How to Open and Fund an HSA Account

You need a high-deductible health plan first, then you can open an HSA through a bank or financial institution

An HSA account is not something you can open on its own. The IRS requires that you be enrolled in a high-deductible health plan (HDHP) before you open one. Once you have that coverage in place, you can open an HSA at a bank, credit union, or investment firm — many of the same places where you keep a checking account or brokerage account.

The process takes a few days to a few weeks depending on where you open the account. You will need to show proof of your HDHP coverage, usually by providing your plan's name and policy number. Some employers offer HSAs directly through payroll, which is the fastest route if your workplace health plan qualifies.

The account itself is straightforward: you fund it with pre-tax money (either through payroll deduction or by depositing after-tax dollars and deducting them on your tax return), and you use it to pay for may have access to medical expenses. The money rolls over year to year — unlike a flexible spending account, you do not lose what you do not spend.

Key Takeaways

• You must be enrolled in a high-deductible health plan to open an HSA; the account cannot exist without that coverage.
• If your employer offers an HSA through payroll, that is usually the fastest and simplest way to set one up.
• You can also open an HSA independently at a bank, credit union, or brokerage firm once you have HDHP coverage.
• Funding through payroll deduction means the money is taken out before taxes, reducing your taxable income for the year.
• Money in an HSA rolls over each year and can be invested, making it different from other medical savings accounts.

Verify your health plan meets HSA requirements

Not every health plan qualifies as an HDHP. The IRS sets minimum deductibles and maximum out-of-pocket limits that your plan must fall within. For 2024, an individual HDHP must have a deductible of at least $1,600 and out-of-pocket maximum of no more than $8,050. For family coverage, the deductible must be at least $3,200 and the out-of-pocket maximum no more than $16,100. These numbers change each year.

Check your health plan documents or call your insurance company to confirm your plan qualifies. Your employer's benefits office can also tell you whether your plan is HSA-may be able to access. If you are shopping for coverage on your own through the health insurance marketplace, the plan details will state whether it qualifies as an HDHP.

Some plans that look like they might may have access to actually do not — for example, plans with copays for primary care visits before you meet your deductible are disqualified. If your current plan does not may have access to, you may need to switch to a different plan during open enrollment to become HSA-may be able to access.

Open an HSA through your employer if available

Many employers that offer HDHP coverage also offer an HSA as part of their benefits package. If yours does, the enrollment process happens during your company's open enrollment period or when you first become may be able to access for health coverage. You will complete a form (usually online) that asks for basic information and your bank account details if you want payroll deduction.

Employer-sponsored HSAs are often administered by a third-party company like Fidelity, Lively, HealthEquity, or Optum Bank. The administrator handles the account setup, sends you a debit card or checkbook for withdrawals, and provides year-end tax documents. Your employer may also contribute money to your account as part of your benefits package.

The main advantage of using your employer's HSA is that payroll deduction is automatic and reduces your taxable income immediately. You also avoid having to shop around for an account. If your employer does not offer an HSA or you are self-employed, you will need to open one independently.

Open an HSA independently at a financial institution

If you do not have access to an employer HSA, you can open one at a bank, credit union, or investment firm. Common providers include Fidelity, Lively, HealthEquity, Optum Bank, and many traditional banks like Chase or Wells Fargo. Each offers slightly different features — some charge monthly fees, some offer investment options, and some provide debit cards or checks.

To open an account, you will typically go to the provider's website, click "open an HSA," and fill out an application. You will need your Social Security number, proof of HDHP coverage (your plan name and policy number), and banking information if you want to link a checking account for transfers. The application takes 10 to 15 minutes.

After you submit the application, the provider will verify your HDHP coverage with your insurance company. This verification step can take a few days to a week. Once approved, you can begin funding the account. If you are funding it yourself (not through payroll), you will deduct the contribution on your tax return when you file.

Fund your HSA through payroll or direct deposit

If you are using an employer HSA, payroll deduction is usually set up during enrollment. You choose how much to contribute per paycheck, and that amount is deducted before taxes are calculated. This reduces your taxable income for the year and is the most tax-efficient way to fund an HSA.

If you opened an HSA independently, you can fund it by transferring money from your bank account or by depositing a check. You can contribute up to the annual limit set by the IRS — for 2024, that is $4,150 for individual coverage or $8,300 for family coverage. These limits change each year. You have until the tax filing deadline (usually April 15) to make contributions for the previous year.

If you fund the account yourself with after-tax dollars, you can deduct the contribution on your tax return (Form 8889) when you file. This gives you the same tax benefit as payroll deduction, but you have to remember to claim it. Many people find payroll deduction simpler because the tax benefit is automatic.

Understand what you can use the money for

Once your HSA is funded, you can use the money to pay for may have access to medical expenses — a specific list defined by the IRS. These include doctor visits, prescription medications, dental work, vision care, mental health treatment, and medical equipment like blood pressure monitors or wheelchairs. You can also use HSA money to pay insurance premiums in certain situations, such as COBRA coverage or long-term care insurance.

What you cannot use HSA money for includes cosmetic procedures, over-the-counter medications (with a few exceptions), gym memberships, and vitamins. If you use the money for a non-may have access to expense, you owe income tax on that amount plus a 20 percent penalty.

You do not have to spend the money in the year you contribute it. Unlike a flexible spending account, HSA balances roll over indefinitely. This makes an HSA a long-term savings tool — you can let the money grow and use it years later for medical expenses in retirement.

Keep records and track your spending

The IRS does not require you to submit receipts when you withdraw HSA money, but you must keep them for your own records in case of an audit. Save receipts for at least three years after you file the tax return for the year you made the withdrawal.

Most HSA providers give you a way to track expenses online or through an app. Some providers require you to submit a receipt before approving a withdrawal; others let you withdraw first and keep the receipt on file. Check your provider's rules when you open the account.

If you are audited and cannot produce a receipt for a withdrawal, the IRS may disallow the deduction and assess taxes and penalties. Keeping organized records is simple insurance against this risk.

Frequently Asked Questions

Can I open an HSA if I am on Medicare?

No. Once you enroll in Medicare, you are no longer may be able to access to contribute to an HSA. If you already have an HSA, you can keep it and use it to pay for may have access to medical expenses, but you cannot add new money to it. You must stop contributing the month you turn 65 and enroll in Medicare Part A.

What happens to my HSA if I change jobs?

Your HSA belongs to you, not your employer. When you leave a job, the account stays open and the money remains yours. If your new employer offers an HSA, you can keep your old one or roll it into the new one. You can also leave it where it is and continue using it to pay for medical expenses.

Can I invest the money in my HSA?

Many HSA providers allow you to invest balances above a certain threshold (often $1,000 or $2,500) in mutual funds or other investments. This lets your money grow over time. Not all providers offer investment options, so check before you open an account if this matters to you. Money you plan to use soon should stay in cash.

What if I do not have a high-deductible health plan anymore?

You can no longer contribute to your HSA once you lose HDHP coverage. However, you can still use the money already in the account to pay for may have access to medical expenses. If you switch to a different HDHP later, you can resume contributions.

Do I have to use a debit card, or can I pay out of pocket and reimburse myself?

You can do either. Some people use the HSA debit card for direct payment at the doctor or pharmacy. Others pay with a personal credit card or check and then withdraw money from the HSA to reimburse themselves. Both methods are allowed as long as you have receipts showing the expense was may have access to.