Why employers should offer an HSA

And why consumers benefit

Steadily rising costs have everyone looking for smart ways to save money, particularly on health insurance. A great way to push back at inflation is to offer a Health Savings Account (HSA) to your employees. These savings accounts are a simple, effective and affordable way to find tax savings that benefits everyone: individuals, small businesses and large employers.

An HSA is a special savings account used just for health care expenses. It provides employees with a way to pay medical, dental and vision expenses with pre-tax dollars.

Certain plans, like high-deductible health plans, are typically paired with an HSA. These types of plans have higher annual deductibles and lower premiums than traditional health care plans. (The IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.) With an HSA, employees decide how much to contribute annually, as long as it equals or is less than the contribution limit the IRS sets for HSAs each year.

Employees can use funds from the HSA to offset the cost of the deductible, and save for health expenses not covered by their health plan.  

As an employer, offering an HSA option for your employees will help you:

  • Leverage your business. In today’s tight labor market, your benefit package is key to recruiting and keeping employees. By offering a high-deductible health plan with an HSA, you can control premium costs, making it an affordable option for you and for your employees.
  • Enjoy tax savings. As an employer, you get a federal income deduction for any contribution made to an employee’s HSA account, and for the amounts contributed through payroll deduction. That’s because the IRS doesn’t consider HSA contributions as wages. This means employers can save as much as 7.65% on any pre-tax employee contributions made through an HSA program.
  • Curb rising health care costs. Traditional health care plans tend to shield consumers from the cost of care. With an HSA, consumers are more price conscious because they manage their own health care spending. They are also more likely to demand price transparency and seek the best value.

As a consumer, enrolling in an HSA will help you:

  • Enjoy tax savings. HSAs offer a triple tax advantage for individuals and employees: contributions are not taxed, the money grows in your account tax-free, and when money is taken from the account, it isn’t taxed, so long as it is used for qualified medical expenses.  
  • Invest in your retirement. HSA funds can help pay for medical costs well into retirement. That’s because any balance in an HSA rolls over each year, and stays with you, regardless of changes in employment, insurance carrier or retirement. In other words, there is no “use it or lose it” limitations or restrictions. You can benefit from long-term, tax-free growth.
  • Protect yourself from rising costs. HSAs can help protect you from rising health care costs. If you invest in your HSA long-term, you can grow your savings tax-free and avoid dipping into retirement funds to pay for health care expenses.

Want to learn more? Find more information about how an HSA works.

Let us help. Contact your representative to discuss your options. We can help you find the best choice for your business or your family.

Sources: Bizjournal, Lively, Chard Snyder

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