2025 HSA Contribution Limit Increase

What’s new for 2025

Under a qualifying high-deductible health plan, employees may contribute a certain amount each year to an HSA. This year that amount is higher, and so is the minimum deductible for a plan to qualify as “high deductible.”

Individual Coverage

Contribute up to $4,300 – up $150 from 2024

Minimum deductible of $1,650 – up $50 from 2024

Family Coverage

Contribute up to $8,550 – up $250 from 2024

Minimum deductible of $3,300 – up $100 from 2024

What these changes mean for your business

Higher contribution limits enable employees to save more tax-free dollars for healthcare and retirement. As an employer, you are not required to up your contributions this year, but you may want to adjust them to align with the new limits. Doing so may be good for morale and demonstrate an overall commitment to employee well-being.

Additionally, your business may benefit from upping your contributions to employee HSAs. Your contributions are fully tax-deductible as a business expense, reducing your taxable income and lowering your overall tax liability.

As for the deductible requirement adjustment for high-deductible health plans, it’s crucial to verify that your plan complies with the updated minimum deductibles for 2025. Keep in mind, these numbers will continue to evolve annually.

Most importantly, if your business offers a HDHP, it’s essential to communicate these updates to employees. You will want to make sure your employees understand their contribution options so they can make the most of their HSA benefits.

Communicate with your employees

When updating your team about the new contribution limits for 2025, you may also want to note a few important points.

Staying Within the Limit

While the new limits allow for more savings, exceeding them can trigger IRS penalties. If an employee inadvertently contributes too much, direct them to their HSA provider to request an Excess Contribution and Deposit Correction to avoid penalties.

Maximizing the Benefits

Encourage employees to fully fund their HSAs. For one, fully funding means maximum tax savings as contributions reduce their taxable income. On top of that, funds grow tax-free and roll over year to year, creating a financial safety net for healthcare and retirement.

How to Contribute

Remind employees of how they can contribute to their HSA:

• Payroll Deductions: The easiest and most tax-efficient method.
• Online Contributions: Direct transfers from other accounts, though less streamlined for tax purposes.

2024 Contribution Deadline Reminder

There’s still time for employees to maximize their 2024 contribution limit ($4,150 for individuals, $8,300 for families). Employees have until the April 2025 tax deadline to make contributions for the 2024 tax year.

Note: For employees 55 and older, an additional $1,000 catch-up contribution is allowed each year. If both spouses are over 55, each can open an individual HSA and make their own catch-up contributions.

By staying proactive and informed about these changes, your business can continue to foster a healthier, more financially secure workforce while capitalizing on valuable tax benefits. Make the most of the 2025 HSA contribution updates and reinforce your role as an employer of choice.