A Health Savings Account (HSA) is a great way for employees to reduce their taxable income and save on medical expenses. It is a tax-advantaged savings account to pay for qualified medical expenses only available to those who are enrolled in a high-deductible health insurance plan.
Benefits of Health Savings Accounts
Combining tax benefits on savings with lower insurance premiums, HSAs have advantages for both employers and employees.
HSAs are offered in conjunction with high-deductible health plans, which can save employers money on insurance premiums. Employer contributions to employee HSAs may be deductible on federal corporate income tax returns for the year in which they were made. HSAs enhance an employee benefits package, which can help employers attract and retain the best workers.
Employees have the benefit of tax-free withdrawals from their HSA accounts to cover qualified medical expenses. They can make pre-tax payroll contributions to their HSA account. As funds accumulate, the account can provide tax-advantaged savings for the employee’s medical needs in the future. There is no “use it or lose it” policy as with flexible spending accounts. Employees can continue earning interest year after year, tax-free, on their HSA funds.
The money in a Health Savings Account belongs to the employee. Whether they change jobs, switch to a different health plan, or retire, employees can continue to use their HSA accounts for tax-deferred savings or to pay for qualified medical expenses.
The cost of providing HSAs for your employees can depend on a number of factors. Contact an agent at Morin Associates LLC in Groton, Connecticut, for assistance establishing the most beneficial Health Savings Accounts.