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

An HSA is not something you sign up for through your employer or the government. You open it the same way you open a regular savings account — by choosing a bank, credit union, or investment firm that offers HSAs, and completing their account application. But you cannot open one unless you are enrolled in a high-deductible health plan (HDHP). Your health insurance company will tell you if your plan qualifies. If it does, you can open an HSA at any time during the year, though most people do it when they first enroll in the HDHP.

The account itself is yours to keep and control. You decide how much money to put in (up to an annual limit set by the IRS, which changes each year), what to spend it on, and which financial institution holds it. Your employer can contribute to it, but they do not have to. You can also contribute your own money. Money in an HSA rolls over year to year — you do not lose it if you do not spend it.

Key Takeaways

  • You must be enrolled in a high-deductible health plan to open an HSA; your insurance company will confirm whether your plan qualifies.
  • You open an HSA directly with a bank, credit union, or investment firm — not through your employer or a government office.
  • You can contribute your own money, your employer can contribute, or both, up to the annual limit the IRS sets each year.
  • Money you spend on may have access to medical expenses is not taxed; money that rolls over stays in the account and earns interest or investment returns.

Confirming your health plan qualifies

Before you look for an HSA provider, check with your health insurance company to confirm your plan is a high-deductible health plan. Call the customer service number on your insurance card or log into your online account. They will tell you the exact deductible amount and whether the plan meets IRS requirements for HSA may be able to access. Write down the deductible and any out-of-pocket maximum — you will need this information when you open the account.

If your plan is not an HDHP, you cannot open an HSA. If you are shopping for health insurance and want an HSA, search specifically for plans labeled as high-deductible or HSA-compatible. Some employers offer multiple plan options; if yours does, the benefits summary will show which ones may have access to.

Choosing where to open your HSA

You can open an HSA at a bank, credit union, or investment firm. Common providers include major banks (Chase, Bank of America, Wells Fargo), online banks (Fidelity, Lively, HealthEquity), and credit unions. Each charges different fees, offers different interest rates or investment options, and has different minimum balances. Some charge monthly maintenance fees; others waive fees if you keep a certain amount in the account. Some let you invest the money in stocks or mutual funds; others keep it in a savings account earning interest.

Compare a few providers before you choose. Look at the monthly fee (if any), the interest rate or investment options, whether they charge for debit cards or withdrawals, and whether they offer online access. If your employer offers an HSA plan through payroll, they may have already chosen a provider for you — ask your HR or benefits department. You can always move the money to a different provider later, though some charge a transfer fee.

Opening the account and setting up contributions

Once you have chosen a provider, go to their website or visit a branch and fill out an account application. You will need your Social Security number, proof of enrollment in an HDHP (your insurance card or a letter from your employer), and your deductible amount. The application usually takes 10 to 15 minutes online. Some providers approve you the same day; others take a few business days.

After the account is open, you decide how much to contribute. If your employer offers payroll deductions for HSA contributions, you can authorize them to deduct a set amount from each paycheck — this is the easiest method because the money goes in before taxes are taken out. If you contribute on your own, you can transfer money from your bank account to the HSA, and you will claim the tax deduction when you file your taxes. The IRS sets an annual contribution limit; for 2024, it is $4,150 for individual coverage and $8,300 for family coverage, but these amounts change yearly.

Using the account to pay for medical expenses

Once money is in the account, you can use it to pay for may have access to medical expenses. These include doctor visits, prescriptions, dental work, vision care, mental health treatment, and medical equipment like hearing aids or wheelchairs. They do not include cosmetic procedures, gym memberships, or over-the-counter vitamins (though some over-the-counter medicines do may have access to). Most HSA providers give you a debit card linked to the account so you can pay at the doctor's office or pharmacy directly.

Keep receipts for everything you buy with HSA money. The IRS does not require you to submit them when you use the money, but you must be able to prove the expense was medical if you are ever audited. If you use HSA money for something that is not a may have access to medical expense, you owe income tax on that amount plus a 20 percent penalty.

What happens if you change jobs or health plans

Your HSA stays with you even if you leave your job or switch health insurance. The account is yours — your employer does not own it. If you move to a new job with a different HDHP, you can keep contributing to the same HSA. If you switch to a plan that is not an HDHP, you can no longer contribute new money, but you can still spend what is already in the account on may have access to medical expenses for the rest of your life.

If you lose your HDHP coverage and do not enroll in a new one within 30 days, you cannot make new contributions for that year. If you are between jobs or waiting for new coverage to start, contact your HSA provider to ask about pausing contributions temporarily.

Tracking and managing your HSA

Most HSA providers give you online access to see your balance, view transactions, and download statements. Log in regularly to make sure contributions are being deposited correctly and that your spending is being tracked. If your employer contributes to your HSA, those deposits should appear in your account within a few days of each paycheck.

At the end of the year, your HSA provider will send you a statement showing how much you contributed, how much you spent, and your ending balance. Keep this for your tax records. If you contributed your own money (not through payroll), you will need to report it on your tax return to claim the deduction. Your HSA provider may also send you a form (1099-SA) if you took money out; you will report this on your taxes as well.

Frequently Asked Questions

Can I open an HSA if my employer does not offer one?

Yes. You can open an HSA at any bank or financial institution that offers them, as long as you are enrolled in a high-deductible health plan. You do not need your employer's permission or involvement. You can contribute your own money and claim the tax deduction when you file your taxes.

What if I do not spend all the money in my HSA in a year?

The money rolls over. Unlike a flexible spending account (FSA), there is no "use it or lose it" rule with an HSA. Money stays in the account indefinitely and can earn interest or investment returns. You can spend it on medical expenses whenever you need to, even years later.

Can I withdraw money from my HSA for non-medical expenses?

Yes, but you will owe income tax on the amount you withdraw plus a 20 percent penalty. After age 65, the penalty goes away, but you still owe income tax on non-medical withdrawals. It is better to leave the money in the account if you do not need it for medical expenses right now.

What if I move to a different state?

Your HSA is not tied to a state. You can keep the same account and the same provider no matter where you move. If your new state has different tax rules for HSAs, contact your provider or a tax professional to understand how it affects your account.

Do I need to report my HSA on my taxes?

If you contributed your own money, you report it as a deduction. If your employer contributed through payroll, it is already excluded from your taxable income. If you withdrew money, your HSA provider sends you a form to report it. A tax professional or tax software can walk you through the specific forms you need.