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The Benefits of a Health Savings Account

In today’s market, High Deductible Health Plan (HDHP) and Health Savings Account (HSA) popularity continues to increase as companies look to control rising healthcare costs. However, some employers are still hesitant to offer a HDHP-HSA because they do not fully understand how it may benefit their employees and their company. Often times, if a company does offer a HDHP option, many employees enroll in that plan option because of the lower price, but never set up a Health Savings Account (HSA) to go with it. It is common for employees to focus on their increased paycheck, and miss the opportunity to save for the future and/or meet the higher deductible. Our mission is to help companies and their employees fully understand what a HSA is, how it can be used and how it can benefit them. Today we are going to start with the basics.

What is a HSA

Simply put, a HSA (Health Savings Account) is a tax-favored savings account created for the purpose of paying medical expenses.

Who is eligible?

To get the benefits of a HSA, the law requires that the savings account be combined with a qualified high deductible health insurance plan which usually costs less than other health insurance plans. In 2019, the minimum annual deductible of a HSA-qualified plan for an individual is $1,350 and $2,700 for a family. The out-of-pocket max is $6,750 for an individual and $13,500 for a family. – Please note that you do NOT have to be enrolled in an employer-sponsored plan to have a HSA. Some individual health plans offered through the marketplace or purchased directly from carriers are also HSA-Qualified.

What are the benefits for EMPLOYERS?

  • Reduced Taxes
    • Employer contributions to HSAs are deductible. In addition,  these contributions are not subject to social security tax. This means employers save on every dollar they contribute to a HSA on behalf of an employee.
  • Cost Management
    • HDHPs offer employers a way to reduce premium rates, thereby buffering the rising costs of healthcare, even if they make contributions to HSAs on behalf of their employees.
  • Talent Recruitment
    • HSAs are attractive to workers. Companies of basically any size can afford to offer HSAs and attract talent in a competitive market. Moreover, a cash contribution to employee HSAs is a tangible benefit likely to be extremely popular among employees.
  • Budget Reallocation
    • The money saved by offering an HSA-HDHP plan can be used to tackle other business projects and to help the business grow.

What are the benefits for EMPLOYEES?

  • Triple Tax Advantage
    • Contributions to the HSA are 100% deductible (up to the legal limits listed below) just like an IRA.
      • 2019 Individual Contribution Limit: $3,500
      • 2019 Family Contribution Limit: $7,000
    • 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.
  • Flexible Contributions
    • Employees can change the amount they contribute as needed to accommodate their lifestyle and financial needs.
  • Individually Owned
    • HSAs are owned by the employee. This means that if an employee leaves a company, they can take their HSA with them.
  • Cost Management
    • HSAs provide a way to cover out-of-pocket healthcare expenses until (and even after) an insurance deductible has been reached.
  •  Roll-Over
    • 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.