A Health Savings Account (HSA) is a powerful, tax-advantaged way for employees to save for health care costs. HSAs are paired with a High-Deductible Health Plan (HDHP) and allow employees to set aside money for qualified medical expenses before they reach their deductible.

CaliforniaChoice offers more than a dozen HSA-qualified health plans, giving employees flexibility and choice.

Why HSAs Are So Valuable

HSAs come with benefits that go far beyond basic savings:

Triple Tax Advantage
Contributions are made pre-tax (or are tax-deductible), funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free.

Employee Ownership & Portability
Employees own their HSA. The account goes with them if they change jobs or retire.

No “Use-It-or-Lose-It” Rule
Unlike Flexible Spending Accounts (FSAs), unused HSA funds roll over year after year, allowing balances to grow over time.

Investment Potential
Many HSA providers allow employees to invest their funds in mutual funds, stocks, and other options. This makes HSAs a smart long-term savings and retirement tool.

Flexible Use — Now and Later
HSA funds can be used for deductibles, copays, prescriptions, dental, and vision care. After age 65, employees can also use funds for non-medical expenses without penalty (funds are taxed as ordinary income, similar to an IRA). Qualified medical expenses remain tax-free at any age, including certain Medicare premiums.

2026 Contribution Limits

For 2026, the IRS has announced:

• $4,400 annual contribution limit for self-only coverage (up from $4,300 in 2025)
• This total includes employee, employer, and family contributions
• Individuals age 55 or older may contribute an additional $1,000 in a catch-up contribution

More details are available in IRS Publication 969.

Year-End HSA Reporting: What Employees Should Know

Employees should be prepared for year-end HSA reporting:

• IRS Form 8889 must be filed with their 2026 federal tax return.
• Employees should keep receipts and Explanation of Benefits (EOBs) for expenses paid with HSA funds.
• Receipts are not submitted with tax returns but should be kept in case of an IRS audit.

Your HSA administrator can help ensure employees receive the correct forms and guidance.

Additional HSA Guidance

For more information, the Society for Human Resource Management (SHRM) published updated guidance in December 2025, offering helpful insights for employers and HR teams.