This allowance also applied to telehealth and other remote care services provided on or after January 1, 2020telehealth and other remote care services provided on or after January 1, 2020~~.23~~
~~This provision was~~ , with respect to HSA-qualified HDHP plan years that began on or before December 31, 2021.24 This telehealth provision was initially included in the CARES Act and was intended to increase health care access included in the CARES Act and was intended to increase health care access
for HSA-qualifiedfor HSA-qualified HDHP enrollees who may have HDHP enrollees who may have had COVID-19 while also protecting other patients COVID-19 while also protecting other patients
from potential exposure.from potential exposure.2425 As such, if an HSA-qualified HDHP plan administrator As such, if an HSA-qualified HDHP plan administrator ~~initial y~~
initially responded to the COVID-19 pandemic by providing telehealth services without a deductible, responded to the COVID-19 pandemic by providing telehealth services without a deductible,
enrollees of that plan would not enrollees of that plan would not ~~lose~~have lost their HSA eligibility their HSA eligibility as a result of that decision. as a result of that decision.
Disqualifying Coverage
There are a number of ways in which an individual could be disqualifiedThere are a number of ways in which an individual could be disqualified from establishing and from establishing and
contributing to an HSA, even contributing to an HSA, even ifthough the individual the individual has coverage under an HSA-qualifiedhas coverage under an HSA-qualified HDHP. HDHP.
Individuals Individuals ~~general y~~generally must not have any other health plan that is not an HSA-qualified must not have any other health plan that is not an HSA-qualified HDHP or HDHP or
that provides coverage for any benefit that is covered under their HSA-qualifiedthat provides coverage for any benefit that is covered under their HSA-qualified HDHP.HDHP.~~25 For~~

~~21 IRS, Internal Revenue Bulletin: 2020-14, Notice 2020-15, March 30, 2020, at https://www.irs.gov/irb/2020-~~
~~14_IRB#NOT -2020-15.~~
~~22 IRS, Internal Revenue Bulletin: 2020-22, Notice 2020-29, May 26, 2020, at https://www.irs.gov/irb/2020-~~
~~22_IRB#NOT -2020-29. Hereinafter IRS, Internal Revenue Bulletin: 2020-22, Notice 2020-29. For an overview of~~
~~Section 6001 of the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security~~
~~(CARES) Act, see CRS Report R46316,~~ ~~Health Care Provisions in the Fam ilies First Coronavirus Response Act, P.L.~~
~~116-127~~ ~~and CRS Report R46334, Selected Health Provisions in Title III of the CARES Act (P.L. 116 -136),~~
~~respectively.~~
~~23 IRS, Internal Revenue Bulletin: 2020-22, Notice 2020-29.~~
~~24 U.S.~~ 26 For example, individuals with an HSA-qualified HDHP are not eligible to establish or contribute to an HSA if they also are covered under a spouse’s policy for the same benefits and that spouse’s policy is not an HSA-qualified HDHP. Some types of health coverage are not considered disqualifying for purposes of being eligible to establish and contribute to an HSA.27 Coverage for any benefit provided under permitted insurance,28 and coverage (through insurance or otherwise) for accidents, disability, vision care, dental care, or long-term care are not considered disqualifying health coverage. In addition, from 23 26 U.S.C. §223(c)(2)(E), as amended by P.L. 117-103. 24 IRS, Internal Revenue Bulletin: 2020-22, Notice 2020-29. 25 U.S. Congress, Senate Committee on Finance, Congress, Senate Committee on Finance, Coronavirus Aid, Relief, and Economic Security Act Subtitle D—
Finance ~~Com m ittee~~Committee Section-by-Section, committee print, 116th Cong., at https://www.finance.senate.gov/imo/media/, committee print, 116th Cong., at https://www.finance.senate.gov/imo/media/
doc/CARES%20Act%20Section-by-Section%20(Finance%20Health).pdf. doc/CARES%20Act%20Section-by-Section%20(Finance%20Health).pdf.
2526 In this context, the term In this context, the term health plan is not limited to traditional health insurance-types of arrangements. For example, is not limited to traditional health insurance-types of arrangements. For example,
health flexible spendinghealth flexible spending arrangements (FSAs)arrangements (FSAs) and health reimbursement arrangements (HRAs) wouldand health reimbursement arrangements (HRAs) would constitute a constitute a
health plan. In addition, and as mentioned in a recent notice of proposed rulemaking, direct primary care arrangements . In addition, and as mentioned in a recent notice of proposed rulemaking, direct primary care arrangements
that provide for a variety of primary care services (e.g., physical examinations, urgent care, laboratory testing, and that provide for a variety of primary care services (e.g., physical examinations, urgent care, laboratory testing, and
treatment and diagnosistreatment and diagnosis of sicknessesof sicknesses or injuries) wouldor injuries) would also constitute a health plan. 26 U.S.C. §223(c)(1)(A)(ii). IRS, Internal Revenue Bulletin: 2004-22, Revised Rule 2004-45, June 1, 2004, at https://www.irs.gov/irb/2004-22_IRB#RR-2004-45. Hereinafter IRS, Internal Revenue Bulletin: 2004-22, Revised Rule 2004-45. IRS, “Certain Medical Care Arrangements,” 85 Federal Register 35398, June 10, 2020. 27 Inversely, although individuals are allowed to have these additional types of coverage (in conjunction with an HSA-qualified HDHP) and remain HSA eligible, a plan in which all of the coverage is through permitted insurance and/or coverage for accidents, disability, vision care, dental care or long-term care would not be considered an HSA-qualified HDHP and an individual would not be eligible for an HSA with only these types of insurance. IRS, Publication 969, p. 4-5. 28 Permitted insurance is defined at 26 U.S.C. §223(c)(3) as insurance under which substantially all coverage relates to liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of property (such as automobile insurance); insurance for a specified disease or illness; or insurance that pays a fixed amount per day or other period of hospitalization. Congressional Research Service 6 Health Savings Accounts (HSAs) April 1, 2022 through December 31, 2022~~also constitute a health plan. 26 U.S.C. §223(c)(1)(A)(ii). IRS,~~
~~Congressional Research Service~~

6

~~Health Savings Accounts (HSAs)~~

~~example, individuals with an HSA-qualified HDHP are not eligible to establish or contribute to an~~
~~HSA if they also are covered under a spouse’s policy for the same benefits and that spouse’s~~
~~policy is not an HSA-qualified HDHP.~~
~~Some types of health coverage are not considered disqualifying for purposes of being eligible to~~
~~establish and contribute to an HSA.26 Coverage for any benefit provided under permitted~~
~~insurance,27 and coverage (through insurance or otherwise) for accidents, disability, vision care,~~
~~dental care, or long-term care are not considered disqualifying health coverage. In addition, for~~
~~plan years beginning on or before December 31, 2021, telehealth and other remote care are not~~
, telehealth and other remote care are not considered disqualifying health coverage. Telehealth and other remote care also was not considered disqualifying health coverageconsidered disqualifying health coverage~~.28~~ for plan years beginning on or before December 31, 2021.29
Individuals are not Individuals are not ~~al owed~~allowed to establish or contribute to an HSA if they are enrolled in Medicare, to establish or contribute to an HSA if they are enrolled in Medicare,
which which ~~general y~~generally first occurs at the age of 65. first occurs at the age of 65.2930
HSA-eligible HSA-eligible individuals individuals ~~general y~~generally may not have employer-established flexible may not have employer-established flexible spending spending
accounts (FSAs) or health reimbursement accounts (HRAs), which are two other types of health-accounts (FSAs) or health reimbursement accounts (HRAs), which are two other types of health-
related tax-advantaged accountsrelated tax-advantaged accounts~~, unless these accounts (1) are for limited purposes (for example,~~
. However, FSAs and HRAs can be offered in HSA-compatible ways that would not preclude HSA eligibility. For example, FSAs and HRAs that can be used only for limited purposes (such as dental services or preventive care)dental services or preventive care)~~, (2)~~ or that can provide reimbursement for services provide reimbursement for services ~~covered by the HSA-~~
~~qualified HDHP~~ only after the only after the ~~qualifying deductible is met, or (3) are used in retirement.30~~
HDHP deductible has been met are considered HSA-compatible.31 Additional Guidelines
HSA-qualifiedHSA-qualified ~~HDHP~~ HDHP enrollees who do not have disqualifying coverage enrollees who do not have disqualifying coverage ~~stil~~ still are considered HSA are considered HSA
eligibleeligible ~~even~~ if they have access to and coverage under an employee assistance program, disease if they have access to and coverage under an employee assistance program, disease
management program, or management program, or ~~wel ness~~wellness program, provided the program does not provide “significant program, provided the program does not provide “significant
benefits in the nature of medical care or treatment.”benefits in the nature of medical care or treatment.”3132 HSA-qualified HDHP HSA-qualified HDHP enrollees who enrollees who
receive treatment under the Veterans Health Administration, within the Department of Veterans receive treatment under the Veterans Health Administration, within the Department of Veterans
Affairs, for service-connected disabilities also are Affairs, for service-connected disabilities also are ~~stil~~ still HSA eligible.HSA eligible.32

Internal Revenue Bulletin: 2004-22, Revised Rule 2004-45, June 1, 2004, at https://www.irs.gov/irb/2004-22_IRB#RR-
~~2004-45. Hereinafter IRS, Internal Revenue Bulletin: 2004-22, Revised Rule 2004-45. IRS, “ Certain Medical Care~~
~~Arrangements,” 85 Federal Register 35398, June 10, 2020.~~
~~26 Inversely, although individuals are allowed to have these additional types of coverage (in conjuncture with an HSA-~~
~~qualified HDHP) and remain HSA eligible, a plan in which all of the coverage is through permitted insurance and/or~~
~~coverage for accidents, disability, vision care, dental care or long-term care would not be considered an HSA-qualified~~
~~HDHP and an individual would not be eligible for an HSA with only these types of insurance. IRS, Publication 969, p.~~
5.
~~27 Permitted insurance is defined at 26 U.S.C. §223(c)(3) as insurance under which substantially all coverage relates to~~
~~liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of~~
~~property (such as automobile insurance); insurance for a specified disease or illness; or insurance that pays a fixed~~
~~amount per day or other period of hospitalization .~~
~~28 T his requirement applies to telehealth and other remote care coverage~~33 HSA Contributions Contribution Limits If an individual is eligible to contribute to an HSA any time during a given tax year, the total amount that individual may contribute to his or her HSA is capped. Generally, the maximum amount an individual may contribute to his or her HSA in a tax year is based on the type of HDHP coverage the individual had during those months (self-only or family), the individual’s age, and the months during the year that he or she was considered HSA eligible. Contributions to HSAs may be made at any time during a calendar year and until the federal income tax return filing date (without extensions), normally April 15 of the following year.34 Thus, contributions 29 This requirement applies to telehealth and other remote care services provided on or after January 1, 2020. IRS, provided on or after January 1, 2020. IRS,
Internal Revenue Bulletin: 2020-22, Notice 2020-29. 22, Notice 2020-29.
2930 Although the law Although the law states that eligible individualsstates that eligible individuals are no longer able to establish and contribute to HSAsare no longer able to establish and contribute to HSAs after after
becoming “becoming “ entitled to benefits” under Medicare, the IRSentitled to benefits” under Medicare, the IRS interprets the phrase “interprets the phrase “ entitled to benefits” as meaning entitled to benefits” as meaning
“eligibility and enrollment”“eligibility and enrollment” in either Medicare Part A or Medicare Part B. 26 U.S.C.in either Medicare Part A or Medicare Part B. 26 U.S.C. §223(b)(7) and IRS,§223(b)(7) and IRS, Internal
Revenue Bulletin: 2004-33, Notice 2004-50. For more information on the relationship between HSAs, Notice 2004-50. For more information on the relationship between HSAs ~~and Medicare,~~
~~see CRS In Focus~~ and Medicare, including HSA eligibility for spouses of Medicare enrollees, see CRS In Focus IF11425, IF11425, Health Savings Accounts (HSAs) and Medicare. .
30 31 IRS, IRS, Internal Revenue Bulletin: 2004-22, Revised RuleRevised Rule 2004-45. 2004-45.
3132 Screening Screening and other preventive care services are not considered “significant benefits in the nature of medical care or and other preventive care services are not considered “significant benefits in the nature of medical care or
treatment.” IRS, treatment.” IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. , Notice 2004-50.
3233 26 U.S.C. 26 U.S.C. §223(c)(1)(C). §223(c)(1)(C). Service-connected disability within the meaning of 38 U.S.C. within the meaning of 38 U.S.C. §101(16). 34 IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2. ~~§101(16).~~
Congressional Research Service Congressional Research Service

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link to page link to page 1615 Health Savings Accounts (HSAs) ~~Health Savings Accounts (HSAs)~~

~~HSA Contributions~~
~~Contribution Limits~~
~~If an individual is eligible to contribute to an HSA any time during a given tax year, the total~~
~~amount that individual may contribute to his or her HSA is capped. General y, the maximum~~
~~amount an individual may contribute to his or her HSA in a tax year is based on the type of~~
~~HDHP coverage the individual had during those months (self-only or family), the individual’s~~
~~age, and the months during the year that he or she was considered HSA eligible. Contributions to~~
~~HSAs may be made at any time during a calendar year and until the federal income tax return~~
~~filing date (without extensions), normal y April 15 of the following year.33 Thus, contributions~~
could occur over a 15½-month time span (e.g., from January 1, 2020, through April 15, 2021), could occur over a 15½-month time span (e.g., from January 1, 2020, through April 15, 2021),
provided they do not exceed the provided they do not exceed the ~~al owable~~allowable annual limit. annual limit.
In In ~~2020~~2022, the maximum annual contribution limit is $3,, the maximum annual contribution limit is $3,~~550~~650 for self-only coverage and $7, for self-only coverage and $7,~~100~~300 for for
family coverage.family coverage.~~34 In 2021~~35 In 2023, the maximum annual contribution limit is $3,, the maximum annual contribution limit is $3,~~600~~850 for self-only for self-only
coverage and $7,coverage and $7,~~200~~750 for family coverage. for family coverage.3536 The applicable annual limits apply to total The applicable annual limits apply to total
contributions to the HSA from contributions to the HSA from al all sources (i.e., from individuals and employers). These amounts sources (i.e., from individuals and employers). These amounts
are adjusted for inflation (rounded to the nearest $50) are adjusted for inflation (rounded to the nearest $50) ~~annual y~~annually. .
In addition, account holders who are at least 55 years of age may contribute an additional catch- In addition, account holders who are at least 55 years of age may contribute an additional catch-
up contribution of $1,000 each year, which is not up contribution of $1,000 each year, which is not ~~annual y~~annually indexed for inflation. indexed for inflation.
The annual limits are calculated on a monthly basis: for each month during the year when The annual limits are calculated on a monthly basis: for each month during the year when
individualsindividuals are eligible,are eligible, they may contribute (or others may contribute on their behalf) up to one-they may contribute (or others may contribute on their behalf) up to one-
twelfth of the applicable annual limit. For example, an individualtwelfth of the applicable annual limit. For example, an individual who is eligiblewho is eligible from January from January
through July could contribute seven-twelfths of the annual limit for that year. through July could contribute seven-twelfths of the annual limit for that year.
As an exception to this rule, individuals who are eligible As an exception to this rule, individuals who are eligible during the last month of the year are during the last month of the year are
treated as if they had been eligibletreated as if they had been eligible for that entire year and thus are for that entire year and thus are ~~al owed~~allowed to contribute up to the to contribute up to the
annual limitannual limit so long as the contribution is before the tax filingso long as the contribution is before the tax filing date of the date of the ~~fol owing~~following year. year.3637
Individuals who make contributions under this exception must maintain their HSA eligibilityIndividuals who make contributions under this exception must maintain their HSA eligibility for for
the entire following year, the the entire following year, the testing period, except in cases of disability or death., except in cases of disability or death.3738 Otherwise, Otherwise,
the additionalthe additional contributions contributions ~~al owed~~allowed under the exception are included in gross income when under the exception are included in gross income when
determining federal income taxes for the year in which an individualdetermining federal income taxes for the year in which an individual fails to be HSAfails to be HSA ~~eligible~~ eligible and, and,
as shown ias shown in Table 4, are subject to a 10% penalty tax. are subject to a 10% penalty tax.
HSA Contribution Rules for Married Couples
Spouses are prevented from having joint HSA accounts (even if the spouses are covered by the same Spouses are prevented from having joint HSA accounts (even if the spouses are covered by the same HSA-HSA-
qualified HDHP). Only one spouse can be listedqualified HDHP). Only one spouse can be listed as the account holder for a given HSA, even though that spouse’s as the account holder for a given HSA, even though that spouse’s
HSA may be used to reimburseHSA may be used to reimburse the medicalthe medical expenses of either spouse. Nothing prevents each spouse from expenses of either spouse. Nothing prevents each spouse from
establishing his or her own HSA, assuming each is eligible. establishing his or her own HSA, assuming each is eligible.
If both spouses are HSA eligibleIf both spouses are HSA eligible and at least one spouse is covered by a familyand at least one spouse is covered by a family coverage HSA-qualified HDHP, then coverage HSA-qualified HDHP, then
the maximumthe maximum amount the couple can col ectivelyamount the couple can col ectively contribute to its HSA(s) is associated with the family coverage contribute to its HSA(s) is associated with the family coverage

~~33 IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2.~~
~~34 IRS, Internal Revenue Bulletin: 2019-22, Revenue Procedure 2019-25.~~
~~35 IRS, Internal Revenue Bulletin: 2020-24, Revenue Procedure 2020-32.~~
~~36 26 U.S.C. §223(b)(8).~~
~~37 26 U.S.C. §223(b)(8)(iii).~~
~~Congressional Research Service~~

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~~link to page 16~~ ~~Health Savings Accounts (HSAs)~~

~~annual limit~~ annual limit for that year ($7,for that year ($7,~~100 in 2020~~300 in 2022 and $7, and $7,~~200 in 2021~~750 in 2023). The col ective). The col ective ~~maximum~~ maximum amount is to be split amount is to be split
evenly between the spouses' HSAs,evenly between the spouses' HSAs, unless both agree on a different division.unless both agree on a different division.3839 If both spouses are aged 55 or If both spouses are aged 55 or
older and eligibleolder and eligible to make catch-up contributions, each spouse must make such a contribution to his or her own to make catch-up contributions, each spouse must make such a contribution to his or her own
account; one spouse cannot make catch-up contributions to his or her own HSA on behalf of the other spouse.account; one spouse cannot make catch-up contributions to his or her own HSA on behalf of the other spouse.3940
Where applicable, HSA Where applicable, HSA limits must be reduced by the amount of any direct contributions limits must be reduced by the amount of any direct contributions
individualsindividuals make to their Archer MSAs during the same year or for any direct contributions to an make to their Archer MSAs during the same year or for any direct contributions to an
HSA from traditional or Roth IRAs, the latter of which is discussed later in this section. HSA from traditional or Roth IRAs, the latter of which is discussed later in this section.
Any excess contributions to an HSA are not tax deductible and, if made by an employer, are Any excess contributions to an HSA are not tax deductible and, if made by an employer, are
treated as gross income for the tax year in which the contributions were earned. Excess treated as gross income for the tax year in which the contributions were earned. Excess
~~contributions general y~~ 35 IRS, Internal Revenue Bulletin: 2021-21, Revenue Procedure 2021-25. 36 IRS, Internal Revenue Bulletin: 2022-20, Revenue Procedure 2022-24.. 37 26 U.S.C. §223(b)(8). 38 26 U.S.C. §223(b)(8)(iii). 39 26 U.S.C. §223(b)(5). 40 IRS, Internal Revenue Bulletin: 2008-29, Notice 2008-59, July 21, 2008, at https://www.irs.gov/irb/2008-29_IRB#NOT-2008-59. Congressional Research Service 8 link to page 15 link to page 15 link to page 15 Health Savings Accounts (HSAs) contributions generally are subject to a 6% penalty tax (se are subject to a 6% penalty tax (see Table 4), unless the excess amounts , unless the excess amounts
are withdrawn prior to the tax filing date of the year the excess contributions were made.are withdrawn prior to the tax filing date of the year the excess contributions were made.4041 If not If not
withdrawn, this penalty tax would apply to each tax year the excess contributions remain in the withdrawn, this penalty tax would apply to each tax year the excess contributions remain in the
account. account.
Allowable Contributors
EligibleEligible ~~individuals~~ individuals may make direct contributions to their HSAs, and employers, family may make direct contributions to their HSAs, and employers, family
members, and other individuals may make contributions to an individual’s HSAmembers, and other individuals may make contributions to an individual’s HSA on the on the
individual’s behalf.individual’s behalf.4142 Contributions by one individual Contributions by one individual or entity do not preclude contributions by or entity do not preclude contributions by
others, provided the total amount of contributions does not exceed annual contribution limits.others, provided the total amount of contributions does not exceed annual contribution limits.4243
Employed individuals Employed individuals may make HSA contributions through may make HSA contributions through cafeteria plans—that is, benefit —that is, benefit
arrangements established by employers under which employees accept lower take-home pay in arrangements established by employers under which employees accept lower take-home pay in
exchange for the difference being deposited in their HSA account.exchange for the difference being deposited in their HSA account.4344 Because these types of Because these types of
individualindividual contributions are excluded from gross income, they are not tax deductible. The IRS has contributions are excluded from gross income, they are not tax deductible. The IRS has
determined that salary reduction agreements must determined that salary reduction agreements must ~~al ow~~allow employees to stop, increase, or decrease employees to stop, increase, or decrease
their HSA contributions throughout the year as long as the changes are effective prospectively; their HSA contributions throughout the year as long as the changes are effective prospectively;
however, employers may place restrictions on HSA contribution elections under this type of however, employers may place restrictions on HSA contribution elections under this type of

~~38 26 U.S.C. §223(b)(5).~~
~~39 IRS, Internal Revenue Bulletin: 2008-29, Notice 2008-59, July 21, 2008, at https://www.irs.gov/irb/2008-~~
~~29_IRB#NOT -2008-59.~~
~~40 26 U.S.C. §4973(a) and (g). As an example, if individual who is HSA eligible~~ arrangement if the restrictions apply to all employees.45 The IRS also has determined that under these agreements, employers are allowed to make an employee’s annual expected HSA contribution available to the employee so that the employee may cover medical expenses that exceed his or her current HSA balances, provided the employee repays the accelerated contributions before the end of the year.46 HSA contributors cannot restrict how HSA funds are used. For example, employers may not limit HSAs to certain medical expenses (or medical expenses only), even for funds they contribute.47 Therefore, account owners may make withdrawals from their HSA for any purpose, though nonqualified withdrawals are subject to taxation, as discussed in the section “Nonqualified Expenses.” 41 26 U.S.C. §4973(a) and (g). As an example, if individual who is HSA eligible from January through July contributes from January through July contributes
more than seven-twelfths of the annual limit for that year, then that individual has until that year’s tax filing date to more than seven-twelfths of the annual limit for that year, then that individual has until that year’s tax filing date to
withdrawwithdraw the excess contributions. If the funds are not withdrawn, the excess contributions wouldthe excess contributions. If the funds are not withdrawn, the excess contributions would be subjectbe subject to a 6% to a 6%
penalty tax. IRS, penalty tax. IRS, Publication 969,, pp. 8pp. 8-9. .
4142 An employer’s contributions to employees’ HSAs are subject An employer’s contributions to employees’ HSAs are subject to 26 U.S.C.to 26 U.S.C. 4980G, which requires4980G, which requires the employer to the employer to
provide comparable HSAprovide comparable HSA contributions to all comparable participating employees, unless the employer makes the HSA contributions to all comparable participating employees, unless the employer makes the HSA
contributions through a cafeteria plan. If an employer contributes to employees’ HSAs undercontributions through a cafeteria plan. If an employer contributes to employees’ HSAs under a cafeteria plan, then the a cafeteria plan, then the
contributions are subject to the cafeteria plan nondiscrimination rules. For more details, seecontributions are subject to the cafeteria plan nondiscrimination rules. For more details, see IRS,IRS, Internal Revenue
Bulletin: 2004-33, Notice 2004-50 and 26 U.S.C. §223(b)(4). , Notice 2004-50 and 26 U.S.C. §223(b)(4).
42 43 26 U.S.C. 26 U.S.C. §223(b)(4). §223(b)(4).
4344 In general, a cafeteria plan is a pretax salary reduction agreement that employers can offer their employees. Under a In general, a cafeteria plan is a pretax salary reduction agreement that employers can offer their employees. Under a
cafeteria plan, an employer allows employees to choose to forego a portion of their salary to instead receive a qualified cafeteria plan, an employer allows employees to choose to forego a portion of their salary to instead receive a qualified
benefit. benefit. ~~T he~~The amount that goes toward the qualified amount that goes toward the qualified benefit isbenefit is then excluded from federal income andthen excluded from federal income and payroll taxes. payroll taxes.
Cafeteria plans must alwaysCafeteria plans must always offer employees a choice between at least one taxable benefit (e.g., cash) and at least one offer employees a choice between at least one taxable benefit (e.g., cash) and at least one
qualifiedqualified (nontaxable) benefit but may also include(nontaxable) benefit but may also include additional benefit choices. HSAsadditional benefit choices. HSAs can be consideredcan be considered a qualified a qualified
benefit under a cafeteria plan. HSAbenefit under a cafeteria plan. HSA contributions made in this manner are treated as employer contributions and are contributions made in this manner are treated as employer contributions and are
excludedexcluded from the employee’s income for federal tax purposes (and are not tax deductible by the employee). 26 U.S.C. from the employee’s income for federal tax purposes (and are not tax deductible by the employee). 26 U.S.C.
§125. §125.
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9

~~link to page 15 link to page 15 link to page 12 link to page 16 link to page 16~~ ~~Health Savings Accounts (HSAs)~~

~~arrangement if the restrictions apply to al employees.44 The IRS also has determined that these~~
~~agreements al ow employers to make an employee’s annual expected HSA contribution available~~
~~to the employee so that the employee may cover medical expenses that exceed his or her current~~
~~HSA balances, provided the employee repays the accelerated contributions before the end of the~~
~~year.45~~
~~HSA contributors cannot restrict how HSA funds are used. For example, employers may not limit~~
~~HSAs to certain medical expenses (or medical expenses only), even for funds they contribute.46~~
~~Therefore, account owners may make withdrawals from their HSA for any purpose, though~~
~~nonqualified withdrawals are subject to taxation, as discussed in the section “Nonqualified~~
~~Expenses.”~~
~~Eligible individuals~~ 45 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. 46 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. 47 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. Congressional Research Service 9 link to page 11 link to page 16 link to page 15 Health Savings Accounts (HSAs) Eligible individuals may use other tax-advantaged accounts to increase the amount of resources may use other tax-advantaged accounts to increase the amount of resources
~~available~~ available in their HSAs. in their HSAs. ~~Specifical y~~Specifically, individuals, individuals may make one rollover contribution to an HSA may make one rollover contribution to an HSA
from an Archer MSA or another HSA during a one-year period.from an Archer MSA or another HSA during a one-year period.4748 Individuals also may make a Individuals also may make a
once-in-a-lifetime distribution from their traditional or Roth IRA and deposit it into an HSA, once-in-a-lifetime distribution from their traditional or Roth IRA and deposit it into an HSA,
which is factored into the annual contribution limits described in the which is factored into the annual contribution limits described in the “Contribution Limits”
section.section.4849 These types of HSA contributions are subject to different tax rules than These types of HSA contributions are subject to different tax rules than ~~regular~~individual HSA HSA
contributions, as discussed in the contributions, as discussed in the “Tax Advantages of HSAs” section. section.
Eligibility to Withdraw HSA Funds
An account holder may withdraw HSA funds at any time, regardless of the account holder’s An account holder may withdraw HSA funds at any time, regardless of the account holder’s
eligibilityeligibility to contribute to the HSA. to contribute to the HSA. ~~General y~~Generally, withdrawals must be used for qualified medical , withdrawals must be used for qualified medical
expenses for the account holder, the account holder’s spouse, or the account holder’s expenses for the account holder, the account holder’s spouse, or the account holder’s
dependents.dependents.4950 Any withdrawals for nonqualified expenses must be included in the account Any withdrawals for nonqualified expenses must be included in the account
holder’s gross income when determining federal income taxes and are holder’s gross income when determining federal income taxes and are ~~general y~~generally subject to an subject to an
additional 20% penalty (additional 20% penalty (seesee Table 4)..50
51 Neither the account holder nor the account holder’s spouse or dependents need to be covered Neither the account holder nor the account holder’s spouse or dependents need to be covered
under the same or separate HSA-qualified HDHPs for the account holder to withdraw funds. under the same or separate HSA-qualified HDHPs for the account holder to withdraw funds.
Likewise, having disqualifying coverage would not prohibit an account holder from withdrawing Likewise, having disqualifying coverage would not prohibit an account holder from withdrawing
HSA funds. For example, an account holder who enrolls in Medicare Parts A and B becomes HSA funds. For example, an account holder who enrolls in Medicare Parts A and B becomes
ineligibleineligible to establish or contribute to an HSA, but the account holder may continue to withdraw to establish or contribute to an HSA, but the account holder may continue to withdraw
funds from a previously established HSA. funds from a previously established HSA.

~~44 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.~~
~~45 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.~~
~~46 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.~~
~~47 T here is no limit on the number of HSA~~ HSA Withdrawals Qualified Medical Expenses As noted above, HSA withdrawals are exempt from federal income taxes if used to cover qualified medical expenses for the account holder, the account holder’s spouse, or the account holder’s dependents. HSA withdrawals for these expenses remain exempt from federal income taxes even if the aforementioned individuals are not covered under an HSA-qualified HDHP or have disqualifying coverage. For HSA purposes, qualified medical expenses are considered most medical care described in 26 U.S.C. §213(d) and further explained in IRS Publication 502, Medical and Dental Expenses.52 48 There is no limit on the number of HSA rollovers if they are sent directly from one trustee to another. Additionally, rollovers if they are sent directly from one trustee to another. Additionally,
individualsindividuals do not need to be HSAdo not need to be HSA ~~eligible~~ eligible to roll over fundsto roll over funds from an existing HSAfrom an existing HSA to a new HSA.to a new HSA. IRS,IRS, Publication
969, p. , p. 87. .
4849 26 U.S.C. 26 U.S.C. §408(d)(9). IRS,§408(d)(9). IRS, Publication 969, p. 7., p. 7.
4950 In this context, the term In this context, the term dependent includes all dependents that the account holder claims on his or her tax return and includes all dependents that the account holder claims on his or her tax return and
any person the account holder couldany person the account holder could have claimed as a dependent on his or her tax return except that (a) the person filed have claimed as a dependent on his or her tax return except that (a) the person filed
a joint return, (b) the person had a joint return, (b) the person had a gross income of $4,gross income of $4,~~050 or more~~400 or more (for tax year 2022), or (c) the account holder could have been, or (c) the account holder could have been claimed claimed
as a dependent on someone else’s return. IRS,as a dependent on someone else’s return. IRS, Publication 969, p. 9., p. 9.
~~50 Nonmedical HSA distributions for those aged~~ Gross income amount for 2022 was published in IRS, Internal Revenue Bulletin: 2021-48, Revenue Procedure 2021-45, at 51 Nonmedical HSA distributions for those aged 65 and older are treated as ordinary income and are not subject to a penalty. 52 Qualified medical expenses that were paid for with an HSA withdrawal cannot be used for a medical and dental expenses deduction. IRS, Publication 502 (2019), Medical and Dental Expenses, January 21, 2020, at Congressional Research Service 10 link to page 15 link to page 16 link to page 16 Health Savings Accounts (HSAs) More specifically~~65 and older are treated as ordinary income and are not subject to a~~
~~penalty.~~
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~~link to page 16~~ ~~Health Savings Accounts (HSAs)~~

~~HSA Withdrawals~~
~~Qualified Medical Expenses~~
~~As noted above, HSA withdrawals are exempt from federal income taxes if used to cover~~
qualified medical expenses for the account holder, the account holder’s spouse, or the account
~~holder’s dependents. HSA withdrawals for these expenses remain exempt from federal income~~
~~taxes even if the aforementioned individuals are not covered under an HSA-qualified HDHP or~~
~~have disqualifying coverage.~~
~~For HSA purposes, qualified medical expenses are considered most medical care described in~~
~~26 U.S.C. §213(d) and further explained in IRS Publication 502, Medical and Dental Expenses.51~~
~~More specifical y~~, qualified medical expenses are defined as including the following: the costs of , qualified medical expenses are defined as including the following: the costs of
diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments
affecting any part of the body; the amounts paid for transportation to receive medical care; and affecting any part of the body; the amounts paid for transportation to receive medical care; and
qualified long-term care services.qualified long-term care services.~~52 The CARES Act (P.L. 116-136) recently expanded the~~
~~definition of~~53 HSA qualified medical expenses HSA qualified medical expenses toalso include menstrual care products and over-the- include menstrual care products and over-the-
counter medications and drugs (without a prescription).counter medications and drugs (without a prescription).5354
Of the medical expenses mentioned in 26 U.S.C. §213(d), health insurance premiums Of the medical expenses mentioned in 26 U.S.C. §213(d), health insurance premiums ~~general y~~
generally are not considered qualified medical expenses for HSA purposes. However, there are four are not considered qualified medical expenses for HSA purposes. However, there are four
exceptions to this rule, which are: (1) long-term care insurance, (2) health insurance premiums exceptions to this rule, which are: (1) long-term care insurance, (2) health insurance premiums
during periods of continuation coverage required by federal law (i.e., Consolidated Omnibus during periods of continuation coverage required by federal law (i.e., Consolidated Omnibus
Budget Reconciliation Act coverage, or COBRA), (3) health insurance premiums during periods Budget Reconciliation Act coverage, or COBRA), (3) health insurance premiums during periods
in which the individualin which the individual is receiving unemployment compensation, and (4) for individuals aged 65 is receiving unemployment compensation, and (4) for individuals aged 65
years and older, any health insurance premiums (including Medicare Part B premiums) other than years and older, any health insurance premiums (including Medicare Part B premiums) other than
a Medicare supplemental policy.a Medicare supplemental policy.5455
There is no time limit There is no time limit on when HSA withdrawals need to be made to pay for (or reimburse on when HSA withdrawals need to be made to pay for (or reimburse
payments for) qualified medical expenses, provided adequate records are kept.payments for) qualified medical expenses, provided adequate records are kept.5556 However, HSAs However, HSAs
may not be used to pay expenses incurred before the HSA was established. For example, an may not be used to pay expenses incurred before the HSA was established. For example, an
account holder may pay 2019 qualified medical expenses today using funds from an HSA account holder may pay 2019 qualified medical expenses today using funds from an HSA
established in 2018 but may not use the account to pay for qualified medical expenses incurred in established in 2018 but may not use the account to pay for qualified medical expenses incurred in
2017, since this was before the account was established. 2017, since this was before the account was established.
Nonqualified Expenses
Withdrawals not used to pay for qualified medical expenses must be included in the account Withdrawals not used to pay for qualified medical expenses must be included in the account
holder’s gross income when determining federal income taxes and holder’s gross income when determining federal income taxes and ~~general y~~generally are subject to a 20% are subject to a 20%
penalty, as shown ipenalty, as shown in Table 4. The penalty is waived in cases of disability or death and for The penalty is waived in cases of disability or death and for

~~51 Qualified medical expenses that were paid for with an HSA withdrawal cannot be used for a medical and dental~~
~~expenses deduction. IRS, Publication 502 (2019), Medical and Dental Expenses, January 21, 2020, at~~
https://www.irs.gov/publications/p502. Hereinafter IRS, Publication 502.
~~52 A nonexclusive list of qualified medical expenses can be found in IRS, Publication 502. Also see 26 U.S.C. §213(d).~~
~~53 26 U.S.C. § 223(d)(2)(A), as amended by Section 3702 of P.L. 116-136~~individuals aged 65 and older; however, withdrawals for nonqualified expenses still may be treated as gross income.57 There is no requirement, as there is for qualified retirement plans, that individuals begin to spend down account balances at a certain age. Table 4. HSA Penalty Taxes Penalty Tax Tax Percentage Tax Base Authorizing Law Withdrawal of Funds for Nonqualified Medical 20% Amount of Withdrawal 26 U.S.C. §223(f)(4) Expensesa Failure to Maintain HSA Contributions into HSA Eligibility During Testing 10% for Months Not Covered 26 U.S.C. §223(b)(8) Periodb by HSA-Qualified HDHP https://www.irs.gov/publications/p502. Hereinafter IRS, Publication 502. 53 A nonexclusive list of qualified medical expenses can be found in IRS, Publication 502. Also see 26 U.S.C. §213(d). 54 26 U.S.C. § 223(d)(2)(A), as amended by Section 3702 of the CARES Act (P.L. 116-136). Prior to the CARES Act, over-the-counter . Prior to the CARES Act, over-the-counter
medicines and drugsmedicines and drugs (other than insulin) were not considered an HSA(other than insulin) were not considered an HSA ~~qualified medical expense unless~~ qualified medical expense unless an individual an individual
received a corresponding prescription for each over-the-counter expense. received a corresponding prescription for each over-the-counter expense.
5455 26 U.S.C. 26 U.S.C. § 223(d)(2)(C). IRS, § 223(d)(2)(C). IRS, Publication 969, p. , p. ~~10.~~
559. 56 IRS, IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. 57 26 U.S.C. §223(f)(4). If the account holder dies and the account holder’s spouse inherits the HSA, the spouse becomes the account holder. If someone other than the deceased account holder’s spouse inherits the account, the account ceases to be an HSA and must be included as gross income by the inheritor. 26 U.S.C. §223(f)(8)(A). Congressional Research Service 11 link to page 16 link to page 16 link to page 16 link to page 16 link to page 16 Health Savings Accounts (HSAs) Penalty Tax Tax Percentage Tax Base Authorizing Law Excess Contributions Additional Contribution Above HSA Annual Limit 6% Amount 26 U.S.C. §4973(a) and (g) Source: Congressional Research Service ~~Internal Revenue Bulletin: 2004-33, Notice 2004-50.~~
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~~link to page 16 link to page 16 link to page 16 link to page 16 link to page 17 link to page 17~~ ~~Health Savings Accounts (HSAs)~~

~~individuals aged 65 and older; however, withdrawals for nonqualified expenses stil may be~~
~~treated as gross income.56 There is no requirement, as there is for qualified retirement plans, that~~
~~individuals begin to spend down account balances at a certain age.~~
~~Table 4. HSA Penalty Taxes~~
~~Penalty Tax~~
~~Tax Percentage~~
~~Tax Base~~
~~Authorizing Law~~
~~Withdrawal of Funds for~~
~~Nonqualified Medical~~
~~20%~~
~~Amount of Withdrawal~~
~~26 U.S.C. §223(f)(4)~~
~~Expensesa~~
~~Failure to Maintain HSA~~
~~Contributions into HSA~~
~~Eligibility During Testing~~
~~10%~~
~~for Months Not Covered~~
~~26 U.S.C. §223(b)(8)~~
~~Periodb~~
~~by HSA-Qualified HDHP~~
~~Excess Contributions~~
6%
~~Additional Contribution~~
~~26 U.S.C. §4973(a) and (g)~~
~~Above HSA Annual Limit~~
~~Amount~~
~~Source:~~ ~~Congressional Research Service~~ analysis of tax code. analysis of tax code.
Notes: HSA = health savings account. HSA = health savings account.
a. The penalty is waived in cases of disabilitya. The penalty is waived in cases of disability or death and for individuals aged 65 and older.or death and for individuals aged 65 and older.
b. Individuals who are eligibleb. Individuals who are eligible during the last month of the year are treated as if they had been eligibleduring the last month of the year are treated as if they had been eligible for the for the
entire year and thus are entire year and thus are ~~al owed~~ allowed to contribute up to the annual limit.to contribute up to the annual limit. Individuals who make additional Individuals who make additional
contributions under this rule must maintain their HSA eligibilitycontributions under this rule must maintain their HSA eligibility for the fol owing year, the for the fol owing year, the testing period, ,
except in cases of disability or death. except in cases of disability or death.
Tax Advantages of HSAs
HSAs often are referred to as having a HSAs often are referred to as having a triple tax advantage: (1) contributions reduce taxable : (1) contributions reduce taxable
income, (2) earnings on the account grow tax free, and (3) withdrawals for qualified medical income, (2) earnings on the account grow tax free, and (3) withdrawals for qualified medical
expenses are not subject to taxation.expenses are not subject to taxation.5758
Qualified individuals Qualified individuals who contribute to their HSAs (outside of a cafeteria plan) may claim a who contribute to their HSAs (outside of a cafeteria plan) may claim a
deduction on their federal income tax return and thus reduce their tax burden, as shown ideduction on their federal income tax return and thus reduce their tax burden, as shown in Table
5.5859 The deduction is The deduction is above the line; that is, it is made in determining adjusted gross income and ; that is, it is made in determining adjusted gross income and
may be taken by taxpayers regardless of whether they claim the standard deduction or the may be taken by taxpayers regardless of whether they claim the standard deduction or the
itemized deduction. itemized deduction.
Table 5. Tax Advantages of Various Types of HSA Contributions
Can Be Used to Claim
Counts Toward
HSA Contribution
Federal HSA Tax
Counts as Federal
Annual HSA
Type
Deduction
Taxable Income
Contribution Limit Individual Contributiona Yes No Yes Employer Contributionb No No Yes Traditional or Roth IRA No No Yes Distribution to HSAc Archer MSA and Other No No No HSA Rol over Investment Earnings Not applicable No No Source: IRS, Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans, January 6, 2022~~Limit~~
~~Individual Contributiona~~
~~Yes~~
No
~~Yes~~
~~Employer Contributionb~~
No
No
~~Yes~~

~~56 26 U.S.C. §223(f)(4). If the account holder dies and the account holder’s spouse inherits the HSA, the spouse~~
~~becomes the account holder. If someone other than the deceased account holder’s spouse inherits the account, the~~
~~account ceases to be an HSA and must be included as gross income by the inheritor. 26 U.S.C. §223(f)(8)(A).~~
~~57 Employee Benefit Research Institute, The Triple Tax Advantage of an HSA, July 31, 2014, at https://www.ebri.org/~~
~~docs/default-source/fast-facts/ff-292-hsa-tax-31july14.pdf?sfvrsn=2f38342f_2.~~
~~58 Individuals who may be claimed as a dependent are not eligible to establish an HSA; therefore, they are not eligible~~
~~for this deduction.~~
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~~Can Be Used to Claim~~
~~Counts Toward~~
~~HSA Contribution~~
~~Federal HSA Tax~~
~~Counts as Federal~~
~~Annual HSA~~
~~Type~~
~~Deduction~~
~~Taxable Income~~
~~Contribution Limit~~
~~Traditional or Roth IRA~~
No
No
~~Yes~~
~~Distribution to HSAc~~
~~Archer MSA and Other~~
~~HSA Rol over~~
No
No
No
~~Investment Earnings~~
~~Not applicable~~
No
No
~~Source: IRS, Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans, March 1, 2018~~, at , at
https://www.irs.gov/pub/irs-pdf/p969.pdf. https://www.irs.gov/pub/irs-pdf/p969.pdf.
Notes: HSA = health savings account. Excess HSA contributions count toward gross income,HSA = health savings account. Excess HSA contributions count toward gross income, cannot be used to cannot be used to
claim the HSA tax deduction, and are subject to a 6% penalty tax. claim the HSA tax deduction, and are subject to a 6% penalty tax.
a. Includes account holder contributions and other contributions made by individuals on behalf of the account a. Includes account holder contributions and other contributions made by individuals on behalf of the account
holder (not including employer holder (not including employer contributions). contributions).
b. Includes employee b. Includes employee contributions made through a cafeteria plan. contributions made through a cafeteria plan.
c. A once-in-a-lifetime traditional or Roth individual retirementc. A once-in-a-lifetime traditional or Roth individual retirement account (IRA) distribution to an HSA would account (IRA) distribution to an HSA would
not be subject to early IRA withdrawal penalties. not be subject to early IRA withdrawal penalties.
~~Individuals may claim the tax deduction for al amounts contributed to their HSAs that were~~
~~made either by the individual or on behalf of the individual~~ 58 Employee Benefit Research Institute, The Triple Tax Advantage of an HSA, July 31, 2014, at https://www.ebri.org/docs/default-source/fast-facts/ff-292-hsa-tax-31july14.pdf?sfvrsn=2f38342f_2. 59 Individuals who may be claimed as a dependent are not eligible to establish an HSA; therefore, they are not eligible for this deduction. Congressional Research Service 12 Health Savings Accounts (HSAs) Individuals may claim the tax deduction for all amounts contributed to their HSAs that were made either by the individual or on behalf of the individual (not including employer amounts or (not including employer amounts or
contributions made through a cafeteria plan) over the course of the year through the subsequent contributions made through a cafeteria plan) over the course of the year through the subsequent
tax filing deadline. For individuals claiming the deduction, the total tax effect of the eligibletax filing deadline. For individuals claiming the deduction, the total tax effect of the eligible HSA HSA
contributions depends on an individual’s marginal tax rate and the amount of nonemployer contributions depends on an individual’s marginal tax rate and the amount of nonemployer
contributions to the individual’s HSA. contributions to the individual’s HSA.
No deduction may be claimed for a once-in-a-lifetime contribution from an IRA (though the IRA No deduction may be claimed for a once-in-a-lifetime contribution from an IRA (though the IRA
distribution is not penalized, as it otherwise might be) or for Archer MSA or other HSA distribution is not penalized, as it otherwise might be) or for Archer MSA or other HSA
rollovers.rollovers.5960 These amounts do not count as gross income in determining income tax liability. These amounts do not count as gross income in determining income tax liability.6061
An employer’s contributions to an HSA cannot be deducted by employees as HSA contributions An employer’s contributions to an HSA cannot be deducted by employees as HSA contributions
or as medical expense deductions; however, they are excluded from employees’ gross income in or as medical expense deductions; however, they are excluded from employees’ gross income in
determining their income tax liability.determining their income tax liability.61 62 In addition, the employer’s contributions are excluded In addition, the employer’s contributions are excluded
from Social Security and Medicare taxes for both employers and employees and are excluded from Social Security and Medicare taxes for both employers and employees and are excluded
from federal unemployment insurance taxes.from federal unemployment insurance taxes.6263 If an employee contributes to his or her HSA If an employee contributes to his or her HSA
through a cafeteria plan, the contributions are considered to be made by the employer and are through a cafeteria plan, the contributions are considered to be made by the employer and are
excluded from the employee’s gross income in determining his or her income tax liabilityexcluded from the employee’s gross income in determining his or her income tax liability and are and are
exempt from the three employment taxes (Social Security, Medicare, and unemployment exempt from the three employment taxes (Social Security, Medicare, and unemployment
insurance taxes). An employee cannot deduct amounts contributed to an HSA through a cafeteria insurance taxes). An employee cannot deduct amounts contributed to an HSA through a cafeteria
plan. plan.
HSA balances can be invested similar to IRAs (e.g., annuities, stocks, mutual funds, bonds, etc.), HSA balances can be invested similar to IRAs (e.g., annuities, stocks, mutual funds, bonds, etc.),
and any associated earnings can accumulate tax free.and any associated earnings can accumulate tax free.63

~~59 26 U.S.C. §223(d)(4)(A).~~
~~60 IRS, Publication 969, pp. 7-8.~~
~~61 IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2.~~
~~62 If an individual is self-employed, the HSA deduction does not affect self-employment net earnings; as a~~
~~consequence, HSA contributions are not exempt from Social Security and Medicare (Self-Employment Contribution~~
~~Act or SECA) taxes. IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.~~
~~63 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50, and IRS, Publication 969, p. 3.~~
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~~Health Savings Accounts (HSAs)~~

~~State income taxes general y follow federal rules with respect to deductions and exclusions.~~
~~However, some states may choose to provide different treatment. For example, California does~~
~~not recognize HSAs as tax-advantaged accounts for state income tax purposes.64 Therefore, a~~
~~California taxpayer who contributed to an HSA is required to increase his or her California~~
~~adjusted gross income by an amount equal to the sum of the taxpayer’s HSA deduction on his or~~
~~her federal return, the interest earned on the HSA, and the contributions made by the taxpayer’s~~
~~employer. This increase results in a larger state tax burden (or a smal er state tax refund) for the~~
~~taxpayer.~~
~~HDHP Enrollment and HSA Utilization~~
~~Data Challenges~~
~~While it would be beneficial to study HSA statistics among the population that is eligible to~~
~~establish and contribute to an HSA (i.e., those that are enrolled in an HSA-qualified HDHP and~~
~~do not have any disqualifying coverage), there is limited information available on this population.~~
~~The lack of available data stems in part from the fact that HSAs and HSA-qualified~~ 64 State income taxes generally follow federal rules with respect to HSA deductions and exclusions. However, some states may choose to provide different treatment. For example, California does not recognize HSAs as tax-advantaged accounts for state income tax purposes.65 Therefore, a California taxpayer who contributed to an HSA is required to increase his or her California adjusted gross income by an amount equal to the sum of the taxpayer’s HSA deduction on his or her federal return, the interest earned on the HSA, and the contributions made by the taxpayer’s employer. This increase results in a larger state tax burden (or a smaller state tax refund) for the taxpayer. 60 26 U.S.C. §223(d)(4)(A). 61 IRS, Publication 969, p. 7. 62 The Federal Employees Health Benefits (FEHB) Program provides health insurance to federal employees, retirees, and their dependents. FEHB insurance carriers offer HSA-qualified HDHPs and these plans contribute money to enrollee’s HSAs. These plan contributions are considered employer contributions (i.e., contributions by the government) and are excluded from the employee’s gross income. Office of Personnel Management, New Health Savings Plan Worksheet, https://www.opm.gov/healthcare-insurance/healthcare/health-savings-accounts/worksheet/. IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2. 63 If an individual is self-employed, the HSA deduction does not affect self-employment net earnings; as a consequence, HSA contributions are not exempt from Social Security and Medicare (Self-Employment Contribution Act or SECA) taxes. IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50. 64 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50, and IRS, Publication 969, p. 3. 65 California Assembly, AB 727 (Choi): Income Tax: Health Savings Accounts, at https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB727 and State of California Franchise Tax Board, Bill Analysis - Health Savings Account Deduction Conformity, https://www.ftb.ca.gov/tax-pros/law/legislation/2021-2022/AB727-021621.pdf. Congressional Research Service 13 Health Savings Accounts (HSAs) HDHP Enrollment and HSA Utilization Data Challenges While it would be beneficial to study HSA statistics among the population that is eligible to establish and contribute to an HSA (i.e., those that are enrolled in an HSA-qualified HDHP and do not have any disqualifying coverage), there is limited information available on this population. The lack of available data stems in part from the fact that HSAs and HSA-qualified HDHPs are HDHPs are
two separate products and often can be administered by two separate institutions. For example, two separate products and often can be administered by two separate institutions. For example,
some individuals have their HSA established with their insurer, whereas others have their HSA some individuals have their HSA established with their insurer, whereas others have their HSA
administered by another type of institution, such as a bank. In the latter case, the insurer would administered by another type of institution, such as a bank. In the latter case, the insurer would
have insights into individuals’have insights into individuals’ potential eligibilitypotential eligibility to contribute to HSAs but would not have any to contribute to HSAs but would not have any
information regarding the individuals’ HSA activity (i.e., contributions, investments, or information regarding the individuals’ HSA activity (i.e., contributions, investments, or
withdrawals). Inversely (and accounting for the fact that individuals can continue to have an HSA withdrawals). Inversely (and accounting for the fact that individuals can continue to have an HSA
and withdraw HSA funds when they are no longer eligibleand withdraw HSA funds when they are no longer eligible to contribute to an HSA), the HSA to contribute to an HSA), the HSA
holding institution likely would not be aware of the individuals’ enrollment in or disenrollment holding institution likely would not be aware of the individuals’ enrollment in or disenrollment
from an HSA-qualifiedfrom an HSA-qualified HDHP. Because of this, HSA holding institutions may not know about an HDHP. Because of this, HSA holding institutions may not know about an
individual’s HSA eligibilityindividual’s HSA eligibility and insurers may not know about an individual’s HSA contributions. and insurers may not know about an individual’s HSA contributions.
As a result, there may be no single As a result, there may be no single data source to answer key questions of interest, for example, data source to answer key questions of interest, for example,
how many individuals eligiblehow many individuals eligible to open an HSA or eligibleto open an HSA or eligible to make an HSA contribution do so.to make an HSA contribution do so.65
66 Instead, HSA research tends to focus on one of two populations, HSA-qualified HDHP enrollees Instead, HSA research tends to focus on one of two populations, HSA-qualified HDHP enrollees
or HSA holders. Although these two product populations overlap, they are not entirely identical. or HSA holders. Although these two product populations overlap, they are not entirely identical.
~~For example, not al~~ As mentioned, not all HSA-qualifiedHSA-qualified HDHP enrollees are eligibleHDHP enrollees are eligible to or have established or to or have established or
contributed to an HSA, and not contributed to an HSA, and not ~~al HSA~~ all HSA holders currently are enrolled in an HSA-qualified holders currently are enrolled in an HSA-qualified
HDHP or are currently eligibleHDHP or are currently eligible to contribute to an HSA. to contribute to an HSA.
Within this research, other methodological limitations limit the extent to which available research Within this research, other methodological limitations limit the extent to which available research
can be generalized to the entire HSA and/or HSA-qualifiedcan be generalized to the entire HSA and/or HSA-qualified HDHP populations. HDHP populations. ~~Specifical y~~Specifically, ,
many HSA holder/HSA-qualifiedmany HSA holder/HSA-qualified HDHP enrollee studies rely on surveys of insurers, businesses, HDHP enrollee studies rely on surveys of insurers, businesses,
or HSA administrators. These data may not be or HSA administrators. These data may not be ~~national y~~nationally representative, may provide unadjusted representative, may provide unadjusted
results from a survey that does not use a random sample of the population being studied, or may results from a survey that does not use a random sample of the population being studied, or may
use administrative data from a subsection of the population whose data are available. As such, use administrative data from a subsection of the population whose data are available. As such,

~~64 California Assembly, AB 2384 (Choi): Income Tax: Health Savings Accounts, at https://leginfo.legislature.ca.gov/~~
~~faces/billNavClient.xhtml?bill_id=201920200AB2384.~~
~~65 A recent study surveyed individuals to determine and evaluate HSA use amongst people enrolled in high -deductible~~
~~health plans. For purposes of the study, “HSA” was defined to include HSAs and other accounts of funds that could be~~
~~used~~ CRS is unaware of data on the entire population of HSA-qualified HDHP enrollees or HSA holders. Current research can, however, highlight various trends with respect to HSA-qualified HDHP enrollment and HSA access and use. 66 A recent study surveyed individuals to determine and evaluate HSA use amongst people enrolled in high-deductible health plans. For purposes of the study, “HSA” was defined to include HSAs and other accounts of funds that could be used to pay for medical care (e.g., health reimbursement arrangements [HRAs]). Jeffrey Tto pay for medical care (e.g., health reimbursement arrangements [HRAs]). Jeffrey T . Kullgren, Elizabeth Q. Cliff, . Kullgren, Elizabeth Q. Cliff,
and Christopher Krenz, et al., “and Christopher Krenz, et al., “ Use of Health SavingsUse of Health Savings Accounts Among USAccounts Among US ~~Adults~~ Adults Enrolled,”Enrolled,” JAMA Network Open. .
2020; 3(7):e2011014. doi:10.1001/jamanetworkopen.2020.11014. 2020; 3(7):e2011014. doi:10.1001/jamanetworkopen.2020.11014.
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Health Savings Accounts (HSAs)

~~data on the entire population of HSA-qualified HDHP enrollees or HSA holders are somewhat~~
~~limited.~~
~~Current research can, however, highlight various trends with respect to HSA-qualified HDHP~~
~~enrollment and HSA contributions.~~
~~Data Findings~~
~~HSA-Qualified HDHP Enrollment~~
~~For 2018 HSA-qualified HDHP enrollment estimates, an Employee Benefit Research Institute~~
~~(EBRI) issue brief looked at four surveys produced by four different entities (two of which~~
~~surveyed individuals and two of which surveyed employers) and found that HSA-qualified HDHP~~
~~enrollment estimates ranged from 23 mil ion individuals to 36.8 mil ion individuals in 2018,~~
~~though EBRI highlights methodological questions associated with these estimates.66 For example,~~
~~the two surveys of individuals indicated lower HSA-qualified HDHP estimates than the~~
~~enrollment estimates indicated in the two surveys of employers. HSA-qualified HDHP estimates~~
~~developed from surveys of individuals would general y be expected to be higher than the~~
~~estimates developed from surveys of employers since the surveys of individuals would include~~
~~those enrolled in HSA-qualified HDHPs in the individual market and the group market, whereas~~
~~the surveys of employers would include only group market enrollment.~~
~~From a historical standpoint, multiple sources have demonstrated continued increases in HSA-~~
~~qualified HDHP enrollment since the mid-2000s. An America’s Health Insurance Plans report~~
~~using survey data from insurers has shown a continued increase in enrollment in HSA-qualified~~
~~HDHPs sold by commercial insurers in the individual and the smal - and large-group markets~~
~~from 2005 through 2017.67~~
~~The Kaiser Family Foundation (KFF) issued a report using survey data from employers with three~~
~~or more workers that showed an increase in the percentage of covered employees in HSA-~~
~~qualified HDHPs between 2006 and 2019.68 The survey also revealed that in 2019, larger~~
~~employers (i.e., those with 200 or more workers) were more likely than smal er~~Data Findings HSA-Qualified HDHP Enrollment HSA-qualified HDHP enrollment has generally increased since the mid-2000s. An America’s Health Insurance Plans report using survey data from insurers has shown a continued increase in the number of people enrolled in HSA-qualified HDHPs sold by commercial insurers in the individual and the small- and large-group markets from 2005 through 2017.67 A Kaiser Family Foundation (KFF) report using survey data from employers with three or more workers showed an increase in the percentage of employees with health insurance enrolled in HSA-qualified HDHPs between 2007 and 2017 from 3% to 19%.68 However, the rate of growth in HSA-qualified HDHP enrollment has more recently fluctuated. The Employee Benefit Research Institute (EBRI) summarized recent HSA-qualified HDHP enrollment trends from the survey results of six different entities (two of which surveyed individuals, three of which surveyed employers, and one of which surveyed insurers).69 EBRI highlighted that most surveys, including the aforementioned KFF source, showed little to no growth in the percentage of enrollees in HSA-qualified HDHPs from 2017 to 2018, followed by a period of increased enrollment from 2018 to 2020. Of the two surveys with data for 2021, both show a decline in the percentage of enrollees in HSA-qualified HDHPs from 2020 to 2021.70 Employer HSA-qualified HDHP offer rates and employee HDHP-enrollment rates with savings options varies by employer size.71 The KFF report revealed that among firms offering health benefits in 2021, larger employers (i.e., those with 200 or more workers) were more likely than smaller employers (i.e., employers (i.e.,
~~those with 3-199 workers) to offer HSA-qualified HDHPs to employees (among firms offering~~

~~66 T he issue brief discussed five surveys that were produced by five entities, however one entity did not have 2018~~
~~estimates. T he sources included in the issue brief were produced by the Employee Benefit Research Institute~~
~~(EBRI)/Greenwald & Associates, Kaiser Family Foundation (KFF), Mercer, National Center for Health Statistics~~
~~(NCHS), and America’s Health Insurance Plans (AHIP). Of these sources, AHIP did not have 2018 HSA-qualified~~
~~HDHP estimates included in the issue brief. Paul Fronstin,~~ ~~Enrollm ent in HSA-Eligible Health Plans: Slow Steady~~
~~Growth Continued Into 2018, Employee Benefit Research Institute, March 28, 2019, p. 5 at https://www.ebri.org/docs/~~
~~default-source/ebri-issue-brief/ebri_ib_478_hsaenrollment -28mar19.pdf?sfvrsn=e86b3f2f_4#:~:text=~~
~~In%202017%2C%20both%20the%20EBRI,enrollment%20increased%20to%2023%20million . Hereinafter Fronstin,~~
Enrollm ent in HSA-Eligible Health Plans: Slow and Steady Growth Continued Into 2018 .
~~67 More recent data from this source was not publically available at the time this report was published. America’s~~
~~Health Insurance Plans,~~ ~~Health Savings Accounts and High Deductible Health Plans Grow as Valuable Financial~~
~~Planning Tools, April 12, 2018, p. 3, https://www.ahip.org/2017-survey-of-health-savings-accounts/.~~
~~68 Gary Claxton, Matthew Rae, and Anthony Damico et al., Employer Health Benefits 2019 Annual Survey, Kaiser~~
~~Family Foundation and Health Research and Educational T rust, September 25, 2019, p. 142, at http://files.kff.org/~~
~~attachment/Report-Employer-Health-Benefits-Annual-Survey-2019. Hereinafter Claxton, Rae, and Damico et al.,~~
~~Em ployer Health Benefits.~~
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~~Health Savings Accounts (HSAs)~~

~~health benefits).69 Large employers also had a higher percentage of covered employees enrolled in~~
~~such coverage in 2019, relative to smal employers.70~~
~~The rate of growth in HSA-qualified HDHP enrollment has recently been slowing. The~~
~~aforementioned EBRI issue brief looked at enrollment data from 2007 to 2018 and highlighted~~
~~that most HSA-qualified HDHP enrollment sources indicated a recent slowing of enrollment~~
~~growth in 2017-2018.71 It is unclear whether or not this slow growth rate wil be temporary, as the~~
~~2019 KFF report indicated a higher rate of growth in the percentage of covered workers enrol ed~~
~~in HSA-qualified HDHPs from 2018 to 2019 (relative to the 2017-2018 rate of growth~~
~~demonstrated by any of the enrollment sources analyzed in the EBRI issue brief), and a 2019~~
~~Mercer report (which used survey data from employers that had 10 or more workers and offered~~
~~health benefits) indicated a rate of growth in the percentage of covered workers enrolled in HSA-~~
~~qualified HDHPs from 2018 to 2019 that was in line with the 2017-2018 rate of growth indicated~~
~~in the EBRI issue brief.72~~those with 3-199 workers) to offer HSA-qualified HDHPs to employees (51% to 16%).72 Large employers also had a higher percentage of covered employees enrolled in HDHPs with a savings option in 2021, relative to small employers (30% to 23%).73 67 America’s Health Insurance Plans, Health Savings Accounts and Consumer-Directed Health Plans Grow as Valuable Financial Planning Tools, April 2018, p. 3, https://www.ahip.org/documents/HSA_Report_4.12.18-1.pdf. 68 Gary Claxton, Matthew Rae, and Gregory Young et al., Employer Health Benefits 2021 Annual Survey, Kaiser Family Foundation and Health Research and Educational Trust (KFF), November 2021, p. 127, at https://files.kff.org/attachment/Report-Employer-Health-Benefits-2021-Annual-Survey.pdf. Hereinafter Claxton, Rae, and Young et al., Employer Health Benefits. 69 The six entities with survey results included in the Employee Benefit Research Institute (EBRI) report include the Americans’ Health Insurance Plans, Mercer, National Center for Health Statistics, Kaiser Family Foundation, EBRI/Greenwald Research Consumer Engagement in Health Care Survey, and the Medical Expenditure Panel Survey. Some surveyed populations account for only those with employer-sponsored plans, whereas others also account for those with individual market plans. Employee Benefit Research Institute, Growth in Enrollment in HSA-Eligible Health Plans Waning, January 27, 2022, https://www.ebri.org/docs/default-source/fast-facts/ff-422-hsaenrollment-27jan22.pdf. Hereinafter, EBRI, Growth in Enrollment in HSA-Eligible Health Plans Waning. 70 The Kaiser Family Foundation Employer Health Benefits Annual Survey and the EBRI/Greenwald Research Consumer Engagement in Health Care Survey were the two surveys with 2021 data. EBRI, Growth in Enrollment in HSA-Eligible Health Plans Waning. 71 High-deductible health plans with a savings option include plans with an HSA or a health reimbursement arrangement (HRA). HRAs do not need to be paired with the same types of plans that HSAs must be paired with. 72 Claxton, Rae, and Young et al., Employer Health Benefits, p. 126. 73 Claxton, Rae, and Young et al., Employer Health Benefits, p. 127. Congressional Research Service 15 link to page 21 Health Savings Accounts (HSAs) HSA Access Among Workers The Bureau of Labor Statistics issued a report based on survey data from private-sector and state and local government employers that indicated that 35% of workers had access to an HSA through their employer in 2021.74 Service industry workers were least likely to have access (18% of workers) and management, professional, and related workers were most likely to have access (50% of workers). Access generally increased as firm size increased and was higher for higher-paying (on average) occupations.
HSA Utilization
The IRS maintains data regarding the number of tax returns reporting HSA contributions and The IRS maintains data regarding the number of tax returns reporting HSA contributions and
withdrawals. Because these IRS data are based on information provided by tax return, it is not withdrawals. Because these IRS data are based on information provided by tax return, it is not
possible to discern from the publicly availablepossible to discern from the publicly available data how many individuals (as opposed to how data how many individuals (as opposed to how
many tax returns or filed forms) made HSA contributions or withdrawals in each tax year. many tax returns or filed forms) made HSA contributions or withdrawals in each tax year.
Because each tax return is filed on behalf of at least one individual, the actual number of Because each tax return is filed on behalf of at least one individual, the actual number of
~~individuals~~ individuals making HSA contributions or withdrawals would be no fewer than the number of making HSA contributions or withdrawals would be no fewer than the number of
returns indicating such activity. Therefore, the figures reported here represent a minimum number returns indicating such activity. Therefore, the figures reported here represent a minimum number
of individuals who made HSA contributions or withdrawal in each tax year. of individuals who made HSA contributions or withdrawal in each tax year.
HSA Contribution Data
For tax year For tax year ~~2017~~2019, the IRS estimated that , the IRS estimated that ~~1.9 mil ion~~2.1 million tax returns reported an HSA that received tax returns reported an HSA that received
~~individual~~ individual contributions (1.3% of filed tax returns) and contributions (1.3% of filed tax returns) and ~~9 mil ion~~11.3 million tax returns reported an HSA that tax returns reported an HSA that
received employer contributions (received employer contributions (~~5.9~~7.1% of filed tax returns).% of filed tax returns).7375 In this context, individual In this context, individual
contributions are contributions are ~~those~~ non-employer contributions made by or on behalf of an individual. non-employer contributions made by or on behalf of an individual.
Employer contributions include contributions made by an employer and Employer contributions include contributions made by an employer and ~~those~~ contributions made contributions made
by an employee through a cafeteria plan. The aforementioned tax return categories are not by an employee through a cafeteria plan. The aforementioned tax return categories are not
~~mutual y~~mutually exclusive (e.g., a tax return can have both individual and employer contributions). exclusive (e.g., a tax return can have both individual and employer contributions).
Similar to historical increases in HSA-qualified Similar to historical increases in HSA-qualified HDHP enrollment, the IRS has estimated HDHP enrollment, the IRS has estimated
increases in both the number of tax returns reporting individual HSAincreases in both the number of tax returns reporting individual HSA contributions and the contributions and the
number of tax returns reporting employer HSA contributions from 2004 to number of tax returns reporting employer HSA contributions from 2004 to ~~2017, though the~~

~~69 Claxton, Rae, and Long et al., Employer Health Benefits, p. 141.~~
~~70 Claxton, Rae, and Long et al., Employer Health Benefits, p. 143.~~
~~71 T his analysis included surveys produced by EBRI/Greenwald & Associates, KFF, Mercer, NCHS, and AHIP.~~
~~Fronstin, Enrollm ent in HSA-Eligible Health Plans: Slow and Steady Growth Continued Into 2018 , p. 8.~~
~~72 Previous iterations of t he KFF and Mercer sources were included in the EBRI issue brief analysis. Claxton, Rae, and~~
~~Long et al., Em ployer Health Benefits, p. 142 and Mercer,~~ ~~National Survey of Em ployer-Sponsored Health Plans 2019:~~
~~Survey Tables, 2020.~~
~~73 T ax~~2019, though the number of returns reporting employer contributions have grown at a faster rate than the number of returns reporting individual contributions (see Figure 1).76 74 U.S. Bureau of Labor Statistics, National Compensation Survey: Employee Benefits in the United States, March 2021, September 2021, pp. 159-160, https://www.bls.gov/ncs/ebs/benefits/2021/employee-benefits-in-the-united-states-march-2021.pdf. 75 Tax returns can represent contributions to more than one HSA account (e.g., spouses returns can represent contributions to more than one HSA account (e.g., spouses contributing to each of their contributing to each of their
own HSAs).own HSAs). ~~T he IRS~~ The IRS estimates do not account for individualsestimates do not account for individuals who were HSAwho were HSA ~~eligible~~ eligible but didbut did not contribute to, or not contribute to, or
receive contributions for, an HSA.receive contributions for, an HSA. ~~CRS~~ CRS analysis of Internal Revenue Service, analysis of Internal Revenue Service, Statistics ~~of Incom e~~ of Income—2017 Individual
~~Incom e~~Income Tax Returns Line Item ~~Estim ates~~ Estimates, pp. 2, , pp. 2, ~~196~~192, https://www.irs.gov/pub/irs-pdf/p4801.pdf, https://www.irs.gov/pub/irs-pdf/p4801.pdf. 76 Internal Revenue Service, SOI Tax Stats – Individual Income Tax Returns, Line Item Estimates, at https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates. .
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link to page link to page ~~21 link to page~~ 22 22

Health Savings Accounts (HSAs)

~~number of returns reporting employer contributions have grown at a faster rate than the number~~
~~of returns reporting individual contributions (see Figure 1).74~~
Figure 1. Tax Returns Reporting HSA Contributions, TY2004-~~TY2017~~TY2019

Source: CRS analysis of Internal Revenue Service,CRS analysis of Internal Revenue Service, SOI Tax Stats – Individual Income Tax Returns, Line Item
Estimates, at https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates. , at https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates.
Notes: TY = tax year. HSA = health savings account. Tax return categories TY = tax year. HSA = health savings account. Tax return categories are not are not ~~mutual y~~mutually exclusive exclusive (e.g., a (e.g., a
tax return can have both individual and employertax return can have both individual and employer contributions).contributions). Tax returns can representTax returns can represent ~~more~~ more than one than one
individual and therefore contributions to more than one HSA (e.g., spouses contributing to each of their own individual and therefore contributions to more than one HSA (e.g., spouses contributing to each of their own
HSAs). HSAs). Employer contributions include employerinclude employer contributions and employeecontributions and employee contributions made through a contributions made through a
cafeteria plan. Data do not account for tax returns of individuals who werecafeteria plan. Data do not account for tax returns of individuals who were HSA eligibleHSA eligible but did not contribute but did not contribute
to, or receiveto, or receive contributions for, an HSA. contributions for, an HSA.
~~For~~CRS analysis of 2017 tax year data provided by the IRS found that, for tax year 2017, the percentage of tax returns within different age brackets that reported tax year 2017, the percentage of tax returns within different age brackets that reported
employer contributions is fairly consistent across employer contributions is fairly consistent across al all age groupings from 26 to 64. These age groupings from 26 to 64. These
percentages range from 7.3% to 9.1% and peak in the 35-44 age bracket (sepercentages range from 7.3% to 9.1% and peak in the 35-44 age bracket (see Figure 2))~~.75~~
.77 The percentage of tax returns within different age brackets that reported individual contributions The percentage of tax returns within different age brackets that reported individual contributions
is also fairly consistent across is also fairly consistent across al all age groupings from 26 to 64. These percentages range from age groupings from 26 to 64. These percentages range from
1.1% to 2.4% and increase as individuals age. Regardless of age, the percentage of tax returns 1.1% to 2.4% and increase as individuals age. Regardless of age, the percentage of tax returns
within an age bracket making individual contributions is lower than the percentage of returns within an age bracket making individual contributions is lower than the percentage of returns
making employer contributions, which suggests that fewer HSA-eligible individualsmaking employer contributions, which suggests that fewer HSA-eligible individuals make make
contributions to an HSA outside of the employer-setting.contributions to an HSA outside of the employer-setting.

~~74 Internal Revenue Service, SOI Tax Stats – Individual Income Tax Returns, Line Item Estimates, at~~
~~https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates.~~
75 77 Age for joint returns was Age for joint returns was ~~based~~ based on the primary taxpayer’s age. CRSon the primary taxpayer’s age. CRS analysis of data provided by Internal Revenue analysis of data provided by Internal Revenue
ServiceService (IRS), Statistics of Income (SOI) Division (provided December 2019) and IRS(IRS), Statistics of Income (SOI) Division (provided December 2019) and IRS Publication 1304.Publication 1304.
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Health Savings Accounts (HSAs)

Figure 2. Percentage of Tax Returns Reporting HSA Contributions in TY2017, by Age

Source: CRS analysis of data provided by Internal Revenue ServiceCRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division (IRS), Statistics of Income (SOI) Division
(provided December(provided December 2019) and IRS Publication 1304. 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 10%. Tax return categories TY = tax year. HSA = health savings account. Y-Axis Maximum = 10%. Tax return categories are not are not
~~mutual y~~mutually exclusive exclusive (e.g., a tax return can have both individual and employer(e.g., a tax return can have both individual and employer contributions).contributions). Tax returns can Tax returns can
representrepresent more than one individual and thereforemore than one individual and therefore contributions to morecontributions to more than one HSA (e.g.,than one HSA (e.g., spouses spouses
contributing to each of their own HSAs).contributing to each of their own HSAs). Age for joint returns was based on the primary taxpayer’s age. Age for joint returns was based on the primary taxpayer’s age.
Employer contributions include employerinclude employer contributions and employeecontributions and employee contributions made through a cafeteria plan. contributions made through a cafeteria plan.
Data do not account for tax returns of individuals who wereData do not account for tax returns of individuals who were HSA eligibleHSA eligible but did not contribute to, or receive but did not contribute to, or receive
contributions for, an HSA. contributions for, an HSA.
Two age groupings have markedly lower HSA contribution rates: under 26, and 65 and over. Of Two age groupings have markedly lower HSA contribution rates: under 26, and 65 and over. Of
the tax returns for those aged 25 and younger, 1.8% make employer contributions and 0.2% make the tax returns for those aged 25 and younger, 1.8% make employer contributions and 0.2% make
~~individual~~ individual contributions. Of the tax returns for those aged 65 and older, 0.9% make employer contributions. Of the tax returns for those aged 65 and older, 0.9% make employer
contributions and 0.4% make individual contributions. contributions and 0.4% make individual contributions.
Those aged 25 and younger are more likely to be considered a tax dependent of another taxpayer, Those aged 25 and younger are more likely to be considered a tax dependent of another taxpayer,
which would preclude an otherwise eligible individuals from being HSA eligible.which would preclude an otherwise eligible individuals from being HSA eligible.76 78 In addition, In addition,
those aged 19 and younger and aged 19-25 tend to have lower rates of private health insurance those aged 19 and younger and aged 19-25 tend to have lower rates of private health insurance
enrollment (relative to other age groupings), which reduces the population that may be HSA enrollment (relative to other age groupings), which reduces the population that may be HSA
eligible.eligible.7779
The drop-off in the number of returns reporting HSA contributions in the 65 and over age bracket The drop-off in the number of returns reporting HSA contributions in the 65 and over age bracket
is most likely associated with individuals enrolling in Medicare at the age of 65 and no longer is most likely associated with individuals enrolling in Medicare at the age of 65 and no longer
being eligiblebeing eligible to contribute to an HSA as a result of such enrollment.to contribute to an HSA as a result of such enrollment.7880 The tax returns that The tax returns that
indicate HSA contributions where the primary taxpayer is aged 65 and over may be the result of indicate HSA contributions where the primary taxpayer is aged 65 and over may be the result of

~~76 T ax~~ 78 Tax dependency and private health insurance coverage dependency are made dependency and private health insurance coverage dependency are made by separate determinations. For by separate determinations. For
example, an individualexample, an individual may be consideredmay be considered a dependent on a parent’s private health insurance policy while not being a dependent on a parent’s private health insurance policy while not being
consideredconsidered a tax dependent to such parent. a tax dependent to such parent. ~~T ax~~Tax dependency is defined in statute at 26 U.S.C. §152 and private health dependency is defined in statute at 26 U.S.C. §152 and private health
insurance coverage dependency requirements can be found atinsurance coverage dependency requirements can be found at 42 U.S.C.42 U.S.C. §300gg-14. §300gg-14.
7779 Edward Edward R. Berchick, JessicaR. Berchick, Jessica C. Barnett, and Rachel D. Upton, C. Barnett, and Rachel D. Upton, Health Insurance Coverage in the United States:
2018, U.S. Census, U.S. Census Bureau,Bureau, November 2019, p. 6, https://www.census.gov/content/dam/Census/library/publications/November 2019, p. 6, https://www.census.gov/content/dam/Census/library/publications/
2019/demo/p60-267.pdf. 2019/demo/p60-267.pdf.
7880 For more information on the relationship between HSAs For more information on the relationship between HSAs and Medicare, see CRSand Medicare, see CRS In FocusIn Focus IF11425, IF11425, Health Savings
Accounts (HSAs) and Medicare. .
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the taxpayer delaying Medicare enrollment and retaining HSA eligibility the taxpayer delaying Medicare enrollment and retaining HSA eligibility and/or the primary tax and/or the primary tax
payer having a spouse who is younger than the primary taxpayer and retains HSA eligibility. payer having a spouse who is younger than the primary taxpayer and retains HSA eligibility.
When looking at contribution statistics by adjusted gross income (AGI) instead of age, the When looking at contribution statistics by adjusted gross income (AGI) instead of age, the
estimated percentage of returns that indicated employer contributions increased as AGI increased estimated percentage of returns that indicated employer contributions increased as AGI increased
up to the $200,000 to $499,999 AGI bracket, before decreasing as AGI increased above such up to the $200,000 to $499,999 AGI bracket, before decreasing as AGI increased above such
bracket (sebracket (see Figure 3).).7981 Of those tax returns with AGI between $200,000 and $499,999, roughly Of those tax returns with AGI between $200,000 and $499,999, roughly
1 in 6 tax returns (17.0%) indicated an employer contribution (and/or employee cafeteria plan 1 in 6 tax returns (17.0%) indicated an employer contribution (and/or employee cafeteria plan
contribution) to an HSA in 2017. The percentages of returns in each AGI bracket making contribution) to an HSA in 2017. The percentages of returns in each AGI bracket making
employer contributions ranged from 0.2% to 17.0%, which is a wider variance than when looking employer contributions ranged from 0.2% to 17.0%, which is a wider variance than when looking
at the data by age. at the data by age.
With respect to individual contributions, the estimated percentage of returns within an AGI With respect to individual contributions, the estimated percentage of returns within an AGI
bracket that indicated individualbracket that indicated individual contributions to HSAs increased as AGI increased. These contributions to HSAs increased as AGI increased. These
percentages ranged from 0.1% in the lowest AGI bracket and increased to 7.9% in the highest percentages ranged from 0.1% in the lowest AGI bracket and increased to 7.9% in the highest
AGI bracket. Similar to when looking at tax returns by age, the percentage of returns within an AGI bracket. Similar to when looking at tax returns by age, the percentage of returns within an
AGI bracket AGI bracket ~~that made~~making individual contributions was lower than the percentage of returns making individual contributions was lower than the percentage of returns making
employer contributionsemployer contributions, across across al all AGI brackets. AGI brackets.
The increased prevalence of HSA contributions among tax returns with higher AGIs is similar to The increased prevalence of HSA contributions among tax returns with higher AGIs is similar to
the findings of previous research that looked at IRS data to evaluate the relationships between the findings of previous research that looked at IRS data to evaluate the relationships between
HSA utilizationHSA utilization and income.and income.80

7982 81 For more information on Adjusted Gross For more information on Adjusted Gross Income, see “AdjustedIncome, see “Adjusted ~~Gross~~ Gross Income (AGI)” in CRSIncome (AGI)” in CRS Report RL30110, Report RL30110,
Federal Individual ~~Incom e Tax Term s~~Income Tax Terms: An Explanation . CRS. CRS analysis of data provided by Internal Revenue Service analysis of data provided by Internal Revenue Service
(IRS),(IRS), Statistics of Income (SOI) Division (provided December 2019) and Statistics of Income (SOI) Division (provided December 2019) and ~~I RS~~ IRS Publication 1304. Publication 1304.
8082 One report by the U.S. Government Accountability Office looked at IRS One report by the U.S. Government Accountability Office looked at IRS data from 2005 and one study looked at IRS data from 2005 and one study looked at IRS
data from 2012. U.S. Government Accountability Office, data from 2012. U.S. Government Accountability Office, HEALTH SAVINGS ACCOUNTS: Participation Increased
and Was ~~More Com m on am ong~~ More Common among Individuals with Higher ~~Incom es~~Incomes, GAO-08-474R, April 2008, https://www.gao.gov/, GAO-08-474R, April 2008, https://www.gao.gov/
products/GAO-08-474R and Lorens A. Helmchen, David W. Brown,products/GAO-08-474R and Lorens A. Helmchen, David W. Brown, and Ithai Z. Lurie, et al., “and Ithai Z. Lurie, et al., “ Health Savings Health Savings
Accounts: GrowthAccounts: Growth Concentrated Among HighConcentrated Among High -Income Households and Large Employers,” Health Affairs Journal, vol. -Income Households and Large Employers,” Health Affairs Journal, vol.
34, no.9 (September 2015), p. 1594, at https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2015.0480. 34, no.9 (September 2015), p. 1594, at https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2015.0480.
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Figure 3. Percentage of Tax Returns Reporting HSA Contributions in TY2017, by
Adjusted Gross Income

Source: CRS analysis of data provided by Internal Revenue ServiceCRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division (IRS), Statistics of Income (SOI) Division
(provided December(provided December 2019) and IRS Publication 1304. 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 20%. Tax return categories TY = tax year. HSA = health savings account. Y-Axis Maximum = 20%. Tax return categories are not are not
~~mutual y exclusive~~ mutually exclusive (e.g., a tax return can have both individual and employer(e.g., a tax return can have both individual and employer contributions). Tax returns can contributions). Tax returns can
representrepresent more than one individual and thereforemore than one individual and therefore contributions to morecontributions to more than one HSA (e.g.,than one HSA (e.g., spouses spouses
contributing to each of their own HSAs).contributing to each of their own HSAs). Employer contributions include employerinclude employer contributions and employee contributions and employee
contributions made through a cafeteria plan. Data do not account for tax returns of individuals who werecontributions made through a cafeteria plan. Data do not account for tax returns of individuals who were HSA HSA
eligibleeligible but did not contribute to, or receivebut did not contribute to, or receive contributions for, an HSA. contributions for, an HSA.
HSA Withdrawal Data
The IRS estimated increases in the number of tax returns indicating non-rollover HSA The IRS estimated increases in the number of tax returns indicating non-rollover HSA
withdrawals from 2004 to withdrawals from 2004 to ~~2017 (se~~e2019 (see Figure 4).).8183 For tax year For tax year ~~2017~~2019, the IRS estimated that , the IRS estimated that
approximately approximately ~~7.5 mil ion~~ 8.6 million tax returns reported a non-rollover HSA withdrawal (tax returns reported a non-rollover HSA withdrawal (~~4.9~~5.5% of filed tax % of filed tax
returns).returns).8284 Of the population indicating HSA Of the population indicating HSA withdrawals in withdrawals in ~~2017~~2019, few tax returns (approximately , few tax returns (approximately
4%) indicated taxable withdrawals (i.e., withdrawals for non-qualified medical expenses). 4%) indicated taxable withdrawals (i.e., withdrawals for non-qualified medical expenses).

~~81 Caution should be exercised~~ 83 Caution should be exercised in comparing contribution and withdrawalin comparing contribution and withdrawal statistics since HSAstatistics since HSA ~~withdrawals may be~~ withdrawals may be tied tied
to contributions from a previous tax year. As such, the population of tax returns that indicated anto contributions from a previous tax year. As such, the population of tax returns that indicated an ~~HSA withdrawal~~ HSA withdrawal is is
not the same as the population of tax returns that indicated an HSAnot the same as the population of tax returns that indicated an HSA contribution.contribution. Internal Revenue Service, Internal Revenue Service, SOI Tax
Stats – Individual ~~Incom e~~Income Tax Returns, Line Item ~~Estim ates~~ Estimates, at https://www.irs.gov/statistics/soi-tax-stats-individual-, at https://www.irs.gov/statistics/soi-tax-stats-individual-
income-tax-returns-line-item-estimates. income-tax-returns-line-item-estimates.
82 84 CRS CRS analysis of Internal Revenue Service, analysis of Internal Revenue Service, Statistics of Income—~~2017~~2019 Individual Income Tax Returns Line Item
~~Estim ates~~Estimates, pp. 2, , pp. 2, ~~196~~192, https://www.irs.gov/pub/irs-pdf/p4801.pdf. , https://www.irs.gov/pub/irs-pdf/p4801.pdf.
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Figure 4. Tax Returns Reporting Non-rollover HSA Withdrawals, TY2004-~~TY2017~~TY2019

Source: CRS analysis of Internal Revenue Service,CRS analysis of Internal Revenue Service, SOI Tax Stats – Individual Income Tax Returns, Line Item
Estimates, at https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates. , at https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates.
Notes: TY = tax year. HSA = health savings account. HSA withdrawal TY = tax year. HSA = health savings account. HSA withdrawal data include tax returns that made data include tax returns that made
withdrawals for non-qualified medicalwithdrawals for non-qualified medical expenses. Tax returns can representexpenses. Tax returns can represent ~~more~~ more than one individual, and than one individual, and
thereforetherefore tax returns can representtax returns can represent more than one HSAmore than one HSA (e.g., spouses withdrawing from each of their own (e.g., spouses withdrawing from each of their own
HSAs). Data do not account for tax returns of individuals who had an HSA but did not makeHSAs). Data do not account for tax returns of individuals who had an HSA but did not make a distribution from a distribution from
an HSA. Data do not correspond to HSA eligibility. an HSA. Data do not correspond to HSA eligibility.
InCRS analysis of 2017 tax year data provided by the IRS found that, in 2017, the percentage of tax returns in the 26-34 age bracket that indicated a non-rollover HSA 2017, the percentage of tax returns in the 26-34 age bracket that indicated a non-rollover HSA
withdrawal was lowest amongst withdrawal was lowest amongst al all age brackets from 26 to 64 (4.9%).age brackets from 26 to 64 (4.9%).8385 The percentage of tax The percentage of tax
returns in the age brackets between 35 and 64 were roughly similar (7.4%-7.6%), with slight returns in the age brackets between 35 and 64 were roughly similar (7.4%-7.6%), with slight
increases as the age of the primary taxpayer increased (increases as the age of the primary taxpayer increased (seesee Figure 5). ).
There are a couple of factors that could contribute to the lower withdrawal rate among those aged There are a couple of factors that could contribute to the lower withdrawal rate among those aged
26-34. Considering the age of the 26-34 population, these individuals are likely26-34. Considering the age of the 26-34 population, these individuals are likely to have had less to have had less
time to establish an HSA relative to those in other age brackets, time to establish an HSA relative to those in other age brackets, ~~especial y~~especially when considering the when considering the
impact of dependency status on HSA eligibility.impact of dependency status on HSA eligibility. Of those in this age bracket that did establish an Of those in this age bracket that did establish an
HSA, the HSAs associated with these individuals may be more likelyHSA, the HSAs associated with these individuals may be more likely to be newer than the HSAs to be newer than the HSAs
associated with individuals in older age brackets. HSA research has indicated that newer accounts associated with individuals in older age brackets. HSA research has indicated that newer accounts
~~general y~~generally have lower rates of HSA withdrawals. have lower rates of HSA withdrawals.8486 This research has speculated that this may be This research has speculated that this may be
because account holders have not had enough time to build up HSA balances and because HSAs because account holders have not had enough time to build up HSA balances and because HSAs
are unable to cover health care expenses incurred prior to the opening date of the account.are unable to cover health care expenses incurred prior to the opening date of the account.
In addition, younger individuals are less likely In addition, younger individuals are less likely to have health care expenditures in a given year to have health care expenditures in a given year
and, when they do, such amounts tend to be lower (relative to older groups).and, when they do, such amounts tend to be lower (relative to older groups).8587 Because of this, Because of this,
individualsindividuals in the 26-34 age bracket may have been less likelyin the 26-34 age bracket may have been less likely to need to make withdrawals from to need to make withdrawals from
their HSA (or may have paid for such expenditures from non-HSA sources). their HSA (or may have paid for such expenditures from non-HSA sources).

~~83 CRS~~ 85 CRS analysis of data provided byanalysis of data provided by Internal Revenue Service (IRS),Internal Revenue Service (IRS), Statistics of Income (SOI) Division (provided Statistics of Income (SOI) Division (provided
December 2019) and IRSDecember 2019) and IRS Publication 1304. Publication 1304.
8486 Paul Fronstin and Jake Spiegel, Paul Fronstin and Jake Spiegel, Trends in Health Savings Account Balances, Contributions, Distributions, and
Investments~~, 2011‒2018: Estimates from the EBRI HSA Database~~ and the Impact of COVID-19, Employee Benefit Research Institute, , Employee Benefit Research Institute, ~~January 9,~~
~~2020, p. 13.~~
85September 15, 2021, p. 14. 87 Agency for Healthcare Research and Quality, Agency for Healthcare Research and Quality, MEPS Summary Tables: Use, Expenditures, and Population , ,
https://https://~~www.meps~~datatools.ahrq.gov/.ahrq.gov/~~mepstrends/hc_use/~~meps-hc. .
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Figure 5. Percentage of Tax Returns Reporting Non-rollover HSA Withdrawals in
TY2017, by Age

Source: CRS analysis of data provided by Internal Revenue ServiceCRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division (IRS), Statistics of Income (SOI) Division
(provided December(provided December 2019) and IRS Publication 1304. 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 10%. HSA withdrawal data include tax TY = tax year. HSA = health savings account. Y-Axis Maximum = 10%. HSA withdrawal data include tax
returns that made withdrawals for non-qualified medicalreturns that made withdrawals for non-qualified medical expenses. Tax returns can represent moreexpenses. Tax returns can represent more than one than one
individual, and thereforeindividual, and therefore tax returns can representtax returns can represent ~~more~~ more than one HSA (e.g., spouses withdrawing fromthan one HSA (e.g., spouses withdrawing from each of each of
their own HSAs). Age for joint returns was based on the primarytheir own HSAs). Age for joint returns was based on the primary taxpayer’s age. Data do not account for tax taxpayer’s age. Data do not account for tax
returns of individuals who had an HSA but did not makereturns of individuals who had an HSA but did not make a distribution froma distribution from an HSA.an HSA. Data do not correspond to Data do not correspond to
HSA eligibility. HSA eligibility.
When looking at the rates of non-rollover HSA withdrawals by AGI, the percentage of tax returns When looking at the rates of non-rollover HSA withdrawals by AGI, the percentage of tax returns
in each AGI bracket that indicated a non-rollover HSAin each AGI bracket that indicated a non-rollover HSA withdrawal increased as AGI increased up withdrawal increased as AGI increased up
to the $500,000 to $999,999 AGI bracket and decreased from the $500,000 to $999,999 AGI to the $500,000 to $999,999 AGI bracket and decreased from the $500,000 to $999,999 AGI
bracket to the $1 bracket to the $1 ~~mil ion~~ million or more AGI bracket (seor more AGI bracket (see Figure 6))~~.86~~.88 Of those tax returns with AGI Of those tax returns with AGI
between $500,000 and $999,999, approximately 1 in 5.5 tax returns (18.0%) indicated a non-between $500,000 and $999,999, approximately 1 in 5.5 tax returns (18.0%) indicated a non-
rollover HSA withdrawal in 2017. The percentages of returns in each AGI bracket making non-rollover HSA withdrawal in 2017. The percentages of returns in each AGI bracket making non-
rollover withdrawals ranged 0.3% to 18.0%, which is a wider variance than when looking at rollover withdrawals ranged 0.3% to 18.0%, which is a wider variance than when looking at
withdrawal data by age. withdrawal data by age.

~~86 CRS~~ 88 CRS analysis of data provided byanalysis of data provided by Internal Revenue Service (IRS),Internal Revenue Service (IRS), Statistics of Income (SOI) Division (provided Statistics of Income (SOI) Division (provided
December 2019) and IRSDecember 2019) and IRS Publication 1304. Publication 1304.
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Health Savings Accounts (HSAs)

Figure 6. Percentage of Tax Returns Reporting Non-rollover HSA Withdrawals in
TY2017, by Adjusted Gross Income

Source: CRS analysis of data provided by Internal Revenue ServiceCRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division (IRS), Statistics of Income (SOI) Division
(provided December(provided December 2019) and IRS Publication 1304. 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 20%. HSA withdrawal data include tax TY = tax year. HSA = health savings account. Y-Axis Maximum = 20%. HSA withdrawal data include tax
returns that made withdrawals for non-qualified medicalreturns that made withdrawals for non-qualified medical expenses. Tax returns can represent moreexpenses. Tax returns can represent more than one than one
individual, and thereforeindividual, and therefore tax returns can representtax returns can represent ~~more~~ more than one HSA (e.g., spouses withdrawing fromthan one HSA (e.g., spouses withdrawing from each of each of
their own HSAs). Data do not account for tax returns of individuals who had an HSA but did not maketheir own HSAs). Data do not account for tax returns of individuals who had an HSA but did not make a a
distribution from an HSA.distribution from an HSA. Data do not correspond to HSA eligibility. Data do not correspond to HSA eligibility.

Author Information

Ryan J. Rosso Ryan J. Rosso

Analyst in Health Care Financing Analyst in Health Care Financing

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Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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Congressional Research Service Congressional Research Service
R45277 R45277 · VERSION 57 · UPDATED
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