Open enrollment is only weeks away, and the 2027 Health Savings Account (HSA) limits are already published. If your employee communications still show last year’s figures, now is the time to update them.
The Internal Revenue Service published the 2027 amounts in Revenue Procedure 2026-24. These figures affect your plan design, employer contribution strategy, payroll communications, and the way employees evaluate their health coverage.
For small and midsized employers, an HSA-eligible plan can be a valuable benefits tool. But the plan must meet specific requirements, and employees need clear education to understand how the account works.
The 2027 HSA limits at a glance
For calendar year 2027, the annual HSA contribution limits are:
| Coverage type | 2027 HSA contribution limit |
|---|---|
| Self-only coverage | $4,500 |
| Family coverage | $9,000 |
These limits include all contributions made to the employee’s HSA, including amounts contributed by the employee and the employer.
Eligible account holders age 55 and older may also make a separate additional $1,000 catch-up contribution on top of the annual limit. This catch-up amount is set by statute and is not indexed for inflation. Because catch-up eligibility and contribution rules can be technical, employees should confirm their individual circumstances with a qualified tax professional.
The 2027 limits apply only when the individual is eligible to contribute to an HSA. Having an HSA account by itself is not enough.
What is an HSA?
An HSA is a tax-advantaged savings account that must be paired with a qualifying high-deductible health plan (HDHP).
The account is designed to help employees pay for qualified medical expenses, such as eligible deductibles, copayments, and other healthcare costs. Unlike a flexible spending arrangement, HSA balances generally roll over from year to year rather than expiring at the end of the plan year.
An HSA provides what is commonly called a triple tax advantage:
- Contributions may go in before taxes or be tax-deductible. This can reduce taxable income, depending on how the contribution is made and the employee’s circumstances.
- Account growth is tax-free. HSA funds can remain in the account, and many providers offer investment options once certain account requirements are met.
- Withdrawals for qualified medical expenses are tax-free. Employees can use HSA funds for eligible expenses without paying tax on those withdrawals.
In plain English, employees may receive tax benefits when money goes into the account, while it remains in the account, and when they use it for qualified medical expenses.
That is a significant part of the value of an HSA-eligible plan. Employees who look only at the deductible may miss the broader financial picture.
The 2027 HDHP requirements employers need to check
For 2027, a qualifying HDHP must meet the following minimum deductible and maximum out-of-pocket requirements:
| HDHP requirement | Self-only coverage | Family coverage |
|---|---|---|
| Minimum annual deductible | $1,750 | $3,500 |
| Maximum annual out-of-pocket expense limit | $8,700 | $17,400 |
The out-of-pocket limits include deductibles, copayments, and other amounts specified under the applicable rules. They exclude premiums.
These figures are not interchangeable with the HSA contribution limits. The deductible and out-of-pocket amounts determine whether the health plan may qualify as an HDHP. The $4,500 and $9,000 figures determine the maximum HSA contributions for 2027.
Before you publish open enrollment materials, review your plan documents and confirm that your plan still meets the 2027 requirements. A plan that worked for a prior year should not be assumed to qualify automatically for 2027.
HSA eligibility depends on the plan, and the employee’s situation
One of the most important points to explain is that HSA eligibility depends on more than whether an employee has an HSA account.
An employee generally must be covered by a qualifying HDHP and must not have disqualifying coverage. Disqualifying circumstances can include being claimed as someone else’s tax dependent or being enrolled in Medicare.
This means an employee may have an HSA from a previous employer but still be unable to make new contributions if the employee is no longer HSA-eligible.
Employees enrolled in Medicare should be specifically flagged during benefits education. They may be able to use existing HSA funds for qualified expenses, but Medicare enrollment affects eligibility to make new HSA contributions.
Your communications should encourage employees to review their own circumstances rather than assuming that every person enrolled in the HDHP can contribute the same amount.
Employer contributions count toward the annual limit
Employers can contribute directly to employee HSAs. This can make an HSA-eligible plan more attractive and can help employees manage the financial impact of a higher deductible.
However, employer contributions count toward the annual HSA contribution limit. For 2027, the total contribution from all sources generally cannot exceed:
- $4,500 for self-only coverage
- $9,000 for family coverage
For example, if your company contributes $1,500 to an employee’s HSA for self-only coverage, the employee’s remaining contribution capacity is generally $3,000 for the year.
Employer HSA contributions are generally excluded from income and are not subject to payroll taxes when made through a cafeteria plan, subject to applicable requirements. Your payroll and benefits advisors should confirm that your contribution method and plan documents are properly structured.
When setting your contribution strategy, consider whether you want to:
- Make a fixed contribution for every eligible employee.
- Contribute different amounts based on self-only or family coverage.
- Fund the account monthly or at another defined interval.
- Provide a contribution at the beginning of the plan year.
- Use the contribution to support recruitment and retention.
The right approach depends on your workforce, budget, plan design, and administrative capabilities.
The last-month rule requires careful communication
The last-month rule can create an opportunity for an HSA-eligible individual who is eligible on December 1 to generally contribute the full annual amount for that year, rather than contributing only for the months of eligibility.
But this rule comes with a testing-period requirement. The individual must generally remain HSA-eligible during the applicable testing period. If eligibility ends too soon, tax consequences may apply.
This is not a rule employers should explain through a one-line statement in an enrollment guide. You can mention that the last-month rule exists, but employees should confirm the details with a qualified tax professional before relying on it.
The rule is especially important when an employee changes coverage, enrolls in Medicare, becomes covered under another type of plan, or otherwise experiences a change in eligibility.
Why HSAs can support retention
Employees often focus on the deductible when comparing health plans. That is understandable, but it does not show the full value of an HSA-eligible plan.
A complete explanation should also cover:
- The employer’s HSA contribution.
- The employee’s potential tax advantages.
- The ability to roll over unused balances.
- The fact that the account generally follows the employee rather than disappearing when employment ends.
- The ability to use HSA funds for qualified medical expenses.
- Potential investment opportunities, depending on the HSA provider and account balance requirements.
For an employee planning for future medical expenses, an HSA can become a portable financial resource. It may also help differentiate your benefits package from another employer offering a plan with similar premiums and deductibles but no HSA contribution.
That does not mean an HSA-eligible plan is the right choice for every employee or every business. Some employees may prefer a plan with a different cost-sharing structure, particularly if they expect frequent medical care. Education should present both the advantages and the tradeoffs.
Your 2027 open enrollment checklist
Before your enrollment materials are finalized, take these steps:
1. Check your plan’s deductible
Confirm that the 2027 deductible is at least $1,750 for self-only coverage or $3,500 for family coverage, as applicable.
2. Confirm the out-of-pocket maximum
Verify that the plan’s annual out-of-pocket expense limit does not exceed $8,700 for self-only coverage or $17,400 for family coverage, excluding premiums.
3. Confirm that the plan qualifies
Do not rely solely on last year’s plan documents. Ask your carrier, third-party administrator, or benefits advisor to confirm the plan’s HSA eligibility for 2027.
4. Update all employee communications
Replace outdated HSA limits in enrollment guides, benefit summaries, payroll materials, presentations, and employee portals.
5. Decide how much you will contribute
Model the cost of your employer contribution under both self-only and family coverage scenarios. Remember that employer contributions count toward the employee’s annual limit.
6. Explain eligibility limitations
Tell employees that Medicare enrollment and other disqualifying coverage can affect their ability to contribute. Encourage employees with individual questions to consult a qualified tax professional.
7. Compare plan designs
An HSA-eligible plan is one option. Depending on your workforce and budget, a level-funded plan or another plan design may provide a better fit. The comparison should include premiums, deductibles, employer contributions, out-of-pocket exposure, network access, and employee understanding.
Let us help you evaluate your options
You do not have to make your 2027 benefits decisions alone. At Total Benefit Solutions, we help small and midsized employers evaluate HSA-eligible plans, review contribution strategies, and compare options against level-funded and other plan designs.
We can also help you turn complicated plan rules into clear employee communications before open enrollment begins.
Visit www.totalbenefits.net or call (215) 355-2121 to discuss your 2027 benefits strategy.
Educational disclaimer: This article provides general information and is not tax or legal advice. HSA eligibility, contribution limits, and tax treatment may depend on individual circumstances and plan design. Employers and individuals should consult qualified tax and legal professionals about their own situations.
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