Opening a Health Savings Account: Step-by-Step

How to open an HSA

You open an HSA through a bank, credit union, or insurance company that offers HSA accounts — not through your employer or the government. The process takes about 15 minutes online or over the phone. You will need proof that you are enrolled in a high-deductible health plan (HDHP), your Social Security number, and a way to fund the account (a bank account or paycheck deduction).

The first step is to confirm you meet the HSA rules: you must be covered by an HDHP, have no other health insurance except what the IRS allows alongside an HSA, and not be claimed as a dependent on someone else's tax return. If you have Medicare or Medicaid, you cannot open an HSA. Once you confirm you may have access to, you can open an account with any HSA provider — your health plan may offer one, but you are not required to use it.

Most people fund their HSA through payroll deduction, which means your employer sends money directly from your paycheck before taxes are taken out. If you are self-employed or want to fund it outside payroll, you can transfer money from your bank account or set up automatic monthly deposits. The IRS sets an annual contribution limit — for 2024 it is $4,150 for individual coverage and $8,300 for family coverage, but these amounts change each year.

Key Takeaways

You must be enrolled in a high-deductible health plan to open an HSA; your health plan may offer an account, but you can choose any bank or insurance company that offers HSAs.
Opening an account requires your Social Security number, proof of HDHP enrollment, and a funding method — usually payroll deduction or a bank transfer.
You cannot have Medicare, Medicaid, or other health coverage besides what the IRS allows with an HSA, and you cannot be claimed as a dependent.
The IRS sets annual contribution limits that change each year; for 2024 the limit is $4,150 for individual coverage and $8,300 for family coverage.
Money in an HSA rolls over year to year and can be invested, unlike a flexible spending account (FSA), which you lose if you do not spend it.

Where to open an HSA account

Your health insurance company may offer an HSA, but you are not required to use it. Banks, credit unions, and standalone HSA administrators all offer accounts. Common providers include Fidelity, HealthEquity, Lively, and Optum Bank, though your employer may have negotiated a specific provider for payroll deduction.

If you want to compare accounts, look at the fees charged — some have monthly maintenance fees, per-transaction fees, or investment fees if you want to invest HSA money rather than keep it in a savings account. Some accounts have no fees at all. You can also change HSA providers later if you find a better option, though you will need to roll over your existing balance.

If you use payroll deduction, your employer's benefits administrator can tell you which HSA provider is set up for your company. If you are self-employed or want to fund the account outside payroll, you can open an account directly with any provider online.

What documents you need to open an account

You will need to provide your Social Security number, date of birth, and address. Most providers also ask for proof that you are enrolled in an HDHP — this can be your health plan's member ID card, an enrollment confirmation email, or a letter from your insurance company showing your plan type.

If you are opening the account through your employer's payroll system, your employer has already verified your HDHP enrollment, so you may not need to provide proof again. If you are opening an account directly with a bank or HSA provider, have your health plan information ready when you start the application.

Some providers ask for your employer's name and address if you are using payroll deduction, so they can coordinate with your payroll department. If you are funding the account yourself, you will need your bank account number and routing number to set up transfers.

How to fund your HSA

The most common way to fund an HSA is through payroll deduction. You tell your employer how much to contribute each pay period, and that amount is taken from your paycheck before income tax is calculated. This reduces your taxable income for the year. You can change your contribution amount during open enrollment or if you have a may have access to life event (marriage, birth of a child, loss of other health coverage).

If you are self-employed or do not want to use payroll deduction, you can transfer money from your bank account to your HSA. You can do this as a one-time transfer or set up automatic monthly deposits. You can also make a lump-sum contribution at tax time and deduct it on your tax return, though you must do this by the tax filing deadline (usually April 15).

There is no requirement to contribute the maximum amount — you can contribute any amount up to the annual limit. If you contribute less than the limit one year, you cannot carry over the unused portion to the next year, but you can contribute more the following year if you want.

Timing: when to open an HSA

You can open an HSA as soon as your HDHP coverage begins. If you enroll in an HDHP during your employer's open enrollment period, you can usually set up HSA contributions to start on January 1 or whenever your new plan takes effect. If you enroll in an HDHP outside of open enrollment (because of a may have access to life event), you can open an HSA right away.

If you are buying an HDHP on the individual market through the health insurance marketplace, you can open an HSA as soon as your coverage is active. There is no waiting period — you can fund the account and use it immediately for may have access to medical expenses.

The IRS allows you to contribute to an HSA for the entire year if you are covered by an HDHP on December 1 of that year, even if you enroll partway through. This is called the "testing period" rule. However, you must remain in an HDHP for the entire following year, or you will owe taxes and penalties on the contributions made for months when you were not covered.

What happens after you open the account

Once your account is open, you can use a debit card (if your provider offers one) or request reimbursement for may have access to medical expenses. may have access to expenses include doctor visits, prescriptions, dental work, vision care, and medical equipment — but not health insurance premiums (except COBRA or premiums while unemployed), cosmetic procedures, or over-the-counter items unless prescribed by a doctor.

You can also invest HSA money in mutual funds or other investments offered by your provider, rather than keeping it in a savings account. Any earnings on invested money are tax-free if used for may have access to medical expenses. This is one major advantage of an HSA over a flexible spending account (FSA) — money rolls over year to year and can grow.

Keep receipts for all medical expenses you pay with HSA money. The IRS can audit HSA accounts, and you may need to prove that expenses were may have access to. You do not have to submit receipts when you withdraw money, but you should keep them for your records.

HSA rules that affect your account

Once you open an HSA, you must stay enrolled in an HDHP to keep using it. If you switch to a different health plan (PPO, HMO, or traditional insurance), you can no longer contribute to the HSA, but you can keep the account and use it for may have access to medical expenses. The money does not disappear — it stays in the account indefinitely.

If you withdraw money from your HSA for something that is not a may have access to medical expense, you owe income tax on that amount plus a 20 percent penalty. The exception is after age 65, when you can withdraw money for any reason without the penalty (though you still owe income tax on non-medical withdrawals).

You cannot have both an HSA and an FSA at the same time, with one exception: a limited-purpose FSA that only covers dental and vision expenses is allowed alongside an HSA. If your employer offers both, make sure you understand the rules before enrolling in the FSA.

Frequently Asked Questions

Can I open an HSA if my employer does not offer one?

Yes. You can open an HSA directly with any bank, credit union, or HSA provider as long as you are enrolled in an HDHP. You will not be able to use payroll deduction, but you can fund the account yourself through bank transfers or a lump-sum contribution at tax time.

What if I enroll in an HDHP partway through the year?

You can open an HSA immediately and contribute a prorated amount based on the months you are covered. For example, if you enroll in July, you can contribute one-seventh of the annual limit for the remaining months of the year. You can also catch up with a full contribution the following year.

Can I have an HSA if I have Medicare?

No. Once you enroll in Medicare, you cannot contribute to an HSA. If you already have an HSA, you can keep the account and use it for may have access to medical expenses, but you cannot add new money to it.

How long does it take to open an HSA?

Most accounts open within 15 minutes to a few hours if you apply online. If you apply through your employer's payroll system, it may take a few days for the provider to coordinate with your payroll department. You can usually start using the account as soon as it is open.

Can I change HSA providers later?

Yes. You can roll over your HSA balance to a different provider at any time. Contact your new provider to start a rollover, and they will handle the transfer from your old account. There is no limit to how many times you can change providers.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.