In these times of rising healthcare costs, many businesses are choosing to offer healthcare coverage plans that require employees to meet a high annual deductible in order to keep premiums lower.
HSAs help employees build tax-exempt savings against future healthcare expenses. Distributions can be taken from an HSA account to pay for qualified healthcare expenses. HSAs are a benefit you can offer employees that can boost the value and attractiveness of your benefits package to potential employees, particularly those who are concerned about rising healthcare costs and saving for the future.
An HSA is an employee-owned account that can be funded by the employee, the employer, or both. There is a maximum HSA contribution allowed per year (in 2019, it is $3,500 for a single employee and $7,000 for a family, with a $1,000 catch-up contribution allowed for people 55 and older).
Benefits of an HSA for Employers:
Reduced premiums. High-deductible plans that include an HSA option are significantly lower cost than other types of health plans.
Lower fixed costs. You have more control over how much you pay for health insurance for your employees. You can predetermine how much you will contribute to employee HSAs each year.
Control over where your money goes. You can choose to give your money to your employees, instead of to the insurance carrier. Because you pay a lower premium for high-deductible plans, you may be able to contribute that savings to employees' HSAs, funding your workers directly rather than paying more to your insurance carrier.
Tax savings. Employer HSA contributions are made pre-tax.
Healthy workers. When employees have an HSA set aside, they may be more likely to receive preventive care, take better care of their health, and make better healthcare decisions — providing you with a healthier, more productive workforce.
Benefits of an HSA for Employees:
- Contributions are tax deductible.
- Any contributions you make to an HSA as an employer are excluded from employee's gross income.
- Contributions remain in the employee's account and are rolled over from year to year.
- Interest earned on HSA accounts is tax-free.
- HSA is portable and may be taken along with the employee to a new job or at retirement.
- Many health-related expenses can be paid for out of HSA funds, such as visits to an urgent-care center, over-the-counter medicines, and medical equipment and supplies such as bandages or splints.
First Commonwealth Bank and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.