HSA Contribution Limits Will Increase in 2023: What Your Employees Need to Know

A Health Savings Account (HSA) is a tax-advantaged savings account owned by an individual that can be used to pay for qualified medical expenses for the owner and their dependents.

To be eligible to open an HSA, your employees need to be enrolled in either an HSA-eligible health plan, or an HDHP. Without a healthcare plan in place, your employee won’t be able to participate in an HSA.     

HSAs are a great way for employees like yours to strengthen their financial and physical health. The popularity of HSAs is increasing due to their flexibility for a variety of financial situations, as well as the tax-saving benefits they provide, and the fact that they afford employees a stronger sense of financial control. As a result, by the end of 2021, $98 billion in HSA assets nationwide existed throughout over 32 million accounts. Meanwhile, over 7% of HSAs have at least a portion of their funds invested. 

As such, the changes to HSA contribution limits coming in 2023 will affect a large number of people—including HSA participants at your organization. Read on to learn what you and your employees should know about upcoming changes to HSA contribution limits, and more.

What are the HSA contribution limits for 2023? 

In response to surging inflation and prices reaching a 40-year high as a result, the IRS has announced that HSA contribution limits will see a small increase in 2023:

  • For HSAs that can only be used to pay for a participant’s qualifying medical expenses, the contribution limit will increase from $3,650 in 2022 to $3,850 in 2023, a difference of $200 

  • For family HSAs that can be used to pay for both a participant and their family’s qualifying medical expenses, the contribution limit will increase from $7,300 in 2022 to $7,750 in 2023, a difference of $450

What are the HDHP amounts and limits for 2023?

As the name implies, a high-deductible health plan (HDHP) is a health insurance plan with a higher deductible than a traditional plan. Just as HSA contribution limits will increase in 2023, HDHP amounts and expense limits are also slated to increase—far more than what we’ve seen in recent years. 

Here are the minimum deductibles participants must pay as of 2022:

  • $1,400 for self-only coverage

  • $2,800 for family coverage

And here are the minimum deductibles your employees should expect to pay in 2023:

  • $1,500 for self-only coverage

  • $3,000 for family coverage

Meanwhile, these are the maximum HDHP out-of-pocket limits as of 2022:

  • $7,050 for self-only coverage

  • $14,100 for family coverage

And here’s what the maximum HDHP out-of-pocket limits will be in 2023:

  • $7,500 for self-only coverage

  • $15,000 for family coverage



How do HSA catch-up contributions work?     

A catch-up contribution enables people 55 years of age or older to contribute more than the usual annual limit of $3,850 for self-only HSAs, or $7,750 for family HSAs. Essentially, this means that the 2023 limits become:

  • $4,850 for self-only participants

  • $8,750 for family participants

When can HSA participants change their contributions? 

Do you have an employee who’s curious about opening an HSA, yet cautious about what it might mean for their financial situation down the road? What they might not know is that once they have an account, they’re able to change their contribution amount at any time throughout the plan year.

For example, if your employee makes monthly contributions from their payroll, they can change their contribution rate to their preferred amount.

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Disclosures

The information is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.

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