An HSA is a powerful tool for accumulating wealth to offset future expenses and a must-have piece of a competitive employee benefits package.
Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to [email protected].
I handle HR for a courier service with a predominantly young, healthy workforce. We provide our employees with a choice of three health plans: an HMO, a PPO and an HDHP. In the past few months, I’ve been getting a lot of requests to offer an HSA plan. Can you tell me in plain English why we should add an HSA to our benefits?
Seeking Help in Leveraging of HSAs
Health Savings Accounts (HSAs) are getting a lot of attention lately. HSAs pair nicely with High-Deductible Health Plans (HDHPs)—which companies are increasingly offering—and have many great benefits. At my age, I’ve learned to appreciate the importance of saving up money to help with sudden unanticipated medical expenses. But I can also appreciate that this is a tricky concept for your young, healthy—and likewise, immortal—employees to understand!
Ultimately, an HSA is a powerful tool for accumulating wealth to offset future expenses (when folks are not so young, healthy, and immortal). HSAs are also becoming a must-have part of a company’s competitive benefits package, and it sounds like your employees are giving you a major hint.
If your workers are healthy, casual users of healthcare, then chances are you should offer an HSA in conjunction with your HDHP. But many employees can get advantages from using an HSA. Since funds are invested in an interest-earning account, the laws of compound interest are on their side. The money is also theirs as soon as it’s credited to their account—and unlike with an FSA, employees need not worry about losing money at the end of the year.
As an employer, the annual expense of providing an HSA is minimal—and it’s up to you whether or not to seed your employees’ accounts. In deciding this, you can consider how much premium dollars you saved when these employees chose the less expensive HDHP (compared to the PPO or HMO options). If you contribute $50 monthly over 10 years, that’s almost $10,000 with interest applied! Keep in mind that your employee contributions are pre-tax and deductible as a business expense, and your employees receive the benefits tax-free, so long as they use the funds for authorized medical expenses.
In today’s world, the ACA has restricted premium rate spreads for the oldest employees (age 64) to the youngest employees (age 19) to 3-1. This means that the oldest person you cover can’t be charged more than three times the rate of the youngest person covered under the plan. Before the ACA, older employees paid a great deal more in premiums than younger employees. By offering an HDHP with an HSA, all healthy employees, regardless of age, have an opportunity to own an HSA and benefit from employer contributions (as well as their own).
HSAs are really win-win, and I see it as a huge employee retention advantage for every employer to offer the choice of PPO/HMO and HDHP/HSA plans. The nice thing about an HSA (if that HDHP of yours is HSA-compliant) is you can start it today. You and your employees can select contribution levels straight away, and start saving. We can help!
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