Several of our clients have inquired about whether they should be offering employees a High Deductible Health Plan combined with a Health Savings Account. So, as we always do, when we’re exploring a topic such as this, let’s start with some definitions.
A Health Savings Account, or HSA, is a personal employee owned savings account the employee establishes when they have selected a High Deductible Health Plan (HDHP) from their employer sponsored health plan offerings. The purpose of the HSA is to help the employee save money for out-of-pocket medical expenses like doctor visits, vision and dental care, and prescriptions. Because of the high deductibles, most coverages, other than wellness visits, are not reimbursed until the deductible is met. Therefore, making regular periodic deposits into an HSA prepares the insured for those out-of-pocket expenses.
Health savings accounts are often a win-win situation for both employers and employees. Let’s break down why for each group.
Benefits to the Employer
The first benefit of an HSA to an employer is the tax savings. The employee nor the employer have to pay payroll taxes on HSA contributions deducted via payroll. As an employer, you get a federal income tax deduction for any contributions you make into the employee’s HSA accounts.
The next advantage the employer has is that employee HSA accounts can be easily moved from one HDHP of a particular carrier to another carrier without penalty or difficulty.
And finally, having an employer sponsored HSA goes a long way to help employers attract and retain employees.
HSAs are easy for employers to set up and maintain and fees are very reasonable. In fact, with Zenefits, setting up an HSA can be completed in a just few minutes. (Yes, it’s that easy!)
Benefits to the Employee
Employees can add to their take home pay by utilizing the HSA tax advantages.
First, employees can withdraw money tax-free to pay for qualified medical expenses. Payroll deductions into their HSA contributions are considered pre-tax, so the employee gets a full dollar saved for every dollar deposited.
Gains or earnings on the monies deposited into a health savings account are also accumulated tax-free, so the employee gets to keep 100 cents of every dollar of earnings, further helping the employee pay for out-of-pocket medical expenses.
Finally, employees have control over their HSA and get to decide how much they wish to contribute, up to the legal maximums. The employees decide which qualified expenses they wish to pay from their account, and also how to invest the HSA funds to earn the most interest or dividends.
At Zenefits, we provide employees with a debit card to access their account and a mobile app to keep track of their funds. Employees can also utilize our secure portal to review and make changes to their accounts.
In today’s world of rising costs and unexpected expenses, HSAs are an excellent weapon to combat the unknown. Talk to your Zenefits broker today for more info!
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