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Health Savings Accounts

Health Savings Accounts (HSA)

A Health Savings Account (HSA) is a tax-advantaged type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.

While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have a High Deductible Health Plan (HDHP) — generally a health plan (including a Marketplace plan) that only covers preventive services before the deductible. The funds contributed to an account are not subject to federal income tax at the time of deposit. Your money grows tax-free and you can withdraw tax-free if you use the money for eligible medical expenses.1

You can enroll in an HSA-qualified health plan and sign up for an HSA during your organization’s annual open enrollment, but can open an HSA at any time with Kensington Bank. If you have a high-deductible health plan on your own, not offered through an employer, you can sign up for the plan immediately.


  • Contributions to the HSA are 100% deductible (up to the legal limit) — just like an IRA.
  • Withdrawals to pay qualified medical expenses, including dental and vision, are never taxed.
  • Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free.
  • Unlike a flexible spending account (FSA), unused money in your HSA isn’t forfeited at the end of the year; it continues to grow tax-deferred.
  • FDIC insured account
  • Unspent money in an HSA rolls over at the end of the year, so it’s available for future health expenses.
  • Contributions can come from you, your employer, a relative, or anyone else who wants to add to your HSA.
  • The money in your HSA remains available for future qualified medical expenses even if you change health insurance plans, go to work for a different employer, or retire. Essentially, your HSA is a bank account in your name, where you decide how and when to use the funds.

Contribution Limits

Contribution limits are frequently updated each year by the IRS. For up-to-date limits please visit the IRS Website.

  1. Subject to qualifications. $20 annual fee per account.

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