Explore a proposed HSA enhancement and then discover the best Health Savings accounts to save on medical expenses in 2025.
Best HSA Accounts: Federal Employee Health Savings Guide for 2025 and Proposed Expansion
With the rising cost of healthcare, HSAs (health savings accounts) have become an appealing option for many federal employees and retirees covered by an FEHB plan. The prospect of tax-free investment growth is very appealing, even if those funds have to be used for qualifying medical expenses.
Proposed Enhancements to HSA Regulations
Before reviewing the optimal features of HSAs, let’s look at the proposed enhancements to HSA regulations recently introduced on Capitol Hill.
New Health Insurance Plans will Allow HSA
The biggest changes in the proposed bill include allowing more individuals to be eligible for an HSA based on what type of healthcare coverage they have. Currently, only those covered by a high deductible health plan (HDHP) can access these accounts. Should the bill get Congressional approval, the following groups would also be able to contribute to an HSA.
- · Individuals age 65 or older who are covered by Medicare A, but not part B.
- · Employees covered by a direct primary care arrangement.
- · Employees who get healthcare from an on-site clinic at their workplace.
- · Individuals covered by a “Bronze” level or catastrophic health plan
Access to the flexibility, tax advantages, and long-term savings available through an HSA could be a welcomed improvement for these listed groups.
Meet with us to learn how an HSA can fit into your financial plan and retirement strategy.
Significant HSA Contribution Limit Increasement
Of the proposed enhancements, HSA contribution limits would double from the current 2025 contribution limits. See chart below:
| 2025 HSA Contribution Limit (Current) | Additional Amount in Proposed Legislation |
Total 2025 Contribution Limit if Bill Passes |
|
|---|---|---|---|
| Individual | $4300 | $4300 | $8600 |
| Family Plans | $8550 | $8550 | $17,100 |
If the new HSA expansion does not pass, then the 2026 health savings account contribution limits are set to be $4,400 for individuals and $8750 for families. This could mean even greater tax savings and improved healthcare affordability for many working in both the private sector and public service.
Gym Memberships will Count as Qualified Expense
Surely a welcomed addition for many gym management companies, the proposed bill also adds gym memberships as a qualified health expense. Money from an HSA would be allowed to be withdrawn tax-free to pay a monthly or annual membership package.
What is a Health Savings Account (HSA) and How Does it Work?
In 2025, the landscape of Health Savings Accounts (HSAs) continues to evolve, offering federal employees and other individuals a robust tool for managing healthcare costs and planning for future medical expenses. HSAs are not just a means to save money on taxes; they are a strategic component of a comprehensive financial plan. This guide aims to provide an in-depth understanding of HSAs, how to choose the best HSA provider, and how to maximize the benefits of these accounts for both immediate and long-term financial health.
Understanding the Basics of HSA Savings
A Health Savings Account (HSA) is a tax-advantaged savings account designed to help individuals with high-deductible health plans (HDHPs) save for medical expenses. The funds contributed to an HSA are tax-deductible, and the account balance grows tax-free. Withdrawals for qualified medical expenses are also tax-free, making HSAs a powerful tool for managing healthcare costs. Unlike flexible spending accounts, HSAs do not have a “use it or lose it” rule, allowing account holders to carry over funds year after year, building a substantial savings for future health care expenses.
How to Qualify and Get an HSA
To qualify for an HSA, individuals must be enrolled in a high-deductible health plan. The IRS defines the minimum deductible and maximum out-of-pocket expenses for these plans, which are adjusted annually. Additionally, individuals cannot be enrolled in other health coverage that is not an HDHP, cannot be claimed as a dependent on someone else’s tax return, and cannot be enrolled in Medicare. Meeting these criteria allows individuals to open and contribute to an HSA, providing access to a range of financial benefits.
Benefits of Using HSA Assets for Medical Expenses
HSAs offer numerous benefits for managing medical expenses. The triple tax advantage—tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses—makes HSAs an attractive option for those looking to minimize their tax burden. Additionally, HSAs can be used to pay for a wide range of qualified medical expenses, including doctor visits, prescription medications, and even some over-the-counter items. This flexibility allows individuals to use their HSA as a spending account to cover current healthcare costs while also saving for future expenses.
How to Choose the Best HSA Investment Provider in 2025
For federal employees who participate in FEHB, access to an HSA is provided bye BeneFeds.
Top Providers: Factors to Consider When Selecting an HSA Provider
Choosing the best HSA provider involves evaluating several key factors, including account features, fees, and investment options. It’s important to consider the maintenance fees associated with the account, as well as any additional costs for accessing investment options. The interest rate that’s offered on the savings portion of the account can also impact the overall growth of the funds. Additionally, the availability of a comprehensive investment menu, including mutual funds and other investment vehicles, is crucial for those looking to maximize their HSA’s potential as an investment account.
Evaluating HSA Account Features and Fees
When evaluating HSA account features and fees, it’s important to consider the overall cost of maintaining the account. Look for providers that offer low fees and competitive interest rates to maximize the growth of your savings. Additionally, consider the investment options available, as a diverse investment menu can provide opportunities for higher returns. Some providers may offer additional features, such as online tools and resources, to help manage your account effectively. By carefully evaluating these factors, you can select the best HSA provider to meet your needs in 2025.
Understanding the Triple Tax Advantage of HSAs
The triple tax advantage of HSAs is one of their most compelling features. Contributions to an HSA are tax-deductible, reducing your taxable income for the year. The funds in the account grow tax-free, allowing you to accumulate wealth over time without the burden of taxes. Finally, withdrawals for qualified medical expenses are tax-free, providing a significant advantage when it comes to managing healthcare costs. This unique combination of tax benefits makes HSAs an attractive option for both saving and investing.
Spend Your HSA Cash to Help Save on Medical Expenses
Using HSAs to Pay for Qualified Medical Expenses
HSAs are designed to help individuals save on medical expenses by providing a tax-advantaged way to pay for qualified medical expenses. These expenses include a wide range of healthcare costs, such as doctor visits, prescription medications, and even some over-the-counter items. By using your HSA to pay for these expenses, you can reduce your out-of-pocket costs and take advantage of the tax-free withdrawal benefit. This makes HSAs an effective tool for managing both current and future healthcare expenses. At age 65, the money in an HSA can be moved to a non-health account, although the account owner will have to pay income tax.
Innovations in HSA Account Management and Technology
The HSA landscape is also seeing innovations in account management and technology, making it easier for individuals to manage their accounts and maximize their benefits. Many providers are offering enhanced online platforms and mobile apps, providing convenient access to account information and investment options. These technological advancements allow for more efficient management of HSA funds, enabling individuals to make informed decisions about their healthcare spending and investment strategies. As technology continues to evolve, HSAs are likely to become even more user-friendly and accessible.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®), Chartered Federal Employee Benefits Consultants (ChFEBC℠), and Accredited Investment Fiduciaries (AIF®). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars right here. Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting on our contact page.
