A New Calendar Year Begins. What Changes Should You Make to Your HSA?

By William Stuart | Originally posted on LinkedIn for MaxHSA

Does the new calendar year trigger actions for Health Savings Account owners?

Jan. 1 is the most common effective date for new and renewing employee benefits and nongroup medical coverage. The autumn months are a time to reassess your financial situation and determine which combination of employee benefits will minimize your financial exposure, maximize your tax situation, and bring the greatest peace to your personal life.

What about Health Savings Account owners? They must make important decisions about their employee benefits. Plus, if they are newly HSA-eligible, they must take steps to open their new account and set payroll deductions. Veteran owners are not required by federal law to take any action, although some companies (but not federal tax law) require employees to set pre-tax payroll deductions annually.

Let's review the actions that Health Savings Account owners must take in the new calendar year.

Remember: A Health Savings Account Is Not an Annual Plan

People who have participated in a Health FSA sometimes forget that a Health Savings Account is different.

A Health FSA is a medical plan that renews annually. Participants must project their level of spending on qualified expenses and make a new election each year (up to $3,400 in 2026, or lower if their employer has chosen a lower ceiling). They can reimburse only expenses incurred during the plan year and must do so within a deadline (usually 90 days after the end of the plan year).

A Health Savings Account is a financial account with no renewal. Yes, the underlying medical plan renews annually. The financial account itself, though, is not restricted to a plan year. Once you have established a Health Savings Account, it remains active indefinitely. You are not restricted to an annual prospective election. You do not face a deadline to reimburse qualified expenses with tax-free distributions. And under federal tax law, you are not required to reaffirm your payroll-deduction amounts. Beware: Some employers require you to do so, so be sure to check your company's policy.