How does offering an HSA benefit your company? We explore how an HSA can help your employer save, and help your employees plan for the future.
January 20, 2022If you're an employer, offering benefits like 401ks, IRAs, and health insurance coverage are often par for the course. As we all know, offering benefits to employees creates higher employee satisfaction, tax incentives, and makes you an attractive place to work. However, there's one benefit that often gets overlooked when employers craft benefits packages for their teams: A Health Savings Account (HSA).
What's an HSA?
An HSA is a triple tax-advantaged savings account that you can use to pay for eligible medical expenses. And although an HSA can certainly be used as a traditional savings account, it particularly shines when account holders use their HSA funds to invest. HSAs are paired with high deductible insurance plans (HDHPs) to help offset the costs incurred under the deductible. Right now, to meet the criteria for an HSA-eligible HDHP, the plan must have an annual minimum deductible of $1,400 for individuals and $2,800 for families.
Here are three reasons why you should consider adding an HSA into your benefits mix:
1. HSAs lower insurance premiums
One of the primary reasons why you may want to offer an HSA to your employees is because they can help you save on health insurance premiums. HSAs are only eligible for those with HDHPs, which carry high deductibles but have much lower monthly premiums. Offering an HSA+HDHP combination means that you can still offer your team a healthcare plan, but both you and your employee can save on premiums and healthcare costs.
2. HSAs reduce taxes
HSAs are renowned for their triple-tax benefits. For employees, this means:
Money goes in pre-tax:If offered by the company, the employee can elect to fund the account via paycheck deductions. If the employee funds with-post tax dollars, they can deduct the amount on their tax returns.
HSAbalances grow tax-free: Employees don't pay taxes on account growth (which is why it's such a great tool for investing in high-yielding stocks, ETFs, and mutual funds).
Spend tax-free on qualified items: Employees can use their account funds to spend their pre-tax dollars on eligible medical items tax-free.
HSAs also have significant tax advantages for the employers who offer them. Employers don't have to pay federal income tax, social security, or medicare taxes (commonly known as FICA taxes) on any pre-tax contributions (from the employer or the employee). Why? The IRS doesn't consider those contributions wages, which means you pocket that 7.65%.
3. HSAs increase employee satisfaction
Beyond the significant savings that offering an HSA can bring you and your company, there's another simple reason why HSAs are an employer's friend: They help keep your employees happy. According to a 2020 John Hanco*ck study, 64% of employees said that a financial wellness program made them want to stay with their company and 56%said that it increased productivity. By offering an HSA, you're providing your employees with more opportunities to save for their future while also taking their health into their own hands. Offering HSAs make you a desirable place to work, and will help attract and retain top talent. That sounds like a pretty good reason to say H-S-Yay to us!
Certainly! It's clear that offering Health Savings Accounts (HSAs) is a fantastic addition to any employer's benefits package, offering a trifecta of advantages for both the company and its employees. Here's a breakdown of the concepts used in the article:
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HSA (Health Savings Account): It's a savings account offering triple tax advantages for medical expenses. Individuals can contribute pre-tax or deduct contributions on their tax returns, while the account balance grows tax-free. Withdrawals for qualified medical expenses are also tax-free.
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HDHP (High Deductible Health Plan): This insurance plan, when paired with an HSA, features high deductibles but lower monthly premiums. It's a prerequisite for opening an HSA.
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Tax Advantages for Employees: Contributions to HSAs are often made pre-tax through paycheck deductions. The account's growth is tax-free, making it an attractive tool for investing in various financial instruments. Withdrawals for eligible medical expenses are also tax-free.
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Tax Advantages for Employers: Employers offering HSAs can benefit from tax savings. They aren't required to pay federal income tax, social security, or medicare taxes on pre-tax contributions made by the company or employees. This exclusion from taxes on contributions is due to IRS classification.
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Employee Satisfaction and Retention: The provision of HSAs contributes significantly to employee satisfaction and retention. Financial wellness programs, including HSAs, enhance employee loyalty, leading to increased productivity and a desire to stay with the company.
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Attractiveness as an Employer: Offering HSAs makes a company a more desirable place to work, aiding in the attraction and retention of top talent.
The evidence here is pretty compelling. HSAs offer a unique combination of tax advantages, cost savings on premiums, investment opportunities, and employee satisfaction benefits that contribute significantly to both the financial wellness of employees and the bottom line of a company. Their triple-tax benefits and potential for growth through investments make them a powerful tool for both individuals planning for medical expenses and employers looking to enhance their benefits packages.
