IRS Sets Health Savings Account Maximums for 2023

The IRS has announced significantly higher health savings account contribution limits for 2023, with the amount increasing more than 5% for individual HSA plans.

The new limits were announced in conjunction with other changes, such as increases in the minimum deductibles and maximum out-of-pocket expenses for high-deductible health plans (HDHPs).

The IRS also announced rises in the maximum contribution amounts to excepted-benefit health reimbursement arrangements (HRAs).

The increases are much larger than usual due to inflation, which has been trending higher than it has in more than four decades.

Here are the new figures for 2023:

HSA annual contribution limit

  • Individual plan: $3,850, up from $3,650 in 2022
  • Family plan: $7,750, up from $7,300 in 2022

HDHP minimum annual deductible

  • Individual plan: $1,500, up from $1,400 in 2022
  • Family plan: $2,800, the same as in 2022

HDHP annual out-of-pocket maximum

  • Individual plan: $7,500, up from $7,050 in 2022
  • Family plan: $15,000, up from $14,100 in 2022

Maximum out of pocket for ACA-compliant plans (non-grandfathered plans)

  • Individual plan: $9,100, up from $8,750 in 2022
  • Family plan: $18,200, up from $17,400 in 2022

Excepted-benefit HRAs

Maximum annual employer contribution: $1,950, up from $1,800 in 2022. Excepted-benefit HRAs are limited to paying for vision and dental coverage or similar benefits exempt from the ACA, and are not covered by the employer’s primary group plan.

For those 55 or older: People who are 55 or older are allowed to contribute an additional $1,000 a year to their HSA, under federal law.

Also, if both spouses with family coverage are 55 or older, they must have two HSA accounts in separate names if they each want to contribute an additional $1,000 catch-up contribution.

If only one spouse is 55 or older but the younger spouse contributes the full family contribution limit to the HSA in his or her name, the older individual must open a separate account to make the additional $1,000 catch-up contribution.

HSAs explained

Under federal law, an HSA must be tied to an HDHP. An HSA is a special bank account that can be used to pay for or reimburse for your employees’ eligible health care costs. They can put money into their HSA through pre-tax payroll deduction, deposits or transfers.

As the amount grows over time, they can continue to save it or spend it on eligible expenses.

Employers can also contribute to the accounts, but the annual contribution maximum applies to all contributions in total (from the employee and the employer).

The money in the HSA belongs to the employee and is theirs to keep, even if they switch jobs. The funds roll over from year to year and can earn interest. Some plans also have investment options for the funds.

Here’s how they work:

  • Employees can make withdrawals with a debit card or check specific to the HSA.
  • Employees can use the money in their HSA to pay for care until they reach their deductible, out-of-pocket expenses like copays and coinsurance.
  • They can use the funds to pay for other eligible expenses not covered by their HDHP, like dental or vision care (eye exams and corrective lenses).

Planning ahead

Knowing what these limits are in advance can help employers plan their messaging for the 2023 open enrollment season.

If you want to get ahead of the ball, you can start updating your payroll and plan administration systems to reflect the 2023 amounts.

You should also include the new limits in relevant communications you send to your staff, particularly in regards to open enrollment, plan documents and summary plan descriptions for next year.

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