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Best ways to navigate 4 different HSA considerations at different times of year



While the general benefits for Health Savings Accounts (HSAs) remain relatively consistent throughout the year, there are some specific factors to consider for different HSAs during different times of the year.

Using an HSA is a true testament to its users’ financial savvy and practicality. One of the key benefits of an HSA is its flexibility. Participants can spend their HSA funds on qualified health-related expenses, or let funds build for future expenses.

There is no push to use remaining funds. This ensures participants are making efficient and effective use of their funds and not wasting them on unnecessary expenses.

Different people, different HSAs

The responsible and mindful spending behavior of HSA users allows for the funds to stretch further. Overall, HSA spending is a simple and smart healthcare tool that any financial-savvy individual should take advantage of.

Many people assume that HSA users have a predictable pattern of spending throughout the year. In reality, HSA users often spend HSA funds based on their life situation rather than the time of year. While there are several different ways to segment HSA users, there are a few key distinct behavior styles.

  • Spenders: These participants are likely to view an HSA as a revolving door. As soon as funds are deposited in the HSA, they are likely using the funds to cover ongoing medical expenses like co-pays, deductibles, prescriptions and even over-the-counter expenses.
  • Savers: These participants are using the HSA to plan for the unexpected. Many medical expenses arise suddenly, such as emergency room visits or unexpected diagnoses. Because these types of expenses are not tied to a specific time of year, HSA Savers will limit routine spending to ensure their HSA funds are available for larger expenses they may have.
  • Investors: These participants have a long-term view of their HSA and will avoid any use of their HSA for near-term expenses. They understand that medical expenses are likely to be high later in life and have chosen to let HSA funds build for future medical expenses.

HSA users are likely to change their behaviors at different points in their life. They are constantly deciding when to use their HSA funds based on their current medical needs versus saving for a potential need to come. Despite these factors, there are still some patterns to HSA use that employers should be aware of.

Beginning of the year

At the start of the year, it is crucial to assess healthcare needs and budget for the upcoming months. HSA users are no different and should plan for their medical expenses. This is the time to budget for annual check-ups and physicals, refill prescriptions and purchase new glasses or contacts.

By planning ahead, participants can ensure they have money available to pay for expense and avoid scrambling to pay for expenses later in the year. Encourage employees to review their medical expenses from the past year, develop a budget, and set their savings goals for the coming year.

HSA users should also consider the following:

  • Understand their contribution limit: Determine the maximum allowable contribution limit set by the IRS for the current year. For 2023, the HSA contribution limit for individuals is $3,850 and $7,750 for families. Employer contributions count towards this maximum.
  • Don’t miss out on open enrollment periods: Evaluate HSA-compatible health plan options during open enrollment periods. Assess the benefits, deductibles, and out-of-pocket costs associated with different plans. While employees can make changes to HSA contributions throughout the year, they will be limited on when they can enroll in a qualified HSA-compatible health plan.
  • Set an HSA contribution goal: Employees should plan annual HSA contributions based on their healthcare needs, expected medical expenses and available funds. If they can afford to do so, employees should stretch their goals to maximize their contributions and take advantage of the tax-free contributions.


By mid-year, participants should understand their current HSA balance, income, and estimated healthcare spending needs. By using this knowledge, they can adjust their HSA contribution rate if needed. Furthermore, the middle of the year is the perfect time to address routine and recommended medical needs. It’s the time when employees can schedule appointments for mammograms, colonoscopies and other preventative care procedures.

The HSA-compatible health plan should cover certain preventive care expenses and the HSA can be used to cover any out-of-pocket expenses that may occur. Staying on top of healthcare needs can help prevent more costly health issues in the future. Additionally, HSAs can be used for mental health treatments like therapy and counseling. Since mental health is just as important as physical health, encouraging employees to use their HSA funds for such treatments is worth promoting.

Throughout the Year

During the year, participants need to keep track of their HSA activity to make informed decisions:

  • Regular contributions: If participants haven’t reached the maximum allowable contribution limit, they may consider making additional contributions to their HSA. Contributions can be made to an HSA either through payroll deductions or personal contributions. To receive the maximum tax benefits while effectively managing a personal budget, it’s advisable to contribute consistently through payroll deductions.
  • Qualified medical expenses: Participants should understand what expenses are considered qualified medical expenses. These include doctor visits, prescription medications, hospital costs and certain medical procedures. Additionally, they should keep track of their medical expenses and ensure they save receipts and relevant documentation for potential reimbursement or tax purposes.
  • Tax benefits: HSA contributions are tax-deductible, withdrawals for qualified medical expenses are tax-free, and any interest or investment gains within the account are tax-free. Employees and employers alike should keep these in mind when managing an HSA.

Year-end considerations

Towards the end of the year, users may want to review and optimize their HSA usage. While HSA funds roll over every year, participants can choose to either save or spend their funds based on their current medical needs.

  • Remaining contributions: If a participant hasn’t reached the maximum contribution limit for the year, they can consider making additional contributions before the year ends. Contributions made before the tax filing deadline (usually April 15) can count toward the prior tax year.
  • Tax planning and reporting: It’s wise for participants to consider an overall tax planning strategy and perhaps consult with a tax professional to understand how HSA contributions, withdrawals, and potential tax deductions may affect their tax liability. During tax season, HSA participants will receive three main items to aid in tax reporting. First, they will receive IRS Form 1099-SA from the HSA administrator reporting any withdrawals from the HSA. Additionally, an employee’s W-2 will report any contributions made on a pre-tax basis through the employer. Lastly, HSA participants will receive a IRS Form 5498-SA reporting the total contributions to the HSA. It is essential to report any contributions and withdrawals from the HSA for the tax year.

End of employment considerations

When employees leave a job where they’ve contributed to their HSA, they take the account with them. This is a primary benefit of HSAs. Former employees have some options to consider with an HSA. They can opt to keep it at their current provider, move it to a new provider or liquidate it and use it to pay for any qualified medical expenses.

When determining the best option for managing a prior HSA balance, former employees should review any fees they will be responsible for, changes to account access and how investments may be impacted.

Help employees throughout year

HSAs can be a vital tool for employee health and wealth alike. Considering the various HSA options throughout the year can help employees maximize their account. Employers can help employees plan at the beginning of the year, address medical issues mid-year, develop a plan to use available funds, and prioritize health and wellness.

Finally, guide outgoing employees to make informed decisions for their HSA when transitioning into their new roles. By prioritizing best practices, employers can help empower employees to take ownership of healthcare finances and achieve health goals.

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