Do You Need a Qualifying Event to Change HSA Contribution?

Health Savings Accounts (HSAs) offer a valuable way to save for medical expenses with significant tax advantages. These accounts are designed for individuals enrolled in a High-Deductible Health Plan (HDHP) and provide a triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Understanding how to manage contributions to an HSA, especially when life circumstances change, is important.

Adjusting Your HSA Contributions

Individuals have considerable flexibility in changing their Health Savings Account (HSA) contribution amounts throughout the year. Unlike some other benefit plans, there is no specific “qualifying event” required to simply alter how much you contribute to your HSA. This flexibility allows you to adjust your savings strategy based on your financial situation or anticipated healthcare needs.

Contributions to an HSA can be made in two primary ways: through pre-tax payroll deductions via your employer or by making direct contributions to your HSA custodian. Employer-sponsored payroll deductions offer an immediate tax benefit by reducing your taxable income, including federal income tax, Social Security, and Medicare taxes. While employers might have administrative processes that limit the frequency of changes to payroll deductions, such as once per pay period or a few times a year, direct contributions to your HSA custodian can be made at any time and as often as you wish. These direct contributions are then tax-deductible when you file your annual income tax return.

Understanding Qualifying Life Events

Qualifying Life Events (QLEs) are specific changes in your life that allow you to make adjustments to certain pre-tax benefits outside of your employer’s annual open enrollment period. These events are primarily governed by Internal Revenue Service (IRS) Section 125 rules, which apply to cafeteria plans. Common examples of QLEs include marriage or divorce, the birth or adoption of a child, a change in employment status for you or your spouse, or a loss of other health coverage.

These QLEs enable changes to benefits such as health insurance plan elections, Flexible Spending Accounts (FSAs), or Dependent Care FSAs. For instance, if you get married, you might be able to add your spouse to your health insurance plan mid-year. It is important to understand that while QLEs permit changes to these types of pre-tax benefits, they do not dictate when or how you can change the amount of your HSA contributions. The rules governing HSA contributions are distinct from those for Section 125 plans.

How Life Changes Affect HSA Eligibility

While qualifying life events do not restrict your ability to modify the amount you contribute to an HSA, they can significantly impact your HSA eligibility. To contribute to an HSA, you must be covered by a High-Deductible Health Plan (HDHP and have no other health coverage, not be enrolled in Medicare, and not be claimed as a dependent on someone else’s tax return. A life event, such as a change in employment, marital status, or dependent status, can alter your health plan coverage and, consequently, your eligibility to contribute to an HSA.

For example, if a change in employment leads you to enroll in a non-HDHP, or if your marital status changes and you gain coverage under a spouse’s non-HDHP, you would no longer be eligible to contribute to an HSA. Similarly, enrolling in Medicare disqualifies you from making new HSA contributions. If your eligibility changes mid-year, your maximum annual contribution limit must be prorated based on the number of months you were HSA-eligible. For instance, if you were eligible for only seven months of the year, your maximum contribution would be seven-twelfths of the annual limit.

The IRS sets annual contribution limits for HSAs, which are $4,300 for self-only coverage and $8,550 for family coverage in 2025. Individuals aged 55 or older can contribute an additional $1,000 as a “catch-up” contribution.

Exceeding the annual contribution limits, whether due to a change in eligibility or miscalculation, can result in penalties. Excess contributions are not tax-deductible and are subject to a 6% excise tax for each year they remain in the account. If you discover an over-contribution, you can avoid these penalties by withdrawing the excess amount and any associated earnings from your HSA before the tax filing deadline, typically April 15th of the following year.