Help Clients Avoid Hitting HSA Contribution Limits

Health savings accounts are powerful financial products that can help your clients cover current health care costs, save for future health care expenses and function as investment vehicles, so it's important for you to discuss them with your clients.

One important consideration is that a client who wants to contribute to an HSA needs to enroll in a high-deductible health plan.

Another important consideration is that there are limits to how much an account holder can contribute each year.

If your clients contribute too much, they could face tax penalties.

In 2024, an individual under 55 can contribute up to $4,150.
A family can contribute up to $8,300.
An individual who is 55 or older can make an additional contribution of up to $1,000 per year.

So, how do your clients know if they're on track to meet their contribution goals?

If they do contribute too much, what can they do to mitigate the tax implications?

Enter technology.

A digital tool can help your clients see how well they're meeting their contribution goals and help them avoid exceeding the contribution limits.

A client's HSA custodian likely provides a dashboard account holders can use to see information about contributions and HSA investment fund performance.

Many online banking platforms, like UMB's, present the information using graphs. Customizable functions may help clients choose what they see on their dashboards.

In some cases, your clients may be able to set up alerts to warn them when they're contributing too little for the year or are on the verge of contributing too much.

If your clients over-contribute to their HSAs, the same technology can help the clients transfer funds out of their HSAs by the tax deadline, so they can avoid paying penalties.

If your clients don't catch over-contributions in time, the online platform can help the clients' tax advisors determine how much will be owed.

Some additional do's and don'ts to keep in mind as you work with your clients on their HSAs:

Do empower clients to take control of regularly monitoring the online platform provided by the HSA custodian. Consider sending a monthly reminder to prompt them to do so.
Don't provide tax advice without working in conjunction with a tax professional.
Do ensure that clients understand what expenses qualify to be covered using HSA funds. You can find a full list of HSA-eligible expenses in IRS Publication 502.

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