Avoiding Common HSA Mistakes: A 2026 Compliance Guide For Employers & Employees
- Apr 14
- 4 min read
Health Savings Accounts (HSAs) paired with High Deductible Health Plans (HDHPs) remain one of the most tax-efficient employee benefits available today. With triple tax advantages, pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses, HSAs continue to grow in popularity. However, the strict federal rules governing HSAs create numerous compliance pitfalls that can trigger excise taxes, unexpected tax bills, and strained employee relations.
Here at the Siekmann Company, we help employers navigate these complexities to protect their organization and their workforce. This article highlights the most common HSA mistakes and provides practical steps to avoid them.
Why HSA Compliance Matters More Than Ever
Employers offering HDHPs must ensure their plans meet IRS requirements so employees can fully benefit from HSA tax advantages. Mistakes often stem from misunderstood eligibility rules, contribution limits, or plan design issues. Regular reviews and clear employee communication are essential for staying compliant.
Here are the five most frequent HSA mistakes we see—and how to avoid them.
1. Failing To Confirm The Health Plan Qualifies As A True HDHP
The foundation of HSA eligibility is proper HDHP design. An employee cannot contribute to an HSA unless covered by a qualifying HDHP with no impermissible first-dollar coverage.
For plan years beginning in 2026, the IRS requires:
Minimum deductible: $1,700 (self-only) or $3,400 (family)
Out-of-pocket maximum: $8,500 (self-only) or $17,000 (family)
Common mistake: Allowing first-dollar coverage for services like generic prescriptions or diagnostic tests that do not qualify as preventive care or telehealth.
How to avoid it: Review your plan document annually before the plan year starts. Pay special attention to embedded deductibles in family coverage and confirm no benefits are paid before the deductible is met (except for allowed preventive care and telehealth). Use the adjusted limits for the calendar year in which the plan year begins.
2. Overlooking the Impact of Health FSAs and HRAs on HSA Eligibility
Many employers still offer Health Flexible Spending Accounts (FSAs) or Health Reimbursement Arrangements (HRAs) alongside HDHPs, creating hidden eligibility traps.
Key rule: General-purpose FSAs or HRAs disqualify employees (and their dependents) from making HSA contributions for the entire year.
Common mistakes:
Employees carrying over unused FSA balances.
Using a grace period on a general-purpose FSA.
How to avoid it:
Offer limited-purpose or post-deductible FSAs that are HSA-compatible.
Allow employees to waive carryovers.
Educate employees during open enrollment about these restrictions.
Employers should verify HDHP-only coverage and review any employer-sponsored health FSAs or HRAs carefully before approving HSA contributions. IRS Notice 2004-50 states an employer is only responsible for determining whether the employee is covered under an HDHP or any low-deductible health plan sponsored by the employer, including health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).
3. Exceeding Annual HSA Contribution Limits
Employees are responsible for their own contribution limits, but employers who facilitate payroll deductions can inadvertently create excess contributions.
2026 Contribution Limits:
Self-only HDHP coverage: $4,400
Family HDHP coverage: $8,750
Catch-up contribution (age 55+): Additional $1,000
Common mistakes:
Failing to adjust contributions mid-year when coverage changes (e.g., switching from family to self-only).
Not accounting for the “last-month rule” or spousal coordination.
How to avoid it: Work closely with your payroll provider to monitor deductions. Provide clear educational materials and send reminders when life events occur that affect limits. Excess contributions are subject to a 6% excise tax until corrected by the April 15 deadline the following year.
4. Ignoring Medicare Eligibility Rules & Retroactive Coverage
One of the most costly and confusing mistakes involves employees approaching age 65.
Key rule: Once Medicare coverage begins, HSA contributions must stop immediately.
Common pitfalls:
Automatic Medicare enrollment for those receiving Social Security.
Retroactive Medicare coverage (up to six months) when applications are filed late.
This can create unexpected excess contributions and excise taxes.
How to avoid it: Proactively educate employees turning 64 about Medicare’s impact on HSAs. Encourage early planning and timely applications to prevent retroactive disqualification.
5. Missing The Permanent Telehealth First-Dollar Coverage Opportunity
Thanks to the One Big Beautiful Bill Act (OBBBA) enacted in July 2025, employers can now permanently offer first-dollar coverage for telehealth and remote care services in HDHPs without jeopardizing HSA eligibility.
Common mistake: Leaving valuable telehealth benefits on the table or failing to communicate the expanded coverage.
Benefits of adding this feature:
Improved access to care, especially in rural areas
Reduced unnecessary in-person visits and lower overall health costs
Greater employee convenience and productivity
Employers should review their current HDHP telehealth provisions and consider enhancements, then clearly communicate changes to participants.
Best Practices For Strong HSA Compliance
Conduct an annual HDHP/HSA compliance audit.
Provide robust employee education during open enrollment and throughout the year.
Partner with experienced benefits advisors and payroll teams.
Monitor IRS guidance, including Publication 969 and recent notices on telehealth.
By addressing these common HSA mistakes proactively, employers can help employees maximize the powerful tax benefits of HSAs while minimizing compliance risks and potential penalties.
At The Siekmann Company, our team delivers comprehensive benefits compliance support tailored to organizations of all sizes. Whether you need a full plan review, employee education resources, or strategic design recommendations, we’re here to help you optimize your HDHP and HSA program.
Contact us today to schedule a compliance check or discuss how to strengthen your health benefits strategy in 2026 and beyond.
