Thanks in part to persistent high inflation, employees will be able to sock away a lot more money in their health savings accounts (HSAs) next year.
Annual health savings account contribution limits for 2024 are increasing in one of the biggest jumps in recent years, the IRS announced May 16: The annual limit on HSA contributions for self-only coverage will be $4,150 in 2023, a 7.8 percent increase from the $3,850 limit in 2023. For family coverage, the HSA contribution limit jumps to $8,300 in 2023, up 7.1 percent from $7,750 in 2023.
Participants 55 and older can still contribute an extra $1,000 to their HSAs.
Meanwhile, for 2024, a high-deductible health plan (HDHP) must have a deductible of at least $1,600 for self-only coverage, up from $1,500 in 2023, or $3,200 for family coverage, up from $3,000, the IRS noted. Annual out-of-pocket expense maximums (deductibles, co-payments and other amounts, but not premiums) cannot exceed $8,050 for self-only coverage in 2024, up from $7,500 in 2023, or $16,100 for family coverage, up from $15,000.
The increases are detailed in IRS Revenue Procedure 2023-23 and take effect in January 2024.
While expected, the increase in 2024 HSA limits is significant for passing certain symbolic financial thresholds. For the first time, including catch-up contributions for those age 55 and older, a couple on family coverage can now contribute more than $10,000, and a single person on self-only coverage can now contribute more than $5,000.
Many industry experts tout health savings accounts as a smart way for employees to save for medical expenses, even in retirement, citing their triple tax benefits: Contributions are made pretax, the money in the accounts grows tax free and withdrawals for qualified medical expenses are tax free. This is very good news to help more Americans understand and use HSAs as a powerful tool in their healthcare spending and long-term savings.
HSA enrollment continues to grow, and more employers also are offering contributions to employees’ accounts. At the end of 2022, Americans held $104 billion in 35.5 million health savings accounts, according to HSA advisory firm Devenir.
Despite the benefits, most holders aren’t taking full advantage of their accounts and are missing out on substantial rewards, according to the Employee Benefit Research Institute. The average account holder has a modest balance, contributes far less than the maximum and does not invest their HSA, recent EBRI data found.