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Should You Offer Health Savings Accounts?

Health Savings Accounts — or HSAs — are becoming a popular way to pay for healthcare expenses. You hear a lot about them in the media, both good and bad. But you don’t hear a lot about what they actually are, and how they work.

Health Savings Accounts work hand-in-hand with high-deductible health plans (HDHP). How high is a “high deductible?” As of this writing, a plan has to have a deductible of $1,050 to be HSA-compatible.

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The HSA lets your employees save part of their income for healthcare expenses without paying taxes on it. As an employer, you can make contributions to your workers’ accounts as an added employment benefit. Your employees get the advantage of using their tax-free savings to pay for healthcare expenses that most insurance plans won’t cover — everything from bandages to cold medicine.

Because an HSA works with a high deductible plan, you can reduce the premiums you have to pay for group coverage. And since your employees will have access to healthcare and an affordable way to pay for it, you get a healthier workforce.

HSA Advantages For Employers

  • HSAs give you an extra benefit to offer that can help you attract and keep the best employees.
  • Your contributions to employees’ accounts are usually tax-deductible.
  • If you have a Cafeteria Plan, your employees can make their contributions as “pre-tax” payroll deductions. That can mean you save on payroll taxes.

HSA Advantages For Your Employees

  • Employees can contribute money their plan on a pre-tax basis, or claim their contributions as a deduction on their income tax return.
  • Employees can earn tax-free interest on their HSA contributions.
  • Withdrawals from a Health Savings Account are tax-free if they’re used for healthcare expenses.
  • HSA funds roll over from year to year.

To offer an HSA, you’ll first need to have a high deductible health plan in place. Most employers choose a group PPO plan.

To find the right plan for your business, you’ll want to work with a professional health insurance agent. Use our free online insurance quote service to get matched with agents. Compare their offers, ask them questions, and explore your group healthcare options.

The New York Times The Wall Street Journal USA Today