Increasing healthcare costs, aging workforces, and diverse and complex health statuses have forced people to find practical and economic solutions that benefit both employers and employees.
Providing healthcare benefits to your employees is an excellent strategy to hire and retain top talent. Choosing a health plan that fits everyone’s needs can be extremely difficult and expensive for you as the employer. One way to help control the cost and give your employees more control over their healthcare is to offer a high deductible health plan (HDHP) in combination with a health savings account (HSA).
Health Savings Accounts
HSAs are tax-advantaged accounts that help individuals and families save for current and future healthcare costs. HSAs are designed to help consumers, but they also help employers. Here are a few ways HSAs benefit employers:
- HDHPs coupled with HSAs usually allow employers to save on insurance premiums for their employees.
- You can save money on your business taxes when you contribute to your employees’ HSAs. When doing your taxes, be sure to consult a tax professional about all your options to see which one fits your company’s needs best.
- If you had previously not been able to provide medical insurance to your employees, a HDHP with an HSA option may allow you to offer health insurance to your employees without it being cost-prohibitive.
Benefits of HSAs for your Employees
In addition to the perks you get, HSAs offer numerous benefits to employees as well. Speaking to your employees about the benefits of utilizing an HSA can help them while helping you.
With an HSA, your employees will be in a better position financially if something unexpected happens, like a broken arm, strained back, or unexpected emergency room visit. HSAs also allow individuals and families to increase their healthcare savings responsibly, carefully, and continuously with fewer overall restrictions.
An HSA gives your employees control over the money they spend on healthcare because the money belongs to them regardless of their job or health status. Your employees can spend the money the way they think is best for themselves and their families.
Using the HDHP and HSA approach couples tax benefits on the savings account with lower health insurance premiums and can give employees more control over how they use their health insurance benefits.
- Potential Tax-Free Interest Earnings: Like any savings account, HSAs earn interest; unlike other savings accounts, your employees won’t have to pay federal income tax on those earnings.
- Contributions Can Be Made with Pre-Tax Payroll Dollars: As an employer, you can make saving in an HSA convenient and seamless for your employees. Through payroll deductions, your employees can take pre-taxed dollars and put them directly in their HSA.
- Tax-Free Withdrawals: The money employees withdraw is not taxed as long as it is spent on qualified medical expenses.
- No “Use It or Lose It” Policy: Unlike flexible spending accounts, funds saved in an HSA roll over from year to year and money can be used for future medical costs. This allows your employees to build a “nest egg” for future and unexpected medical costs.
- Contributions Can Change: Depending on the financial status of the employee, he or she can change contribution amounts from week-to-week or month-to-month. For example, at the beginning of the year, an employee can deposit a modest $50 per month in the HSA and change it to $50 per week to save for a qualified medical procedure the employee schedules for later in the year.
- Penalty-Free Withdrawals After Age 65: If your employee turns 65 and has not used all the money in his or her HSA, it can be used for non-medical expenses without a penalty.
As you can see, HSAs are mutually beneficial if utilized properly and responsibly. Speak to your employees about the benefits of an HSA today!
Encouraging employees to save money in an HSA will create a healthier workplace with fewer disruptions. Better yet, help them save in their HSA and you’ll likely be rewarded with employee loyalty and productivity.