The IRS announced the 2025 maximum contribution levels for health savings accounts (HSAs) and out-of-pocket spending limits as well as deductible minimums for high deductible health plans (HDHPs) that must be used in conjunction with HSAs. These updated contribution limits are effective for HSAs in the calendar year 2025.  

The Basics

An HSA is an account created or organized exclusively to pay the qualified medical expenses of an “account beneficiary.” An HSA can only be established for the benefit of an eligible individual who is covered under an HDHP. In addition, a participant cannot be enrolled in Medicare or have other health coverage, with the exception of dental, vision, long-term care, accident and specific disease insurance. 

Known as a tax triple threat, there is no tax going in, tax-free growth and tax-free withdrawals if used for eligible health care expenses. Eligible medical expenses include doctor visits, deductibles, copays, vision and dental services, prescriptions and even long-term care expenses. In addition, an HSA is portable and owned by the account holder if they change employers or leave the workforce.  

For calendar year 2025, an HDHP is defined as a health plan with an annual deductible that is not less than $1,650 for self-only coverage or $3,300 for family coverage, and for which the annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) do not exceed $8,300 for self-only coverage or $16,600 for family coverage.  

2025 Contribution Limits  

Advantages for Employers

While participants are enjoying the benefits noted above, employers will appreciate lower payroll costs, a federal tax deduction and reduced administrative burden.  

Neither the employer nor the employee are required to pay payroll taxes on HSA contributions deducted through payroll. Employers will receive a federal income tax deduction for any contributions made into employees' HSA accounts, and for the amounts they contribute via payroll deduction. Employers benefit through reduced employer Federal Insurance Contributions Act (FICA) taxes and Federal Unemployment Tax Act (FUTA) taxes.  

Employees can take distributions from their HSA accounts at any time without employer involvement since the funds belong exclusively to them during and after their employment with the employer. This leads to less work on the employer’s end for offering this benefit to employees. Employers do have the responsibility to report HSA contributions accurately on employees’ Forms W-2.  

We’re Here to Help 

With these new increases to HSA contribution limits, employees are sure to benefit from increased savings. However, when it comes to updating employee HSA contribution amounts, how efficient is your benefits process?  

We offer access to end-to-end payroll solutions that help organizations manage benefits administration through an online portal. Automatic workflows transfer demographic information, payroll deductions and compensation adjustments between our system and benefit management systems, streamlining the process for businesses.