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Health Savings Accounts (HSAs)

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

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

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;
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-qualified HDHP, do
not have disqualifying coverage, and cannot be claimed as a dependent on another person’s tax return. The account is tied to
the individual and account holders retain access to their accounts (and can keep using HSA funds) if they change employers,
insurers, or subsequently become ineligible to 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
minimum threshold, it must limit total annual out-of-pocket expenditures for covered benefits to no more than a certain
maximum threshold, and it can cover only preventive care services and (for limited periods) telehealth services before the
deductible is met. In 2022, 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 that does not exceed
$7,050 and $14,100, respectively. In 2023, HSA-qualified HDHPs must have a minimum deductible of $1,500 for self-only
coverage and $3,000 for family coverage and an annual limit on out-of-pocket expenditures for covered benefits that does not
exceed $7,500 and $15,000, respectively. These amounts are adjusted for inflation (rounded to the 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
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
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 2022, the maximum annual amount an individual with self-only coverage can
contribute to his or her HSA is $3,650 and the maximum annual amount an individual with family coverage can contribute to
his or her HSA is $7,300. For 2023, the maximum annual contribution limit amounts are $3,850 and $7,750 respectively. For
those aged 55 or older, the maximum 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 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,
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 qualified long-term care services. Health insurance premiums generally are not
considered qualifying medical expenses (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 taxes and generally are subject
to a 20% penalty. Individuals do not need to be enrolled in an HSA-qualified HDHP to make withdrawals from an HSA.
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.
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.
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Contents
Introduction ..................................................................................................................................... 1
Eligibility to Establish and Contribute to an HSA .......................................................................... 1
HSA-Qualified High-Deductible Health Plans ......................................................................... 2
Minimum Deductible .......................................................................................................... 2
Out-of-Pocket Limit ............................................................................................................ 3
Services Allowed to Be Provided Before the Deductible Has Been Met............................ 3
Disqualifying Coverage ............................................................................................................ 6
Additional Guidelines ............................................................................................................... 7
HSA Contributions .......................................................................................................................... 7
Contribution Limits ................................................................................................................... 7
Allowable Contributors ............................................................................................................. 9
Eligibility to Withdraw HSA Funds .............................................................................................. 10
HSA Withdrawals .......................................................................................................................... 10
Qualified Medical Expenses ................................................................................................... 10
Nonqualified Expenses ............................................................................................................. 11
Tax Advantages of HSAs ............................................................................................................... 12
HDHP Enrollment and HSA Utilization ........................................................................................ 14
Data Challenges ...................................................................................................................... 14
Data Findings .......................................................................................................................... 15
HSA-Qualified HDHP Enrollment ................................................................................... 15
HSA Access Among Workers............................................................................................ 16
HSA Utilization ................................................................................................................. 16

Figures
Figure 1. Tax Returns Reporting HSA Contributions, TY2004-TY2019 ...................................... 17
Figure 2. Percentage of Tax Returns Reporting HSA Contributions in TY2017, by Age ............. 18
Figure 3. Percentage of Tax Returns Reporting HSA Contributions in TY2017, by
Adjusted Gross Income .............................................................................................................. 20
Figure 4. Tax Returns Reporting Non-rollover HSA Withdrawals, TY2004-TY2019 .................. 21
Figure 5. Percentage of Tax Returns Reporting Non-rollover HSA Withdrawals in
TY2017, by Age ......................................................................................................................... 22
Figure 6. Percentage of Tax Returns Reporting Non-rollover HSA Withdrawals in
TY2017, by Adjusted Gross Income .......................................................................................... 23

Tables
Table 1. HSA-Qualified HDHP Deductible and Out-of-Pocket Limit Requirements for
2022 .............................................................................................................................................. 2
Table 2. HSA-Qualified HDHP Deductible and Out-of-Pocket Limit Requirements for
2023 .............................................................................................................................................. 3
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Table 3. HSA-Qualified HDHP Preventive Care Services for
Specified Chronic Conditions ...................................................................................................... 5
Table 4. HSA Penalty Taxes ........................................................................................................... 11
Table 5. Tax Advantages of Various Types of HSA Contributions ................................................ 12

Contacts
Author Information ........................................................................................................................ 23

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Introduction
An HSA is a tax-advantaged account that individuals can use to save and pay for unreimbursed
medical expenses (e.g., deductibles, co-payments, coinsurance, and services not covered by
insurance). Eligibility to contribute to an HSA is associated with enrollment in a high-deductible
health plan (HDHP); however, an HSA is a trust/custodial account and is not health insurance.
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
account/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: individual contributions are tax deductible unless made 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; earnings on invested account balances 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,
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
corresponding recession. It concludes with a discussion of HSA data limitations and recent trends
in HDHP enrollment and HSA utilization.
Eligibility to Establish and Contribute to an HSA
Individuals are eligible to establish and contribute to an HSA if they have coverage under an
HSA-qualified HDHP, do not have disqualifying coverage, and cannot be claimed as a dependent
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
might be eligible 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
period would begin on October 1 of that year. Individuals may keep their HSAs and withdraw
funds if they become ineligible but cannot make contributions until they become eligible once
again.
Accounts may be established with banks, insurance companies, or other entities approved by the
Internal Revenue Service (IRS) to hold individual retirement accounts (IRAs) or Archer medical

1 Other categories of health-related tax-advantaged accounts/arrangements include health flexible spending
arrangements (FSAs), Archer medical savings accounts (Archer MSAs), and health reimbursement arrangements
(HRAs). For more information on these types of tax-advantaged accounts/arrangements, see CRS Report R46782, A
Comparison of Tax-Advantaged Accounts for Health Care Expenses.
2 Cafeteria plans are further discussed in “Allowable Contributors”.
3 Tax dependency is determined on a yearly basis and 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.
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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 All eligible individuals
have the flexibility to establish an HSA with an institution other than their insurer or may choose
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
certain minimum threshold, it must limit out-of-pocket expenditures for covered benefits to no
more than a certain maximum threshold, and it can cover only preventive care services and (for
limited time periods) telehealth services before the deductible is met.6 (See Table 1 for the
minimum deductibles and out-of-pocket limits for 2022 and Table 2 for the minimum deductibles
and out-of-pocket limits for 2023.)
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
prevent individuals from establishing and making HSA contributions when the only insurance
they have is coverage for a narrow class of benefits.
Table 1. HSA-Qualified HDHP Deductible and Out-of-Pocket Limit Requirements
for 2022
Requirement
Self-Only Plan
Family Plan
Minimum Deductible
$1,400
$2,800
Out-of-Pocket Limit
$7,050
$14,100
Source: Internal Revenue Service (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.
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.
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-
02_IRB#NOT-2004-2. Hereinafter IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2.
6 26 U.S.C. §223(c)(2) and IRS, Publication 969, pp. 2-5. Individuals should be able to find out from their insurer
whether their high-deductible health plan (HDHP) is HSA qualified. They cannot apply to the IRS or another
government agency for a determination.
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.
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2022 and $3,000 in 2023.9 Minimum deductible amounts are adjusted for inflation (rounded to
the nearest $50) annually.10 Premiums are not included in meeting the deductible.
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
deductible must also meet the same minimum requirements.11
Out-of-Pocket Limit
To be HSA qualified, a health plan’s annual limit on out-of-pocket expenditures for covered
benefits for self-only coverage must not exceed $7,050 in 2022 and $7,500 in 2023. For family
policies, the limit must not exceed $14,100 in 2022 and $15,000 in 2023.12 These amounts are
adjusted for inflation (rounded to the nearest $50) annually.
Generally, enrollee cost sharing—deductibles, co-payments, and coinsurance—for in-network
coverage provided under the HSA-qualified HDHP is taken into account in determining
accumulation toward the out-of-pocket limits. However, these limits should not be interpreted as
ceilings on all 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
bills) or payments for services that are not covered by the HSA-qualified HDHP do not count
toward the out-of-pocket limit. Premiums for the HSA-qualified HDHP and any other insurance
also do not count toward the out-of-pocket limit.
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 IRS, Internal Revenue Bulletin: 2021-21, Revenue Procedure 2021-25 and Internal Revenue Bulletin: 2022-20,
Revenue Procedure 2022-24.
10 This and other HSA inflation adjustments are based upon the Chained Consumer Price Index for All Urban
Consumers published by the U.S. Department of Labor. 26 U.S.C. §223(g)(1)(B) provides that the measurement period
for HSA inflation adjustments is the 12-month period ending on March 31 of the prior year.
11 IRS, Internal Revenue Bulletin: 2004-15, Revenue Ruling 2004-38, April 12, 2004, at https://www.irs.gov/irb/2004-
15_IRB#RR-2004-38.
12 IRS, Internal Revenue Bulletin: 2021-21, Revenue Procedure 2021-25 and Internal Revenue Bulletin: 2022-20,
Revenue Procedure 2022-24.
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the aforementioned minimum annual deductible requirement) for preventive care benefits and
(for limited time periods) telehealth services.13
Preventive Care Services
IRS guidance provides that preventive care includes, but is not limited to, periodic health
evaluations, routine prenatal and well-child care, immunizations, tobacco cessation programs,
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
that has not yet manifested itself or not yet become clinically apparent or to prevent a disease
recurrence.15
Additionally, HSA-qualified HDHPs are required to comply with the federal private health
insurance requirement to provide specified preventive care services without imposing cost
sharing.16 For this requirement, preventive care includes evidenced-based services that have in
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
screenings for women and children.17 Because this requirement provides that health plans,
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
https://www.irs.gov/irb/2004-15_IRB#NOT-2004-23. Hereinafter IRS, Internal Revenue Bulletin: 2004-15, Notice
2004-23.
15 IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50, August 16, 2004, at https://www.irs.gov/irb/2004-
33_IRB#NOT-2004-50. Hereinafter IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.
16 42 U.S.C. §300gg-13.
17 42 U.S.C. §300gg-13. For more information about preventive care services, see Department of Health and Human
Services, “Preventive Care,” February 1, 2017, at https://www.hhs.gov/healthcare/about-the-aca/preventive-care/
index.html. The United States Preventive Services Task Force is an independent, volunteer panel of experts in
prevention, evidence-based medicine, and primary care. 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.
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Table 3. HSA-Qualified HDHP Preventive Care Services for
Specified Chronic Conditions
Items and Service
Chronic Condition
Angiotensin Converting Enzyme (ACE) inhibitors
Congestive heart failure, diabetes, and/or coronary
artery disease
Anti-resorptive therapy
Osteoporosis and/or osteopenia
Beta-blockers
Congestive heart failure and/or coronary artery disease
Blood pressure monitor
Hypertension
Inhaled corticosteroids
Asthma
Insulin and other glucose lowering agents
Diabetes
Retinopathy screening
Diabetes
Peak flow meter
Asthma
Glucometer
Diabetes
Hemoglobin A1c testing
Diabetes
International Normalized Ratio (INR) testing
Liver disease and/or bleeding disorders
Low-Density Lipoprotein (LDL) testing
Heart disease
Selective Serotonin Reuptake Inhibitors (SSRIs)
Depression
Statins
Heart disease and/or diabetes
Source: Internal Revenue Service, Internal Revenue Bulletin: 2019-32, Notice 2019-45, August 5, 2019, at
https://www.irs.gov/irb/2019-32_IRB#NOT-2019-45.
Notes: HSA = health savings account. HDHP = high-deductible health plan. The items and services in this table
are treated as preventive care for purposes of HSA-qualified HDHPs if 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.
A 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 allowed to provide
benefits related to the testing for and treatment of COVID-19 before the deductible has been met.
Specifically, 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
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 (P.L. 116-127, as amended by the
Coronavirus Aid, Relief, and Economic Security Act [CARES Act], P.L. 116-136).22

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.
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Allowable Telehealth Services
From April through December 2022, HSA-qualified HDHPs may have no deductible (or a
deductible less than the aforementioned minimum annual deductible requirement) 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, 2020, 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 for HSA-qualified HDHP enrollees who may have had COVID-19 while also
protecting other patients from potential exposure.25 As such, if an HSA-qualified HDHP plan
administrator initially responded to the COVID-19 pandemic by providing telehealth services
without a deductible, enrollees of that plan would not have lost their HSA eligibility as a result of
that decision.
Disqualifying Coverage
There are a number of ways in which an individual could be disqualified from establishing and
contributing to an HSA, even though the individual has coverage under an HSA-qualified HDHP.
Individuals generally must not have any other health plan that is not an HSA-qualified HDHP or
that provides coverage for any benefit that is covered under their HSA-qualified HDHP.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, Coronavirus Aid, Relief, and Economic Security Act Subtitle D—
Finance Committee Section-by-Section, committee print, 116th Cong., at https://www.finance.senate.gov/imo/media/
doc/CARES%20Act%20Section-by-Section%20(Finance%20Health).pdf.
26 In this context, the term health plan is not limited to traditional health insurance-types of arrangements. For example,
health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs) would constitute a
health plan. 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
treatment and diagnosis of sicknesses or 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.
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April 1, 2022 through December 31, 2022, telehealth and other remote care are not considered
disqualifying health coverage. Telehealth and other remote care also was not considered
disqualifying health coverage for plan years beginning on or before December 31, 2021.29
Individuals are not allowed to establish or contribute to an HSA if they are enrolled in Medicare,
which generally first occurs at the age of 65.30
HSA-eligible individuals generally may not have employer-established flexible spending
accounts (FSAs) or health reimbursement accounts (HRAs), which are two other types of health-
related tax-advantaged accounts. 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) or that can provide
reimbursement for services only after the HDHP deductible has been met are considered HSA-
compatible.31
Additional Guidelines
HSA-qualified HDHP enrollees who do not have disqualifying coverage still are considered HSA
eligible if they have access to and coverage under an employee assistance program, disease
management program, or wellness program, provided the program does not provide “significant
benefits in the nature of medical care or treatment.”32 HSA-qualified HDHP enrollees who
receive treatment under the Veterans Health Administration, within the Department of Veterans
Affairs, for service-connected disabilities also are still HSA eligible.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,
Internal Revenue Bulletin: 2020-22, Notice 2020-29.
30 Although the law states that eligible individuals are no longer able to establish and contribute to HSAs after
becoming “entitled to benefits” under Medicare, the IRS interprets the phrase “entitled to benefits” as meaning
“eligibility and enrollment” in either Medicare Part A or Medicare Part B. 26 U.S.C. §223(b)(7) and IRS, Internal
Revenue Bulletin: 2004-33, Notice 2004-50. For more information on the relationship between HSAs and Medicare,
including HSA eligibility for spouses of Medicare enrollees, see CRS In Focus IF11425, Health Savings Accounts
(HSAs) and Medicare.
31 IRS, Internal Revenue Bulletin: 2004-22, Revised Rule 2004-45.
32 Screening and other preventive care services are not considered “significant benefits in the nature of medical care or
treatment.” IRS, Internal Revenue Bulletin: 2004-33, Notice 2004-50.
33 26 U.S.C. §223(c)(1)(C). Service-connected disability within the meaning of 38 U.S.C. §101(16).
34 IRS, Internal Revenue Bulletin: 2004-2, Notice 2004-2.
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could occur over a 15½-month time span (e.g., from January 1, 2020, through April 15, 2021),
provided they do not exceed the allowable annual limit.
In 2022, the maximum annual contribution limit is $3,650 for self-only coverage and $7,300 for
family coverage.35 In 2023, the maximum annual contribution limit is $3,850 for self-only
coverage and $7,750 for family coverage.36 The applicable annual limits apply to total
contributions to the HSA from all sources (i.e., from individuals and employers). These amounts
are adjusted for inflation (rounded to the nearest $50) annually.
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 annually indexed for inflation.
The annual limits are calculated on a monthly basis: for each month during the year when
individuals are eligible, they may contribute (or others may contribute on their behalf) up to one-
twelfth of the applicable annual limit. For example, an individual who is eligible from January
through July could contribute seven-twelfths of the annual limit for that year.
As an exception to this rule, individuals who are eligible during the last month of the year are
treated as if they had been eligible for that entire year and thus are allowed to contribute up to the
annual limit so long as the contribution is before the tax filing date of the following year.37
Individuals who make contributions under this exception must maintain their HSA eligibility for
the entire following year, the testing period, except in cases of disability or death.38 Otherwise,
the additional contributions allowed under the exception are included in gross income when
determining federal income taxes for the year in which an individual fails to be HSA eligible and,
as shown in Table 4, 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 HSA-
qualified HDHP). Only one spouse can be listed as the account holder for a given HSA, even though that spouse’s
HSA may be used to reimburse the medical expenses of either spouse. Nothing prevents each spouse from
establishing his or her own HSA, assuming each is eligible.
If both spouses are HSA eligible and at least one spouse is covered by a family coverage HSA-qualified HDHP, then
the maximum amount the couple can col ectively contribute to its HSA(s) is associated with the family coverage
annual limit for that year ($7,300 in 2022 and $7,750 in 2023). The col ective maximum amount is to be split
evenly between the spouses' HSAs, unless both agree on a different division.39 If both spouses are aged 55 or
older and eligible 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.40
Where applicable, HSA limits must be reduced by the amount of any direct contributions
individuals 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.
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

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.
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contributions generally are subject to a 6% penalty tax (see Table 4), unless the excess amounts
are withdrawn prior to the tax filing date of the year the excess contributions were made.41 If not
withdrawn, this penalty tax would apply to each tax year the excess contributions remain in the
account.
Allowable Contributors
Eligible individuals may make direct contributions to their HSAs, and employers, family
members, and other individuals may make contributions to an individual’s HSA on the
individual’s behalf.42 Contributions by one individual or entity do not preclude contributions by
others, provided the total amount of contributions does not exceed annual contribution limits.43
Employed individuals may make HSA contributions through cafeteria plans—that is, benefit
arrangements established by employers under which employees accept lower take-home pay in
exchange for the difference being deposited in their HSA account.44 Because these types of
individual contributions are excluded from gross income, they are not tax deductible. The IRS has
determined that salary reduction agreements must allow employees to stop, increase, or decrease
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
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
more than seven-twelfths of the annual limit for that year, then that individual has until that year’s tax filing date to
withdraw the excess contributions. If the funds are not withdrawn, the excess contributions would be subject to a 6%
penalty tax. IRS, Publication 969, pp. 8.
42 An employer’s contributions to employees’ HSAs are subject to 26 U.S.C. 4980G, which requires the employer to
provide comparable 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 under a cafeteria plan, then the
contributions are subject to the cafeteria plan nondiscrimination rules. For more details, see IRS, Internal Revenue
Bulletin: 2004-33, Notice 2004-50 and 26 U.S.C. §223(b)(4).
43 26 U.S.C. §223(b)(4).
44 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
benefit. The amount that goes toward the qualified benefit is then excluded from federal income and payroll taxes.
Cafeteria plans must always offer employees a choice between at least one taxable benefit (e.g., cash) and at least one
qualified (nontaxable) benefit but may also include additional benefit choices. HSAs can be considered a qualified
benefit under a cafeteria plan. HSA contributions made in this manner are treated as employer contributions and are
excluded from the employee’s income for federal tax purposes (and are not tax deductible by the employee). 26 U.S.C.
§125.
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.
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Eligible individuals may use other tax-advantaged accounts to increase the amount of resources
available in their HSAs. Specifically, individuals may make one rollover contribution to an HSA
from an Archer MSA or another HSA during a one-year period.48 Individuals also may make a
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 “Contribution Limits”
section.49 These types of HSA contributions are subject to different tax rules than individual HSA
contributions, as discussed in the “Tax Advantages of HSAs” section.
Eligibility to Withdraw HSA Funds
An account holder may withdraw HSA funds at any time, regardless of the account holder’s
eligibility to contribute to the HSA. Generally, withdrawals must be used for qualified medical
expenses for the account holder, the account holder’s spouse, or the account holder’s
dependents.50 Any withdrawals for nonqualified expenses must be included in the account
holder’s gross income when determining federal income taxes and are generally subject to an
additional 20% penalty (see Table 4).51
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.
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
ineligible to establish or contribute to an HSA, but the account holder may continue to withdraw
funds from a previously established 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,
individuals do not need to be HSA eligible to roll over funds from an existing HSA to a new HSA. IRS, Publication
969, p. 7.
49 26 U.S.C. §408(d)(9). IRS, Publication 969, p. 7.
50 In this context, the term dependent includes all dependents that the account holder claims on his or her tax return and
any person the account holder could have claimed as a dependent on his or her tax return except that (a) the person filed
a joint return, (b) the person had gross income of $4,400 or more (for tax year 2022), or (c) the account holder could
have been claimed as a dependent on someone else’s return. IRS, Publication 969, p. 9. 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
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More specifically, 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
affecting any part of the body; the amounts paid for transportation to receive medical care; and
qualified long-term care services.53 HSA qualified medical expenses also include menstrual care
products and over-the-counter medications and drugs (without a prescription).54
Of the medical expenses mentioned in 26 U.S.C. §213(d), health insurance premiums generally
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
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
in which the individual is receiving unemployment compensation, and (4) for individuals aged 65
years and older, any health insurance premiums (including Medicare Part B premiums) other than
a Medicare supplemental policy.55
There is no time limit on when HSA withdrawals need to be made to pay for (or reimburse
payments for) qualified medical expenses, provided adequate records are kept.56 However, HSAs
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
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.
Nonqualified Expenses
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 generally are subject to a 20%
penalty, as shown in Table 4. The penalty is waived in cases of disability or death and for
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 medicines and drugs (other than insulin) were not considered an HSA qualified medical expense
unless an individual received a corresponding prescription for each over-the-counter expense.
55 26 U.S.C. § 223(d)(2)(C). IRS, Publication 969, p. 9.
56 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).
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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 analysis of tax code.
Notes: HSA = health savings account.
a. The penalty is waived in cases of disability or death and for individuals aged 65 and older.
b. Individuals who are eligible during the last month of the year are treated as if they had been eligible for the
entire year and thus are allowed to contribute up to the annual limit. Individuals who make additional
contributions under this rule must maintain their HSA eligibility for the fol owing year, the testing period,
except in cases of disability or death.
Tax Advantages of HSAs
HSAs often are referred to as having a triple tax advantage: (1) contributions reduce taxable
income, (2) earnings on the account grow tax free, and (3) withdrawals for qualified medical
expenses are not subject to taxation.58
Qualified individuals 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 in Table
5.59 The deduction is above the line; 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
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, at
https://www.irs.gov/pub/irs-pdf/p969.pdf.
Notes: HSA = health savings account. Excess HSA contributions count toward gross income, cannot be used to
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
holder (not including employer contributions).
b. Includes employee contributions made through a cafeteria plan.
c. A once-in-a-lifetime traditional or Roth individual retirement account (IRA) distribution to an HSA would
not be subject to early IRA withdrawal penalties.

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.
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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
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 eligible HSA
contributions depends on an individual’s marginal tax rate and the amount of nonemployer
contributions to the individual’s HSA.
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
rollovers.60 These amounts do not count as gross income in determining income tax liability.61
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
determining their income tax liability.62 In addition, the employer’s contributions are excluded
from Social Security and Medicare taxes for both employers and employees and are excluded
from federal unemployment insurance taxes.63 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
excluded from the employee’s gross income in determining his or her income tax liability and are
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
plan.
HSA balances can be invested similar to IRAs (e.g., annuities, stocks, mutual funds, bonds, etc.),
and any associated earnings can accumulate tax free.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.
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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
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
administered by another type of institution, such as a bank. In the latter case, the insurer would
have insights into individuals’ potential eligibility to contribute to HSAs but would not have any
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
and withdraw HSA funds when they are no longer eligible to contribute to an HSA), the HSA
holding institution likely would not be aware of the individuals’ enrollment in or disenrollment
from an HSA-qualified HDHP. Because of this, HSA holding institutions may not know about an
individual’s HSA eligibility and insurers may not know about an individual’s HSA contributions.
As a result, there may be no single data source to answer key questions of interest, for example,
how many individuals eligible to open an HSA or eligible to make an HSA contribution do so.66
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.
As mentioned, not all HSA-qualified HDHP enrollees are eligible to or have established or
contributed to an HSA, and not all HSA holders currently are enrolled in an HSA-qualified
HDHP or are currently eligible to contribute to an HSA.
Within this research, other methodological limitations limit the extent to which available research
can be generalized to the entire HSA and/or HSA-qualified HDHP populations. Specifically,
many HSA holder/HSA-qualified HDHP enrollee studies rely on surveys of insurers, businesses,
or HSA administrators. These data may not be nationally representative, may provide unadjusted
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,
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 T. Kullgren, Elizabeth Q. Cliff,
and Christopher Krenz, et al., “Use of Health Savings Accounts Among US Adults Enrolled,” JAMA Network Open.
2020; 3(7):e2011014. doi:10.1001/jamanetworkopen.2020.11014.
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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., 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.
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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
withdrawals. Because these IRS data are based on information provided by tax return, it is not
possible to discern from the publicly available data how many individuals (as opposed to how
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
individuals 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
of individuals who made HSA contributions or withdrawal in each tax year.
HSA Contribution Data
For tax year 2019, the IRS estimated that 2.1 million tax returns reported an HSA that received
individual contributions (1.3% of filed tax returns) and 11.3 million tax returns reported an HSA
that received employer contributions (7.1% of filed tax returns).75 In this context, individual
contributions are non-employer contributions made by or on behalf of an individual. Employer
contributions include contributions made by an employer and contributions made by an employee
through a cafeteria plan. The aforementioned tax return categories are not mutually exclusive
(e.g., a tax return can have both individual and employer contributions).
Similar to historical increases in HSA-qualified HDHP enrollment, the IRS has estimated
increases in both the number of tax returns reporting individual HSA contributions and the
number of tax returns reporting employer HSA contributions from 2004 to 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 contributing to each of their
own HSAs). The IRS estimates do not account for individuals who were HSA eligible but did not contribute to, or
receive contributions for, an HSA. CRS analysis of Internal Revenue Service, Statistics of Income—2017 Individual
Income Tax Returns Line Item Estimates, pp. 2, 192, 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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Health Savings Accounts (HSAs)

Figure 1. Tax Returns Reporting HSA Contributions, TY2004-TY2019

Source: 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.
Notes: TY = tax year. HSA = health savings account. Tax return categories are not mutually exclusive (e.g., a
tax return can have both individual and employer contributions). Tax returns can represent more than one
individual and therefore contributions to more than one HSA (e.g., spouses contributing to each of their own
HSAs). Employer contributions include employer contributions and employee contributions made through a
cafeteria plan. Data do not account for tax returns of individuals who were HSA eligible but did not contribute
to, or receive contributions for, an HSA.
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 employer contributions is
fairly consistent across all age groupings from 26 to 64. These percentages range from 7.3% to
9.1% and peak in the 35-44 age bracket (see Figure 2).77
The percentage of tax returns within different age brackets that reported individual contributions
is also fairly consistent across all 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
within an age bracket making individual contributions is lower than the percentage of returns
making employer contributions, which suggests that fewer HSA-eligible individuals make
contributions to an HSA outside of the employer-setting.

77 Age for joint returns was based on the primary taxpayer’s age. CRS analysis of data provided by Internal Revenue
Service (IRS), Statistics of Income (SOI) Division (provided December 2019) and IRS Publication 1304.
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Figure 2. Percentage of Tax Returns Reporting HSA Contributions in TY2017, by Age

Source: CRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division
(provided December 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 10%. Tax return categories are not
mutually exclusive (e.g., a tax return can have both individual and employer contributions). Tax returns can
represent more than one individual and therefore contributions to more than one HSA (e.g., spouses
contributing to each of their own HSAs). Age for joint returns was based on the primary taxpayer’s age.
Employer contributions include employer contributions and employee contributions made through a cafeteria plan.
Data do not account for tax returns of individuals who were HSA eligible but did not contribute to, or receive
contributions for, an HSA.
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
individual contributions. Of the tax returns for those aged 65 and older, 0.9% make employer
contributions and 0.4% make individual contributions.
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.78 In addition,
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
eligible.79
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
being eligible to contribute to an HSA as a result of such enrollment.80 The tax returns that
indicate HSA contributions where the primary taxpayer is aged 65 and over may be the result of

78 Tax dependency and private health insurance coverage dependency are made by separate determinations. For
example, an individual may be considered a dependent on a parent’s private health insurance policy while not being
considered a tax dependent to such parent. Tax dependency is defined in statute at 26 U.S.C. §152 and private health
insurance coverage dependency requirements can be found at 42 U.S.C. §300gg-14.
79 Edward R. Berchick, Jessica C. Barnett, and Rachel D. Upton, Health Insurance Coverage in the United States:
2018, U.S. Census Bureau, November 2019, p. 6, https://www.census.gov/content/dam/Census/library/publications/
2019/demo/p60-267.pdf.
80 For more information on the relationship between HSAs and Medicare, see CRS In Focus IF11425, Health Savings
Accounts (HSAs) and Medicare.
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the taxpayer delaying Medicare enrollment and retaining HSA eligibility and/or the primary tax
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
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
bracket (see Figure 3).81 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
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
at the data by age.
With respect to individual contributions, the estimated percentage of returns within an AGI
bracket that indicated individual 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
AGI bracket. Similar to when looking at tax returns by age, the percentage of returns within an
AGI bracket making individual contributions was lower than the percentage of returns making
employer contributions, across all AGI brackets.
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
HSA utilization and income.82

81 For more information on Adjusted Gross Income, see “Adjusted Gross Income (AGI)” in CRS Report RL30110,
Federal Individual Income Tax Terms: An Explanation. CRS analysis of data provided by Internal Revenue Service
(IRS), Statistics of Income (SOI) Division (provided December 2019) and IRS Publication 1304.
82 One report by the U.S. Government Accountability Office looked at IRS data from 2005 and one study looked at IRS
data from 2012. U.S. Government Accountability Office, HEALTH SAVINGS ACCOUNTS: Participation Increased
and Was More Common among Individuals with Higher Incomes, GAO-08-474R, April 2008, https://www.gao.gov/
products/GAO-08-474R and Lorens A. Helmchen, David W. Brown, and Ithai Z. Lurie, et al., “Health Savings
Accounts: Growth Concentrated Among High-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.
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Health Savings Accounts (HSAs)

Figure 3. Percentage of Tax Returns Reporting HSA Contributions in TY2017, by
Adjusted Gross Income

Source: CRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division
(provided December 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 20%. Tax return categories are not
mutually exclusive (e.g., a tax return can have both individual and employer contributions). Tax returns can
represent more than one individual and therefore contributions to more than one HSA (e.g., spouses
contributing to each of their own HSAs). Employer contributions include employer contributions and employee
contributions made through a cafeteria plan. Data do not account for tax returns of individuals who were HSA
eligible but did not contribute to, or receive contributions for, an HSA.
HSA Withdrawal Data
The IRS estimated increases in the number of tax returns indicating non-rollover HSA
withdrawals from 2004 to 2019 (see Figure 4).83 For tax year 2019, the IRS estimated that
approximately 8.6 million tax returns reported a non-rollover HSA withdrawal (5.5% of filed tax
returns).84 Of the population indicating HSA withdrawals in 2019, few tax returns (approximately
4%) indicated taxable withdrawals (i.e., withdrawals for non-qualified medical expenses).

83 Caution should be exercised in comparing contribution and withdrawal statistics since HSA withdrawals may be tied
to contributions from a previous tax year. As such, the population of tax returns that indicated an HSA withdrawal is
not the same as the population of tax returns that indicated an HSA contribution. 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.
84 CRS analysis of Internal Revenue Service, Statistics of Income—2019 Individual Income Tax Returns Line Item
Estimates, pp. 2, 192, https://www.irs.gov/pub/irs-pdf/p4801.pdf.
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Health Savings Accounts (HSAs)

Figure 4. Tax Returns Reporting Non-rollover HSA Withdrawals, TY2004-TY2019

Source: 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.
Notes: TY = tax year. HSA = health savings account. HSA withdrawal data include tax returns that made
withdrawals for non-qualified medical expenses. Tax returns can represent more than one individual, and
therefore tax returns can represent more than one HSA (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 make a distribution from
an HSA. Data do not correspond to HSA eligibility.
CRS 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 withdrawal was lowest
amongst all age brackets from 26 to 64 (4.9%).85 The percentage of tax 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 (see Figure 5).
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 likely to have had less
time to establish an HSA relative to those in other age brackets, especially when considering the
impact of dependency status on HSA eligibility. Of those in this age bracket that did establish an
HSA, the HSAs associated with these individuals may be more likely to be newer than the HSAs
associated with individuals in older age brackets. HSA research has indicated that newer accounts
generally have lower rates of HSA withdrawals.86 This research has speculated that this may be
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.
In addition, younger individuals are less likely to have health care expenditures in a given year
and, when they do, such amounts tend to be lower (relative to older groups).87 Because of this,
individuals in the 26-34 age bracket may have been less likely to need to make withdrawals from
their HSA (or may have paid for such expenditures from non-HSA sources).

85 CRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division (provided
December 2019) and IRS Publication 1304.
86 Paul Fronstin and Jake Spiegel, Trends in Health Savings Account Balances, Contributions, Distributions, and
Investments and the Impact of COVID-19, Employee Benefit Research Institute, September 15, 2021, p. 14.
87 Agency for Healthcare Research and Quality, MEPS Summary Tables: Use, Expenditures, and Population,
https://datatools.ahrq.gov/meps-hc.
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Health Savings Accounts (HSAs)

Figure 5. Percentage of Tax Returns Reporting Non-rollover HSA Withdrawals in
TY2017, by Age

Source: CRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division
(provided December 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 10%. HSA withdrawal data include tax
returns that made withdrawals for non-qualified medical expenses. Tax returns can represent more than one
individual, and therefore tax returns can represent more than one HSA (e.g., spouses withdrawing from each of
their own HSAs). Age for joint returns was based on the primary taxpayer’s age. Data do not account for tax
returns of individuals who had an HSA but did not make a distribution from an HSA. Data do not correspond to
HSA eligibility.
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 HSA 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
bracket to the $1 million or more AGI bracket (see Figure 6).88 Of those tax returns with AGI
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 withdrawals ranged 0.3% to 18.0%, which is a wider variance than when looking at
withdrawal data by age.

88 CRS analysis of data provided by Internal Revenue Service (IRS), Statistics of Income (SOI) Division (provided
December 2019) and IRS Publication 1304.
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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 Service (IRS), Statistics of Income (SOI) Division
(provided December 2019) and IRS Publication 1304.
Notes: TY = tax year. HSA = health savings account. Y-Axis Maximum = 20%. HSA withdrawal data include tax
returns that made withdrawals for non-qualified medical expenses. Tax returns can represent more than one
individual, and therefore tax returns can represent more than one HSA (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 make a
distribution from an HSA. Data do not correspond to HSA eligibility.

Author Information

Ryan J. Rosso

Analyst in Health Care Financing

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Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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copy or otherwise use copyrighted material.

Congressional Research Service
R45277 · VERSION 7 · UPDATED
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