Benefits Made Simple

Starting an HSA or FSA Program: What Employers Need to Know

Last checked: Nov 2026 · By Josh Hall, benefits professional

Health savings accounts (HSAs) and flexible spending arrangements (FSAs) let employees pay for health costs with pre-tax money. They sound alike, but the rules for employers are very different. This guide walks through the basics from IRS Publication 969 and Publication 15-B, so you know what to ask your benefits provider, payroll team, and tax adviser.

HSA vs FSA at a glance (for employers)

HSA Health FSA
Who owns it The employee Your plan (it is an employer-established benefit plan)
Needs a special health plan? Yes, an HSA-qualified high-deductible health plan (HDHP) No
2026 limit $4,400 self-only / $8,750 family $3,400 per employee
2027 limit $4,500 self-only / $9,000 family Not yet published (as of Nov 2026)
Leftover money Stays with the employee, year after year Generally "use it or lose it," unless the plan has a grace period or a carryover

Sources: IRS Publication 969 and Revenue Procedure 2026-24 (HSA); Revenue Procedure 2025-32 and Publication 15-B (FSA).

Offering HSAs

Who can have an HSA

Employees must be covered by an HSA-qualified HDHP and generally have no other health coverage, apart from exceptions the IRS allows. See our plan types guide for the 2026 and 2027 HDHP limits.

If you contribute to employees' HSAs

IRS Publication 969 (2025) has a section just for employers. Key points:

  • Contributions must be comparable. If you contribute, you must give "comparable" contributions to all comparable participating employees. That means either the same dollar amount or the same percentage of the deductible.
  • Who counts as comparable. Comparable employees are those covered by your HDHP, eligible for an HSA, in the same coverage category (self-only or family), and in the same employment category (part-time, full-time, or former employees).
  • The cafeteria plan exception. The comparability rules don't apply to contributions made through a cafeteria plan.
  • There is a notice requirement. Some eligible employees may not have opened an HSA by December 31. Publication 969 describes a written notice you must give them by January 15 of the following year.
  • There is a penalty for getting it wrong. If your contributions weren't comparable, you must pay an excise tax of 35% of the amount you contributed.
  • Taxes and reporting. Your contributions generally aren't subject to employment taxes. You report them, including amounts employees elected through a cafeteria plan, on Form W-2, box 12, code W.
  • Employer money counts toward the limit. Employer and employee contributions together count toward the yearly HSA limit.

Offering a health FSA

Publication 969 says health FSAs are employer-established benefit plans. They may be offered as part of a cafeteria plan.

Key rules

  • Employees choose an amount up front. Employees elect an amount at the start of the plan year, and it is taken out of pay over the year. They can change it mid-year only if the law and the plan allow.
  • The full amount is available early. Employees can use the FSA for qualified expenses even if the money hasn't been taken from their pay yet. Your plan carries that risk if someone leaves early.
  • Leftover money. FSAs are generally "use it or lose it." A plan may offer either a grace period of up to 2½ months or a carryover, but not both. For 2026, the most a plan can let employees carry over is $680 (Revenue Procedure 2025-32).
  • Self-employed people can't join. Self-employed persons aren't eligible for FSAs.
  • HSAs and FSAs can conflict. Publication 969 says an employee covered by an HDHP and a health FSA that pays general medical expenses generally can't contribute to an HSA. A limited-purpose health FSA is one of the exceptions. Ask your provider about it if you offer both.

The cafeteria plan

IRS Publication 15-B (2026) describes a cafeteria plan as a written plan that lets employees choose between cash and certain qualified benefits that aren't taxed. Points from Pub 15-B:

  • Nondiscrimination rules. These apply so the plan doesn't favor highly compensated or key employees.
  • Simple cafeteria plans. Employers that averaged 100 or fewer employees in either of the 2 prior years may be able to use a "simple cafeteria plan." These plans are treated as meeting certain nondiscrimination rules.

Dependent care FSA

This is a separate benefit for child and dependent care, not medical bills. For 2026, Pub 15-B lists the exclusion as $7,500 ($3,750 for a married employee filing separately).

A made-up example

This example is made up to show the idea. It is not real data or advice.

A 60-person company offers an HSA-qualified HDHP. It decides to put $500 into the HSA of every employee with self-only coverage and $1,000 for every employee with family coverage. Every full-time employee in the same coverage tier gets the same amount, which is one way to meet the comparability rule. The company reports the amounts on each W-2 with code W.

What other employers do (2026 data)

KFF's 2026 Employer Health Benefits Survey found:

  • How common HSA plans are. 39% of firms with 10 or more workers that offer health benefits offered an HSA-qualified plan.
  • How much employers contribute. Among workers in HSA-qualified plans, 3% got an employer HSA contribution at least equal to their single deductible. Another 10% got enough to bring their deductible down to $1,000 or less.

Steps to get started

  1. Pick a provider. Choose an HSA trustee or custodian, and an FSA administrator if needed. Ask what they handle for you, such as plan documents, debit cards, and claims checks.
  2. Put your cafeteria plan in writing if employees will make pre-tax elections.
  3. Set your contribution policy so it meets the comparability rules.
  4. Set up payroll codes for pre-tax deductions and W-2 reporting.
  5. Explain it clearly at open enrollment. See Open enrollment communication.

Sources