Health Savings Account (HSA)

An HSA is a tax-advantaged account for participants in a high deductible health plan (HDHP) that can be used to pay for qualified medical expenses, including copays, prescriptions, dental care, contacts and eyeglasses, bandages, X-rays, and a lot more. It’s "tax-advantaged" because your contributions reduce your taxable income, and the money isn't taxed while it’s in the account—even if it earns interest or investment returns.

Bonus: As long as you use your HSA funds for qualified medical expenses, you won't owe taxes when you take money out of the account.

An HSA works together with a high deductible health plan (HDHP), such as the UM/Aetna Health Savings Medical Plan. If you're enrolled in this medical plan, you can make pretax contributions to an HSA and, consequently, pay for qualified medical expenses tax-free. Making HSA contributions can help create a cash cushion to offset the higher deductibles that HSA-eligible health plans typically have.

If you don't need the money in your HSA for current medical expenses, you can save and invest it until you do. This sets HSAs apart from another popular account, the health care flexible spending account (FSA). Unlike an FSA, an HSA is not "use-it-or-lose-it," can be invested, and you can take it with you when you leave an employer.

The IRS defines a qualified medical expense (QME) as the cost to diagnosis, treat, or prevent disease and includes equipment and supplies needed for those purposes.

You can use your HSA to pay for doctor's visits, hospital services, surgery, and medications, to name a few. For a full list, see IRS Publication 502.

To be considered an HSA-qualified HDHP, a health plan must meet several tests:

1. It must have a deductible above a certain minimum threshold
2. It must limit total annual out-of-pocket expenditures for covered benefits to no more than a certain maximum threshold, and
3. It can cover only preventive care services and certain insulin products before the deductible is met.

In 2026, HSA-qualified HDHPs must have a minimum deductible of $1,700 for self-only coverage and $3,400 for family coverage and an annual limit on out-of-pocket* expenditures for covered benefits that does not exceed $8,500 and $17,000, respectively. These amounts are adjusted for inflation (rounded to the nearest $50) annually.

What’s an HSA-Eligible Health Plan?

* The maximum out-of-pocket limit includes deductibles, copayments, and coinsurance, but not premiums. 

No. Unlike a Flexible Spending Account (FSA), HSAs are not subject to "use-it-or-lose-it" rules. This means you don't forfeit any money you don't use in a given year, and you can carry it forward until you reach a time that you want or need to use the money in your HSA. Combined with the ability to invest funds, this allows your health savings to benefit from compounding returns.

No. Your HSA is your account, not your employer's. Unlike health care FSAs, which your employer technically owns, your HSA belongs to you. So when you leave a job, you keep all of the money you've saved up in your HSA and can transfer into a new HSA or employer-sponsored HSA at your next job. You can even open an HSA if you're in an HSA-eligible health plan and your employer does not provide one—or if they do but you prefer a third-party option. (But keep in mind you can only avoid FICA taxes if you contribute to your employer's HSA through payroll deductions). It's also possible to have multiple HSAs. Some people have one for investing and another for cash to pay medical expenses.

Your HSA is always yours, so you can still spend your HSA money on qualified medical expenses with no federal income taxes or penalties in retirement.

Retirement-related qualified medical expenses, covered by your HSA, could include:

• COBRA coverage costs
• Health care coverage while you’re receiving unemployment benefits
• Medicare premiums other than Medicare Supplemental coverage
• Qualified long-term care coverage

If you choose to use your HSA money for something other than qualified medical expenses, you will be responsible for paying federal income taxes on it and may be penalized if you’re under age 65. You’ll also still be eligible to contribute to your HSA in retirement as long as you aren’t enrolled in Medicare or covered by an ineligible health plan.

Per IRS regulations, to be eligible to contribute to or receive employer contributions in the HSA, you must be enrolled in a high deductible medical plan (Aetna Health Savings Medical Plan) and faculty and staff cannot be enrolled in:

• Secondary medical coverage (Medicare Parts A/B, TRICARE, VA, Medicaid, or a spouse’s employer plan)
• Healthcare Flexible Spending Account (HCFSA)
  • Faculty and staff may still enroll in the Health Savings Medical Plan and elect not to participate in the HSA if they want to participate in a HCFSA.

If you enroll in the UM/Aetna Health Savings Medical Plan and elect to participate in the Health Savings Account (HSA), the University will contribute $500 per person, up to $1,000 per family to your account. Note, you are not required to make voluntary contributions to receive employer contributions, however you must elect the HSA.

Employer contributions are deposited in the first payroll period following full month of enrollment. 

Employee voluntary contributions are deposited each pay period. Funds must be available in the account before use, unlike a HCFSA.

Health Savings Medical Plan Preventive Drug List

Fidelity HSA Funds to Consider

Expanded Availability of Health Savings Accounts under the One, Big, Beautiful Bill Act (OBBBA)

Fidelity Health Savings Account Calculator

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6 benefits of an HSA in your 20s and 30s

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Learn what an HSA is—and all the reasons to have one

Making the most of a health savings account

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